Judge temporarily halts Tribune bid for California papers

AP News
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Posted: Mar 19, 2016 2:59 AM
Judge temporarily halts Tribune bid for California papers

SANTA ANA, Calif. (AP) — A federal judge has granted a temporary restraining order blocking Tribune Publishing Co.'s purchase of Southern California newspapers the Orange County Register and the Press-Enterprise of Riverside.

The move late Friday from U.S. District Judge Andre Birotte Jr. comes a day after the U.S. Department of Justice requested the restraining order in its antitrust lawsuit against the purchase by the owner of the Los Angeles Times, the dominant newspaper in the region.

In his ruling, Birotte said the government has shown "a likelihood of success on the merits of its claim," the Los Angeles Times reported. He wrote that many online websites don't produce original content, but "primarily post links to stories on the websites of other content generators - including local newspapers like the Register or the Press-Enterprise."

Tribune said in court filings opposing the order earlier Friday that the temporary restraining order may well kill the $56 million deal entirely. That would make second bidder Digital First Media the likely new owner.

"The government's request, if granted by this court, effectively removes Tribune altogether from the proceedings in the Bankruptcy Court," Tribune said according to the papers filed in U.S. District Court in Los Angeles. "A temporary restraint on Tribune will ensure that it will not acquire the properties."

A hearing in bankruptcy court is scheduled for Monday, and the longer-term implications of the restraining order were not immediately clear.

Tribune announced Thursday it had prevailed in the bankruptcy auction, but the Justice Department the same day moved to prevent the sale, saying it would give Tribune a monopoly over newspaper sales in the region.

The Tribune already operates the Times and San Diego Union-Tribune, which it purchased last year.

If the sale to Tribune goes forward, it would give the company control of the four largest daily newspapers in Southern California, with as many as 1,000 journalists covering an area that stretches from Los Angeles to the Mexican border. It's a region of 18 million people.

In its Friday objections, Tribune criticized the Justice Department's "eleventh hour" interest in the deal, given that the media conglomerate was open about its interest as bankruptcy proceedings unfolded.

The company also complained that the government was relying on "severely outdated" notions of the media market and had cited 50- and 60-year-old legal cases from an era before digital publication in its bid to block the sale.

The Justice Department fired back in court papers late Friday, saying that 200,000 residents of Orange and Riverside counties buy daily newspapers despite the advent of digital publications and the additional cash the higher bid would provide for creditors does not justify the loss of media competition.

The bankruptcy must close by March 31, when temporary private financing keeping the two newspapers afloat will dry up.

Freedom Communications now operates both publications.

The judge operates independently but has the discretion to consider the Justice Department's concerns, said Tom Campbell, a Chapman University law professor and former director of the Federal Trade Commission's Bureau of Competition.

That could make the runner-up bidder, Digital First Media, the winner, Campbell said.

The judge "could say, 'I don't know if it's a big antitrust problem or not, but I have two bidders who don't have an antitrust problem and one who does,'" Campbell said. "The likeliest outcome is he would award it to the second bidder. That's what I would predict."

That would end regulators' concerns, but the Tribune surely would appeal, as would creditors, who would get less money from the deal, he said.

Digital First, which owns nine Southern California papers and websites, including the Los Angeles Daily News, made a $45.5 million "stalking horse bid" for the newspapers.

An investor group led by Freedom Communications' managers pulled out of bidding.

If the deal were approved, Tribune would control 98 percent of daily English-language newspaper sales in Orange County and 81 percent in Riverside County, the Justice Department estimated.

Freedom Communications filed for bankruptcy protection in November. It followed a series of layoffs and buyouts after an aggressive expansion of print journalism that included starting daily papers in Los Angeles and Long Beach and buying the Press-Enterprise for $27 million.

The Associated Press is among the creditors in Freedom's bankruptcy proceedings.

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Associated Press writer Andrew Dalton contributed to this report.

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Follow Gillian Flaccus on Twitter at http://www.twitter.com/gflaccus .