MICHIGAN CITIZENS FOR AN INDEPENDENT PRESS, et al., Appellants v. Richard THORNBURGH, United States Attorney General, et al.
No. 88-5286.
United States Court of Appeals, District of Columbia Circuit.
Argued Oct. 28, 1988. Decided Jan. 27, 1989.
Rehearing Denied Feb. 24, 1989.
868 F.2d 1285
Clark M. Clifford, with whom Robert A. Altman, Robert P. Reznick, Philip A. Lacovara and Gerald Goldman, Washington, D.C., were on the brief, for appellee The Detroit Free Press, Inc.
Douglas Letter, Atty., Dept. of Justice, with whom John R. Bolton, Asst. Atty. Gen., Jay B. Stephens, U.S. Atty., Washington, D.C., were on the brief, for appellee Thornburgh, Atty. Gen., et al. Robert K. Kopp also entered an appearance for the Atty. Gen.
Lawrence J. Aldrich, John Stuart Smith, and Gordon L. Lang, Washington, D.C., were on the brief, for appellee The Detroit News, Inc.
Paul L. Friedman and Anne D. Smith, Washington, D.C., were on the brief, for amicus curiae Little Rock Newspapers, Inc. urging reversal.
W. Terry Maguire and Claudia James, Washington, D.C., were on the brief, for amicus curiae American Newspaper Publishers Ass‘n urging affirmance.
Before ROBINSON, RUTH BADER GINSBURG, and SILBERMAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
Dissenting opinion filed by Circuit Judge RUTH BADER GINSBURG.
SILBERMAN, Circuit Judge:
This case presents a challenge to a decision and order of the Attorney General, pursuant to the Newspaper Preservation Act (“NPA“),
I.
A.
Congress passed the Newspaper Preservation Act in 1970 with the stated purpose of “maintaining a newspaper press editorially and reportorially independent and competitive in all parts of the United States.”
The first joint newspaper operating arrangement was started by three newspapers in Albuquerque, New Mexico in 1933, and by 1966 there were twenty-two JOAs in effect. In 1964, the Department of Justice initiated an investigation of newspaper JOAs, and in 1965 it sued the publishers of two daily newspapers in Tucson, Arizona, which operated jointly, for violations of sections 1 and 2 of the Sherman Act,
The Court rejected the newspapers’ argument that the so-called “failing company” defense—a judicially created doctrine—absolved them from liability under the antitrust laws. Id. at 137-38, 89 S.Ct. at 930. Under the “failing company” doctrine, conduct which would otherwise violate antitrust laws does not do so if one of the suspect businesses “faced the grave proba-
In Citizen Publishing, the Court narrowly confined the scope of the doctrine. It held that a financially troubled company may not employ the “failing company” defense unless it meets three conditions. The disputed merger may be sought only when the owners of the “failing” company are contemplating liquidation; indeed, the JOA must be the “last straw” at which the company can grasp. 394 U.S. at 137, 89 S.Ct. at 930. The defendants are required to establish that the company that acquires the failing company is “the only available purchaser,” id. at 138, 89 S.Ct. at 931, and finally, the prospects for successful reorganization under the bankruptcy laws must be “dim or nonexistent.” Id. Because the Tucson papers did not make such a showing, their JOA violated the Sherman Act.
Congress reacted to Citizen Publishing by passing the Newspaper Preservation Act, which established a less stringent test for newspapers seeking a JOA. S. REP. No. 535, 91st Cong., 1st Sess. 4 (1969). Congress did not question the Court‘s reasoning in defining the failing company doctrine, but it felt that “the economics of the newspaper industry make it more likely for newspapers to fail when faced with competition than other businesses.” Id. As the Senate Judiciary Committee noted, “when a newspaper is failing it is harder to reverse the process and it is almost impossible to find an outside buyer.” Id. The NPA therefore provides that a newspaper is “failing” and eligible for a JOA when it is “in probable danger of financial failure.”
Since 1970, four new JOAs have been approved and implemented.5 In each of those cases, unlike the Detroit case, the “failing newspaper” was well into what in the newspaper industry is known as the “downward spiral.” The fate of a struggling newspaper is thought to be determined by the close interrelationship between circulation and advertising revenues. Once a paper loses circulation, advertisers are less likely to purchase space in the paper. Readers, in turn, are less likely to buy a paper that is short on advertising, so circulation drops further. The result of this interrelationship is an apparently irreversible downward plunge that ends in business failure. The only court to address the Act, Committee for an Independent P-I v. Hearst Corp., 704 F.2d 467 (9th Cir.), cert. denied, 464 U.S. 892, 104 S.Ct. 236, 78 L.Ed.2d 228 (1983), concluded that a newspaper in the downward spiral satisfies the “probable danger of financial failure” test, as long as it had followed reasonable management practices. Id. at 479.
B.
The Detroit Free Press and the Detroit News are daily newspapers that compete in Detroit, which is the nation‘s fifth largest newspaper market. The papers are owned by the two largest news organizations in the United States; Knight-Ridder, Inc. owns the Free Press, and the Gannett Company has controlled the News since February 1986, when it purchased the paper from the Evening News Association. Over the
This bitter fight has led to large operational losses by both papers. The Free Press has lost money every year since 1979, and it lost over $10 million per year from 1981 to 1986. The News has sustained operational losses since 1980, and it lost over $50 million between 1981 and 1986. A circulation price war has driven the daily prices in Detroit to twenty cents for the News and fifteen cents for the Free Press—probably the lowest daily prices in the United States. In recent years, the News has maintained a consistent circulation lead of approximately 51% to 49%. Perhaps more important, the News has continuously maintained more than a 60% share of total full-run advertising linage.
As a result of their losses, the papers began to consider the alternative of a JOA as early as 1980 when the chief executive officers of Knight-Ridder and the Evening News Association first discussed the possibility. Negotiations continued sporadically from January 1981 to January 1984, but no agreement was reached during that period. In August 1985, Gannett agreed in principle to purchase the News from the Evening News Association, and senior officials of Gannett and Knight-Ridder thereafter met 16 times between August 1985 and April 1986 to shape the final agreement. On April 11, 1986 the News and the Free Press executed the JOA.
The agreement, which has an initial term of 100 years, provides—as is typical—that the news and editorial staffs of the two papers are to remain independent and insulated from influence by the other party to the arrangement. The Free Press would publish a morning paper on Monday through Friday, and the News would print a corresponding afternoon edition. On Saturday and Sunday, the parties would publish only one paper, with each paper assum-
During the first three years of the JOA, the News would receive 55% of the profits of the combined enterprise, while the Free Press would receive 45%. In the fourth and fifth years, the profit split would reduce to 53%/47% and 51%/49%, respectively. Beginning in the sixth year, the profits and losses would be shared equally by the News and the Free Press.
On May 9, 1986, the two papers applied for approval of the JOA by the Attorney General as required by the Act, and the application was referred to the Assistant Attorney General in charge of the Antitrust Division, pursuant to Justice Department regulations. See 28 C.F.R. § 48.7 (1988). The then Assistant Attorney General, Douglas H. Ginsburg (now Judge Ginsburg), issued a report on July 23, 1986, concluding that the applicants had “not yet sustained their burden of proof of showing that the Detroit Free Press is a ‘failing newspaper’ within the meaning of the Act and that approval of the application would effectuate the policy and purpose of the Act.” However, he did not advise disapproval of the application; instead, he recommended that the Attorney General order that a hearing be held before an administrative law judge to resolve material issues of fact raised by the application. See 28 C.F.R. § 48.7(b)(2) (1988).
Attorney General Edwin Meese followed his Assistant Attorney General‘s advice and pursuant to the Justice Department‘s regulations, 28 C.F.R. § 48.10, an administrative law judge was appointed to conduct the hearing. On December 29, 1987, ten months later, the ALJ issued a decision, recommending that the application be denied. He concluded, inter alia, that the applicants had failed to prove that there exists in Detroit an irreversible market condition that will probably lead to the failure of the Free Press. According to the ALJ, the Free Press is not dominated by the News and the Free Press is not in a downward spiral toward failure. He instead attributed the losses incurred by the Free Press and the News to “their strategies of
The ALJ did not deny that the fiercely competitive strategies employed by both papers were perfectly rational, given the disastrous history of junior papers in the United States. But he believed that each paper had an eye on a potential JOA application in the event that it turned out to be the loser. They both saw the JOA as a safety net, in other words, and were thereby encouraged to engage in particularly risky competitive acrobatics.
Indisputably, the News was leading the Free Press in most of the circulation, revenue, and advertising linage figures used to measure the relative positions of rival newspapers. The ALJ maintained, however, that the Free Press was within “striking distance” of the total circulation lead, and that the News’ advertising lead was “vulnerable” to a change in the circulation lead. Neither paper could achieve profitability as long as they both pursued the current price war, but he believed that the record did not support the conclusion that “reader and advertiser demand in Detroit is so inadequate that the market cannot sustain two profitable papers irrespective of changes in pricing policies.” He hypothesized that Detroit could sustain two profitable papers if the Free Press and the News both raised circulation and advertising prices. Still, he recognized that since “neither the Free Press nor the News can raise circulation or advertising prices without regard to what the other paper does, there is no completely unilateral course of action which either paper can pursue which would return it to profitability.”
The ALJ accepted the testimony of the Antitrust Division‘s expert, who calculated that the 50/50 profit split (after five years) represented a perception by Gannett that it could not achieve domination of the market for “at least seven years.” He was, moreover, unpersuaded by Gannett officials’ testimony that if the JOA were denied, they would not raise circulation prices, and he
Attorney General Meese, in his opinion of August 8, 1988, disagreed with the conclusions of the ALJ and granted approval of the JOA. The Attorney General “accepted as accurate the fact findings of the Administrative Law Judge,” but differed with his “ultimate conclusion as to where those facts lead.” Adopting the legal standard enunciated by the Ninth Circuit in Hearst the Attorney General asked: “Is the newspaper suffering losses which more than likely cannot be reversed?” Committee for an Independent P-I v. Hearst Corp., 704 F.2d 467, 478 (9th Cir.), cert. denied, 464 U.S. 892, 104 S.Ct. 236, 78 L.Ed.2d 228 (1983). The Attorney General decided that the answer was yes: the Free Press had met its burden of proof, because it had suffered persistent operating losses over nearly a decade and had no prospect of unilateral action to reverse those losses.
Central to the Attorney General‘s opinion was his disagreement with the ALJ‘s prediction of future behavior by the two papers in the event that the JOA is denied. He noted and accepted the ALJ‘s finding that the News was in a stronger competitive position according to all major economic indices. But he determined—or more accurately predicted—that if the News continues its current pricing practices, it “undoubtedly has the ability on such terms to outlast the Free Press.” Given this premise, the Attorney General found persuasive Gannett‘s testimony that it would continue its current competitive policies (and not raise prices), which he said “hardly reflects unsound business judgment.” Similarly, the Attorney General felt that the testimony of Knight-Ridder‘s CEO concerning a
In response to the allegation that the papers had pursued their competitive strategies because of the potential of a JOA, the Attorney General read the record as showing that Knight-Ridder was not ”principally pursuing any end other than market domination.” (emphasis added). Moreover, he noted that “newspapers cannot be faulted for considering and acting upon an alternative that Congress had created.”
II.
Appellants allege that the Attorney General‘s determination is invalid both because it is based on an impermissible interpretation of the statute and is arbitrary or capricious.6 As is not unusual in appeals from agency actions, the claims are interrelated. At the core of appellants’ case is the assertion that the Attorney General could not legally grant approval for a JOA because the Detroit Free Press was not in a tough enough spot to qualify as “in probable danger of financial failure.” Whether the Attorney General legally decided that the Free Press did meet the statutory standard in turn depends to a large extent on whether his prediction of the newspapers’ future course (if he did not approve the JOA) was reasonable. The Attorney General‘s interpretation of the probable danger of financial failure test draws content from the factual showing that he requires to meet that test. See INS v. Cardoza-Fonseca, 480 U.S. 421, 107
Not surprisingly, the exact meaning of the linguistically imprecise phrase “probable danger of financial failure” is not apparent from the statute or the legislative history. The Senate bill, which differed slightly from the House version, “defined” a failing newspaper as one “in danger of probable failure.” The Senate took this phrase—or at least the words “probable failure“—from the Bank Merger Act,
To be sure, the Attorney General had not previously faced a case such as this. Prior approvals of JOAs had always involved at least one newspaper that had actually entered the downward spiral, whereas the Detroit Free Press could be said to be poised on the brink of the spiral, its future dependent on the competitive behavior of the News.7 Still, the only prior case reviewing an Attorney General‘s approval of a JOA—the pre-Chevron decision of the Ninth Circuit in Hearst—phrased the question before the Attorney General in broader terms than whether one of the newspapers had entered a downward spiral. The court asked: “Is the newspaper suffering losses which more than likely cannot be reversed?” This interpretation of the statutory language, which the court called a “commonsense construction,” id. at 478, was explicitly adopted by the Attorney General in this case, and thus made his own interpretation entitled to Chevron deference. Only for cogent reasons would we reject as unreasonable an interpretation of a statute that a sister circuit had considered a commonsense construction.
The Ninth Circuit thought implicit in its inquiry was an examination of alternative forms of relief for the putatively failing newspaper. Was there, for example, a group of interested buyers or a potential for improved management? Congress’ reference to the Third National Bank case in the legislative history of the statute suggested to the Ninth Circuit that Congress
The dissent suggests that the Attorney General‘s statutory construction is impermissible because it did not employ the interpretative canon that exemptions to the antitrust laws—like all exemptions—should be construed narrowly. Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 231, 99 S.Ct. 1067, 1083, 59 L.Ed.2d 261 (1979). Certainly, courts interpreting the antitrust statutes have often employed that canon. See, e.g., Hearst, 704 F.2d at 473 (“Our review of the Newspaper Preservation Act and its interpretation by the Attorney General is guided by [the] additional rule ... [that] exemptions to the antitrust laws are to be narrowly construed.“).8 But Chevron implicitly precludes courts picking and choosing among various canons of statutory construction to reject reasonable agency interpretations of ambiguous statutes. If a statute is ambiguous, a reviewing court cannot reverse an agency decision merely because it failed to rely on any one of a number of canons of construction that might have shaded the interpretation a few degrees in one direction or another.
We do not mean to say that canons of construction are completely irrelevant in the post-Chevron era. If employment of an accepted canon of construction illustrates that Congress had a specific intent
In this type of case by contrast, the Attorney General is called upon to balance two legislative policies in tension: The pro-consumer direction of the antitrust laws and a congressional desire embodied in the Newspaper Preservation Act that diverse editorial voices be preserved despite the unique economics of the newspaper industry. This is precisely the paradigm situation Chevron addressed. If the agency‘s choice “represents a reasonable accommodation of conflicting policies that were committed to the agency‘s care by the statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned.” Chevron, 467 U.S. at 845, 104 S.Ct. at 2783 (quoting United States v. Shimer, 367 U.S. 374, 383, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 (1961)). To invoke the normal canon of construction is merely to say that the Attorney General put too much weight on the
Appellants argue that the Attorney General should receive less deference than Chevron requires, because “his interpretation of the statute was different from that of the Antitrust Division, where the Justice Department‘s expertise on the Newspaper Preservation Act resides.” We have previously rejected the notion that Chevron deference is based solely on agency expertise. Public Citizen v. Burke, 843 F.2d 1473, 1477 (D.C.Cir.1988); Cablevision Systems Dev. Co. v. Motion Picture Ass‘n of America, 836 F.2d 599, 608-09 (D.C.Cir.1988). The rationale of Chevron is also grounded in the principle that the political branches of government, rather than the judiciary, should make policy choices. Chevron, 467 U.S. at 865-66, 104 S.Ct. at 2793.
Nevertheless, our dissenting colleague seems to accept the argument, since she relies heavily on the Antitrust Division‘s brief submitted to the ALJ. Dissent at 1298 n. 3, 1299 n. 5, 1299 n. 6. It is not surprising that the Division—charged with the front line responsibility for enforcing the antitrust laws—sought a narrow interpretation of sections
It is also suggested, dissent at 1299, that the Attorney General‘s decision is legally defective because he did not explain his interpretation of the conceptual difference between the section of the statute that applied to this transaction and the section that did not apply. The latter, section
III.
Even if the Attorney General is statutorily authorized to treat a newspaper as in probable danger of failing before it actually enters the downward spiral, appellants claim that the Attorney General‘s decision was arbitrary and capricious because not rationally connected to the facts before him. Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962)) (agency must articulate a “rational connection between the facts found and the choice made“). This, as we have noted, is in essence a challenge to the reasonableness of the Attorney General‘s determination that the News had the economic power to outlast the Free Press and was not likely to reduce competitive pressure by raising prices.
The only specific challenge, as far as we can determine, to the Attorney General‘s appraisal of the respective competitive strengths of the two newspapers is based on the different opinion of the ALJ
Similarly, appellants rely on the ALJ‘s contrary prediction to dispute the Attorney General‘s conclusion that the News would not release the pressure on the Free Press by raising prices if the JOA were disapproved. Gannett officials testified that they had no intention of raising prices regardless of the Attorney General‘s decision. The ALJ refused to credit this testimony, not on account of the witnesses’ demeanor, but because he, the ALJ, thought that course would only cause more losses for the News and was therefore irrational.10 Cf. Universal Camera Corp.
Knight-Ridder seems to have thought that its competitor‘s strategy was rational, since its CEO testified that if the JOA were disapproved, the Free Press would close down. The ALJ again assigned “little weight” to that testimony, because “if a Free Press closure was imminent, it would have made no economic sense for [the News] to agree to share prospective JOA profits with [the Free Press].” Also, he
The Attorney General had to consider which of the two papers would blink first in the event the JOA were denied. Gannett said that it would not, and Knight-Ridder said that it would. Appellants assert that it was unreasonable for the Attorney General to believe them, because the more likely event was the exact reverse: that if the JOA were denied, Gannett would raise prices and the Free Press would remain in business. The Attorney General, it would seem, did not want to play the high stakes regulatory game that his ALJ proposed. He obviously was concerned that if he gambled on the ALJ‘s prediction that both newspapers were bluffing, Detroit would lose a newspaper. That is not to say that the Attorney General should put undue stress on self-serving declarations by newspaper executives seeking a JOA. But here, the statements that the Attorney General credited follow a long period of bitter competition. For the News to stay the course, as for the British and French in 1917, promised absolute victory.
It may well be; as appellants argue and the ALJ found, that under ideal circumstances, Detroit could support two newspapers. The same could also be true of many cities that have lost competing newspapers and are now one newspaper monopoly towns. It is not at all clear whether the newspaper business in some cities is a natural monopoly, and, if so, in cities of what size. This sort of speculation, it seems to us, as it did to the Attorney General, is hardly conclusive. That an omniscient Detroit newspaper czar could set circulation and advertising prices that would permit both papers to return to profitable status is not a useful observation in this context. The Attorney General is required to deter-
Appellants might also be understood to complain that the Attorney General did not provide a reasoned explanation for his decision, because his only citations to the record at certain crucial points were to portions of the ALJ‘s opinion that reached different conclusions based on the same facts. Of course, the decision of the ALJ is part of the record and must be considered by the court when it determines whether the Attorney General‘s ruling is supported by substantial evidence or, in this case, arbitrary or capricious. Universal Camera Corp. v. NLRB, 340 U.S. 474, 493, 71 S.Ct. 456, 467, 95 L.Ed. 456 (1951). We have said that an agency must both express an awareness that it is disagreeing with an ALJ and set forth the basis of the disagreement. Local 441, IBEW v. NLRB, 510 F.2d 1274, 1276 (D.C.Cir.1975); Greater Boston Television Corp. v. FCC, 444 F.2d 841, 853 (D.C.Cir.1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2233, 29 L.Ed.2d 701 (1971). To reverse the Attorney General, however, for failure to state at the exact point of the citations the obvious nature of his disagreement with the ALJ would be excessive judicial nitpicking. His difference with the ALJ is clear throughout the opinion, and although “[t]he explanation may have been curt, ... it surely indicated the determinative reason for the final action taken.” Camp v. Pitts, 411 U.S. 138, 143, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973).
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The real difficulty with this case—the factor that quite plainly underlies the ALJ‘s discomfort as well as appellants’ quarrel with the Attorney General‘s decision—is the effect that the prospect of a JOA has on the behavior of competing newspapers. See also dissent at 1299. It
Appellants argue that the Attorney General inadequately considered whether or not “critical aspects of the newspapers’ conduct were influenced by the prospect of obtaining a JOA.” But his opinion addressed this “dual motive” concern at some length; he observed that this was not the classic case that had worried Congress, where a newspaper had “brought itself to the brink of financial failure through improper marketing practices or culpable management.” Instead, the record of years of fierce competitive and consequent losses to both papers led the Attorney General reasonably to conclude that both papers were principally pursuing market domination and that their strategies had been followed before any mutual discussion of a JOA. Nevertheless, the Attorney General implicitly recognized that it would be impossible completely to preclude competing newspapers from factoring into their business strategy the prospect of a JOA. As he laconically put it, “newspapers cannot be faulted for considering and acting upon an alternative that Congress has created.”13
We can envision a perfectly rational different policy, one that would require a showing that the weaker paper was more bloodied before approving a JOA and therefore might discourage the sort of competition we saw in Detroit. Congress, however, delegated to the Attorney General, not to us, the delicate and troubling responsibility of putting content into the ambiguous phrase “probable danger of financial failure.” We cannot therefore say that his interpretation of that phrase as applied to this case, with all of its obvious policy
AFFIRMED.
RUTH BADER GINSBURG, Circuit Judge, dissenting:
As a condition to the consummation of a joint operating agreement (JOA), and receipt of the attendant antitrust exemption, Congress required the approval of the Attorney General, an approval intended to “act as a brake” upon premature resort to such devices. 116 CONG.REC. 2006 (1970) (statement of Sen. Hruska). In this important and unprecedented case, the Attorney General approved a JOA and, in so doing, rejected the contrary conclusions of the administrative law judge (ALJ) and the Justice Department‘s Antitrust Division, as elaborated in the post-hearing brief the Division presented to the ALJ. At issue is a large and attractive newspaper market, Detroit, one concededly capable of sustaining two profitable newspapers. I have grave doubts whether the Attorney General properly performed in this instance the braking function Congress envisioned for him. I would therefore remand the case for reconsideration and a fuller account of the standard of approval the Attorney General deems applicable.
I.
As the Antitrust Division emphasized before the ALJ, no prior JOA application “has presented a comparable situation.” Post-Hearing Brief of the Antitrust Division, Docket No. 44-03-24-8 (Sept. 23, 1987) [hereinafter, Antitrust Division Brief], at 2. The Detroit Free Press (a morning newspaper)-Detroit News (evening paper) application “involves the largest market and largest newspapers” in the nation “ever to be involved in a JOA.” Id.1
Applicants concede that the Free Press is unlike any other newspaper thus far declared “failing.” The typical case presents an applicant caught in a “downward spiral” in which the newspaper‘s “declining circulation and lessening advertising feed off one another, eventually forcing it to close.” Committee for an Independent P-I v. Hearst, 704 F.2d 467, 471 (9th Cir.), cert. denied, 464 U.S. 892, 104 S.Ct. 236, 78 L.Ed.2d 228 (1983). The only Newspaper Preservation Act-JOA before this one to be examined in court, Hearst, fit that description.
Just as there is no dispute that the Free Press and the News have both incurred significant losses on an operating basis,2 so it is undisputed that neither paper has experienced any “downward spiral” effect. On the contrary, in the relevant time period, 1976 to 1986, the Free Press share of daily circulation was never less than 49%; its competitive position has remained essentially stable; the News, though retaining a “leading” edge, is not “dominant.” Antitrust Division Brief at 7-11. In other words, the two papers, each now maintained by a “deep pocket,” the News by Gannett, the Free Press by Knight-Ridder, have fought to a draw. Neither has achieved supremacy. The competition today “is as close, or closer, than it was a decade ago.” Id. at 2.3
II.
Three “failing newspaper” standards figured in the design of the Newspaper Preservation Act: the deathbed “failing company” doctrine which Congress rejected; the “not likely to remain or become financially sound” standard Congress adopted for existing JOAs, i.e., those entered into prior to July 24, 1970; and the “probable danger of financial failure” definition Congress set for future JOAs. See
The Newspaper Preservation Act‘s legislative history confirms that the “probable danger” standard was meant to have bite, to be “far more stringent” than the “not financially sound” test, 116 CONG.REC. 23,146 (statement of Rep. Kastenmeier), and thus “limited only to those situations where a joint newspaper operating arrangement is demonstrably essential to prevent a newspaper failure.” Id. at 23,148 (statement of Rep. McCulloch). Given the congressional design, approval of a proposed JOA requires an affirmative answer to this question: “Is the [allegedly failing] newspaper suffering losses which more than likely cannot be reversed?” Hearst, 704 F.2d at 478.
The Attorney General‘s readiness to say “Yes” to a JOA for Free Press-Detroit News now, despite the view of the Antitrust Division and the ALJ that such a judgment remains premature,5 seems to me problematic on two counts. First, the Decision affords no assurance that the Attorney General has found a “middle ground” firmer than the pliant “not likely to become financially sound” ground Congress thought inadequate for new agreements. The Decision never suggests any separate content for the “probable danger” standard to distinguish it from the more accommodating one. Second, the demonstration that satisfied the Attorney General allows parties situated as Gannett and Knight-Ridder are artificially to generate and maintain the conditions that will yield
It is accepted by the Attorney General that the Free Press and News have arrived at a “competitive stalemate,” Attorney General‘s Decision at 5, and that market dominance is “no longer within the grasp of either paper.” Id. at 13. It is also a “given” that “the Detroit market could sustain two profitable newspapers if both circulation and advertising prices were increased.” Id. at 9 n. 3 (emphasis in original). But “the unbroken pattern of annual operating losses” cannot be reversed by Free Press “unilateral actions,” and that, in the Attorney General‘s judgment, makes “probable” if not “imminent” the “danger of financial failure.” Id. at 7, 12.
Without the lure of a JOA, however, what reason is there to believe that the losses here “likely cannot be reversed“? Absent the Attorney General‘s promise of that large pot of gold, would the parties not have, as the Antitrust Division suggested, an effective “incentive to adopt strategies directed toward achieving profitability in a competitive marketplace“? Antitrust Division Brief at 27, 28.
The Attorney General does not disavow “the well-recognized rule that antitrust exemptions must be narrowly construed.” Hearst, 704 F.2d at 478 (citing Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 231, 99 S.Ct. 1067, 1083, 59 L.Ed.2d 261 (1979)). This accepted rule6 should be factored into an evaluation already
Detroit, as the Attorney General said, “is a highly prized $300 million dollar market.” Attorney General‘s Decision at 4. That market could sustain two profitable newspapers. Id. at 9 n. 3. Market dominance is now beyond the grasp of the News as well as the Free Press. Id. at 13. The Attorney General has not cogently explained why, on the facts thus far found, the proposed JOA has become “an available option.” Id. Making the JOA an option now, in the situation artificially created and maintained by the Free Press and the News, moves boldly away from the “frame of reference [Congress] essentially embraced“—“the scenario of a strong newspaper poised to drive from the market a weaker competitor,” a newspaper experiencing, “due to external market forces,” a decline in revenues and circulation “that in all probability cannot be reversed.” Id. at 6, 13-14. I therefore dissent from the majority‘s disposition approving instanter the giant stride the Attorney General has taken.
No. 88-5286.
United States Court of Appeals, District of Columbia Circuit.
Feb. 24, 1989.
ON APPELLANTS’ SUGGESTION FOR REHEARING EN BANC
Before WALD, Chief Judge; ROBINSON, MIKVA, EDWARDS, RUTH B. GINSBURG, STARR, SILBERMAN, BUCKLEY, WILLIAMS, D.H. GINSBURG and SENTELLE, Circuit Judges.
ORDER
Appellants’ Suggestion for Rehearing En Banc has been circulated to the full court. The taking of a vote was requested. Thereafter, a majority of the judges of the court in regular active service did not vote in favor of the suggestion. Upon consideration of the foregoing it is
ORDERED, by the court en banc, that the suggestion is denied. It is
FURTHER ORDERED, by the court en banc, on its own motion, that the stay of implementation of the joint operating agreement reimposed by the order of Feb-
Notes
Gannett, it is also conceded, acquired the News only after obtaining expression of Knight-Ridder‘s willingness to consider a JOA. Id. at 27-28. The nearly equal profit split for the Free Press under the JOA indicates the “standoff” that existed; it reflects “a recognition on Gannett‘s part that the Free Press was not likely to exit