Michigan Citizens for an Independent Press v. Richard Thornburgh, United States Attorney General

(1) the concession that weighted projections,

newspapers, their own AN MICHIGAN CITIZENS FOR profitability in- “could achieve PRESS, al., INDEPENDENT et discounting,” creases and the elimination of Appellants, (2) Decision at General’s proof applicants which JOA the burden of THORNBURGH, Richard 48.10(a)(4)(1988). United States bear, A re- 28 C.F.R. § et al. give the General an mand would comprehensibly to state more opportunity No. 88-5286. ripe approba- for why the JOA-route his now, i.e., why that course should tion Appeals, United States Court of for consideration “at some fu- be deferred District of Columbia Circuit. ture time” the results of the current when Feb. pre- a firmer for competition afford basis Press, dicting profitably whether readers, advertisers, itself,

for for and for Antitrust Division Brief survive. See

Conclusion ON APPELLANTS’ FOR SUGGESTION said, as the “is EN REHEARING BANC highly prized million a dollar market.” $300 WALD, Judge; Before Decision at 4. That General’s ROBINSON, MIKVA, EDWARDS, market could sustain two STARR, papers. GINSBURG, Id. at 9 Market dominance is RUTH B. grasp beyond SILBERMAN, BUCKLEY, WILLIAMS, of the News as well now as the Free Press. Id. 13. The Attor- SENTELLE, D.H. GINSBURG and cogently explained has not ney General Judges. found,

why, pro- on the facts thus far posed op- JOA has become “an available ORDER Making now, option tion.” Id. the JOA an artificially in the situation created and Appellants’ Suggestion Rehearing maintained the Free Press and the En Banc has been circulated to the full News, boldly away moves from the “frame taking requested. court. The of a vote was [Congress] essentially of reference em- Thereafter, majority judges strong newspa- braced”—“the scenario of a regular court did not active service vote per poised to from the market a suggestion. Upon favor of the consider- competitor,” newspaper experi- weaker foregoing ation of the it is forces,” encing, “due to external market ORDERED, by banc, the court en decline in revenues and circulation “that suggestion is denied. It is probability all cannot be reversed.” Id. at ORDERED, FURTHER I court en 13-14. therefore dissent from the ma- motion, banc, jority’s disposition stay on its own approving instanter giant implementation joint operating stride the tak- General has en. agreement reimposed by the order of Feb-

gates Chevron, the “narrow construction of antitrust ex- law administration? Under is it the emptions” prerogative rule to cases in which had a to construe an specific Maj.Op. ambiguously-phrased exemption intent. See at 1292. Did Chev- antitrust law (both uproot guide expansively? believe, questions, ron indeed to the executive The answer to these judiciary) Higher Authority and to the of such "fundamental im- unless and until tells (Hearst, otherwise, portance” unambiguously 704 F.2d at to antitrust us must be "No."

1301 1989, ney in until of the statute. remain effect ruary shall 6,1989, to afford March General’s conclusion that the p.m. E.S.T. on 5:00 to the opportunity apply “probable danger to Detroit Free Press is appellants date. stay beyond unreasonable, that Supreme Court for of financial failure” is we told, it is on an economi-

are because based cally unreasonable the De- Judge WALD and —that Circuit willing price troit News is to continue to MIKVA, Judges HARRY T. its costs in order to Free drive the EDWARDS and RUTH BADER to Press close its doors.1 This is unreason- grant GINSBURG would sophisticated able because firms do not— suggestion rehearing en banc. significant period over a of time—cut concurring A statement of Circuit prices competitor in order to out of SILBERMAN, Judge joined by Circuit market, entry prevent unless barriers Judge ROBINSON, SPOTTSWOOD W. competitors emerging. new If new III, is attached. competitors emerge, could in- costs competitor curred the old out of dissenting A statement of Chief Cargill, the market would be wasted. See Judge WALD, joined by Judges Circuit Colorado, Inc., Inc. v. 479 U.S. Monfort of EDWARDS, MIKVA and HARRY T. is 121 107 n. n. S.Ct. 495 93 attached. (1986); L.Ed.2d 427 Matsushita Electric Judges Circuit STARR and D.H. Corp., 475 Industrial Co. v. Zenith Radio participate GINSBURG in this 1348, 1357, 106 U.S. 89 matter. (1986). L.Ed.2d 538 quite agree proposition. But with SILBERMAN, Judge, Circuit I cannot see its relevance to this case. ROBINSON, whom SPOTTSWOODW. Congress obviously passed would not have III, concurring in joins, Act unless it Preservation en the denial banc: perceived entry prevented had barriers that challenge monopoly to a an effective Judge justifications The Chief offers two And, paper. although up it is not to tous slip restraining leash. Nei- Chevron’s Congress’ judgment, surely question we grounded ther is on an actual construction suggest (which nothing have seen in this case to statutory language she con- Congress misinformed. Whether ambiguous) legislative cedes is nor its his- barriers, Instead, theoretical mat- Judge those as a tory. first inter- ter, poses properly analyzed are as due to a natu- a theoretical economic challenge monopoly2 Attor- ral or a variation on that classic the reasonableness accurately, question competition media outlets and 1. Or more is whether from other metropoli- reasonably siphoning off of readers from General believed that region portend suburbs—that would reasonably tan to the the Detroit Free Press believes event, And his statement that almost certain failure." the News will follow that course. In that “the Detroit market could sustain newspapers opinion, said in our asser- as we Press’ advertising both circulations and it if the JOA tion that will shut down is denied is prices really were increased” is inconsistent hardly incredible. possibility the Detroit market is a with the Turner, Kaysen Policy 2. See C. & D. Antitrust Turner, monopoly. D. natural See P. Areeda & ("There (1971) disturbing n. 1 are indica- Law, (In monop- Antitrust at 48 a natural newspaper publishing approaching tions that is market, oly may "demand be sufficient at some unhappy monopoly] state natural [of fixed law or cartel to cover the costs of towns.”). many cities and General producer, produc- more than one but the cost of position never took a on whether the Detroit significantly single tion will be producer."). lower with monopoly, passage market is a natural and the say The ALJ did that "there is no obviously on which the Chief relies fails convincing superior scale econo- evidence that suggest that he did. See Statement of Chief likely mies is to be determinative for the [sic] Wald, News,” 2. The General clear that it is but it no means simply plainly chiefly said that "the Free Press does not scale economies that cause one-news- rising may why face external market forces—such as towns. That (if may (I beginning petitive equilibrium rarity well be a am doubt economic theme chimera), newspa- surely anyone truly understands the not a no market) point. is beside the owner such a market can be confident prevent authorized the ex- that he and his are monopoly city newspaper editorial See city. Cong.Rec. ceptional —even monopoly economic the risk of a shared (1970) (Statement Fong) (“[I]t of Sen. [is] thought unusual econom- —because increasingly many newspapers difficult for industry compelled ics community in the same under to coexist Oth- exception to the antitrust laws. competi- of all-out economic conditions erwise, newspaper may achieve a stun- tion.”). Accordingly, the AU found that (politi- ning economic and editorial fusion of “strategies pursued by the Free Press cal) actual and power due to the loss of perceived manage- ... were News Judge’s The potential competition. Chief economically given rational ment as premise of quarrel is with the basic thus junior history papers of the demise of the statute itself. spiral.” had entered the which downward present Report, 112-13. if the Although appellants did not AU Even Detroit gloss Judge exception prevailing that the Chief market was an to the theoretical they rely puts argument, (and Press) did pattern, on their the News —as Judge that, does the Chief possibly could not know and therefore —on De- hypothetically General’s statement gamble paper rationally neither papers. That support both troit could assumption. such an big so if—and this is if—both would be see, short, not do how the Chief prices. their raised Judge’s interposition theory of economic General, however, predicted never how supports her contention that long last hypothetical situation would General’s construction of the statute or his might There is the or how it be enforced.3 prediction as to the Detroit News’ behavior S.Rep. realized, No. rub. As is unreasonable. (1969), Cong., one of 91st 1st Sess. Judge Wald’s second contention Chief competing newspapers any American (inconsistent first) with her assumes that it city all too often to achieve a domi- seems would reasonable for the News to con- newspa- position, nant means that a tinue below cost order to advantage in a who holds an two owner business, argues the Free Press out of if he newspaper city might be irrational illegal preda- constitutes that such behavior attempt to drive his out of something “perilously il- Otherwise, tion —or close” to might up business. he wake legal predation. difficulty with this day he lost to realize that had couched, argument, no superior already himself matter how position and was words, by appellant was it not raised in this spiral. In other downward court,4 unregulated long-term by any party corn- it not raised —in- Appellants merely puzzling. contended market is so Statement {see Wald, Judge Chief at 6 n. that the of the NPA would allow quote management 3. The AU did large corporate newspaper chains to obtain saying Free Press as that the could be- pursuing aggressive compe- JOAs a course of "competitive pricing come becomes Only predation, tition. and its concern was that the amicus mentioned with other markets and consistent approval of the Detroit country.” around the See Statement of Chief illegal pricing would lead to Little Rock. Wald, But, Judge explained at 1. as we in our Amicus asserted that the Arkansas Gazette had opinion, all the General said was that engaged “unprecedented” action in hypothetical some scheme could (which hopes obtaining suggests a JOA papers. might appropriate place Little be an Rock Judge's argument). advance the Chief The ami- public cus filed no comments on the Detroit Nevertheless, General and eluding division—before the antitrust Indeed, might ponder his Antitrust Division Chief Attorney General. ALT or the suggested approach to unneces- Wald’s specifically noted that was AU policy paper antitrust enforcement predation would sary to consider whether Or, statute, modify position accordingly. their in a analysis because it affect his case, party might argu- Report, make argued in this case. was not That, Judge suggests. com- And he observed that ment however, predation deny that de- is all the more reason to petition short —even competitors out of signed prop- to drive business here. If and when we are irrelevant, “neither erly since the NPA —was faced with the contentions the Chief advances, nor firms determined penalize[s] we can decide their cor- reward[s] competition.” event, eliminate their Id. might In rectness. this case specifically challenged either of party No any enduring impact. not have any stage of the AU at those observations WALD, course, with whom is, proceedings. It black in these EDWARDS, MIKVA and HARRY T. argument made be- letter law that an not Judges, concur, dissenting agency cannot be the basis of a fore an denial of en banc: challenge Unemployment legal appeal. Aragon, v. 329 Compensation Comm’n split panel’s approval of the Attor- 245, 251, 91 L.Ed. U.S. 67 S.Ct. ney General’s decision to allow the Joint (1946); 136 United States v. L.A. Tucker (“JOA”) Operating Agreement between the Trucklines, 67, 69, 73 U.S. S.Ct. Detroit Free Press and Detroit News (1952); Kreps, 551 97 L.Ed. 54 Safir single turns on the reasonableness of a (D.C.Cir.1977)(“[Ajppellant is F.2d prediction: in that even the absence of a regard points not free to raise without thereof, any possibility JOA News stage they argued were at some

whether continue to will sustain- process.”).5 the administrative ing significant losses itself and predation argument, Majority Free Press from Detroit. Wald’s See moreover, Opinion, 1285, 1290, 1291, implicates good deal more than 868 F.2d 1294- Attorney approach Although General’s to Joint 95. Preserva- Operating Agreements. “failing newspa- If of a tion Act’s definition per” ambiguous, Congress to conclude that he must have General were would approve stronger paper if the had meant for the term to make economic sense; failing newspa- engaged in below cost for some indeed it defined a JOA, danger period of the one “in before submission finan- 1802(5) (em- responsibility he would have to assume the cial 15 U.S.C.A. § failure.” added). preventing “predation.” phasis Other- Thus Chevron U.S.A. v. wise, would, Council, newspapers like the News for Natural Resources Defense above, engage the reasons in 81 L.Ed.2d 694 described U.S. (1984) requires such behavior to achieve dominance in their at a minimum that the At- regard By torney prediction markets without to a JOA. General’s about suggesting pricing practices newspaper prices that the News’ Detroit be economical- “illegal predation,” ly were that the economic reasonable. believe words, implicitly preempt other seeks to reasonableness prosecutorial prediction, weight decisions of the Executive on which the full of his rests, Branch. decision to allow the JOA is suffi- Ginsburg JOA with the General and did not seek B. focused on in her dissent—that proceeding. major exceptions to intervene in that to the antitrust laws should be nar- De- rowly Mayor Young construed. troit-area unions and of General, Detroit intervene before the 48.11, ap- Perhaps appellants predation 28 C.F.R. but did not did not raise the Moreover, (in peal. appellants only barely argument they here because knew was sentence) made the Ruth raised before the General. without future, to warrant prospect of a treat- inite ciently dubious finding ment. But to this critical JOA. also (see Majority Opin- Attorney General happen prediction about would His what pric- merely ion at asserted that such economic of a JOA makes no in the absence ing not reflect “unsound business would findings he light of the factual sense in judgment” response to such and that Crucially, true. accepted as himself pricing “it neither counterintui- accepted the AU's basic be Attorney General fifth-largest finding contradictory” for the Free Press tive nor country, support in the paper market enough, Surely to shut it cannot down. if, two Chevron, words prong even under the second management, “competitive of Free Press that, just say for the and consistent pricing becomes more, and no view AU’s country,” around the other markets with strong Antitrust dis- and the Division’s 85, i.e., competi- if these Report at agreement prediction. with engage do not continue deliber- tors principles economic Classic and basic an- pricing strategies ately unprofitable any run counter titrust law part predatory objective on the sophisticated pursue firms will below- the other into failure so as to paper to drive pricing strategies long cost over the haul. a JOA.1 The secure See, e.g., Predatory Pricing Revis- McGee, course, different could have substituted ited, (1980); 23 J.L. & Econ. 291-300 findings ability about factual Paradox, The Antitrust Bork, Detroit market Turner, Predatory Pric- (1978); Areeda & Thus, he did not.2 his conclusion that ing Practices and Related Under Section one newspaper has a Act, the Sherman 697, assumption Harv.L.Rev. depends on the (1975). pricing (Newspaper giants for the indef- 697-704 like below-cost approval” AU and 1. The found that the Detroit situation was of JOA that dominance was “junior” newspaper valiantly trying sought by exploiting advantages not one of a cost market, Majority to retain a foothold see in the cutting price Consequently, costs. “as below 1289, Opinion at and ele- that the characteristic might expect, one Detroit cannot sustain two pushing ments into a “downward profitable papers practically both are be- when spiral,” Majority Opinion see and 1291-1292 ing given away." Report AU n. not exist in Detroit. See In the Press, Matter of Detroit Free Recommended De- (and Silberman in his concurrence (Office Attorney cision 95-100 the majority opinion) appears the to contest this 44-03-24-8, 29, 1987) (“AU No. December Re- finding. explicitly But the AU basic factual port") (discussing relationship between scale rejected there the was evidence economies, spiral junior paper downward and monopoly. that Detroit is a natural And the concerns); (finding relationship id. at 112-113 Attorney “plainly General stated: The Free Press Detroit). Judge not to exist Silberman in his does not face external market forces—such concurrence in the denial of suggests en banc rising competition from other out- media newspapers that it is sufficient that the siphoning lets and the off of readers expressed junior newspaper prob- a belief in the region metropolitan to the suburbs —that would lem even if there were no facts to show this was a rational portend almost certain failure. Nor ... do belief; quote from the AU’s full marketplace declines in there exist overall ad- report strategies pursued is: "The vertising newspaper circulation in Detroit profit- Press and News—future ability domination traditionally junior propel of the sort that profits per- at the cost of current —were proverbial spi- into the “downward by management economically ceived given rational Attorney ral" that is fatal survival." General's history junior papers of the demise of Order, (August No. Decision and 44-03-24-8 spiral. which had entered the downward There Moreover, added). (emphasis at 8 Free however, convincing proof, is no that the eco- management Press itself stated that "one of the underlying history partic- nomic conditions — prerequisites returning profitability ularly applica- scale economies—is —for effects of restoring pricing large papers.” Report ble to these both AU —is market,”; added). (emphasis "projected in the in 1983 it from an economic model that under conditions of ‘nor- explicitly objectives The AU found that "[t]he competition’ profitability pur- malized the Free Press would earn of dominance and future were (and parents) per year sued $1.5 $5 their million and the News million.” Report belief that failure too had its reward in the form at 85-86. certainly quali- General’s economic Knight-Ridder and Gannett precisely Yet this is sophisticated). warring newspapers fy as about the fate of the Gener- predicate on which a second look deserves will, that the News had to build his case: al court. Neither the General nor denied, price its even the JOA is panel provides any why reasons stan- the deliberate and unabashed costs with principles dard economic are not relevant Press; and that goal strangling the Free this case. heavy far into incur losses the News will ignore Nor Ido see how a court can (the AU found that would the future fact that the economic behavior years seven to ten to eliminate take at least grant immunity fashion) Free Press in this on the perilously rests comes close if it does not hope monopoly profits at the ephemeral actually practice constitute5 “a inimical to line, assuming, is, that its end of the laws,” purpose of the antitrust id. at goes unchallenged by a monopoly status 107 S.Ct. at 493.6 The seeking to share new or revived rival Preservation Act authorizes the spoils.3 prose General to immunize from antitrust Supreme only recently has Court mergers cution otherwise unlawful be “predatory pricing schemes reiterated that newspapers. tween two Gen tried, rarely rarely and even more suc are eral’s decision here immunity extends that cessful,” Electric Industrial Matsushita beyond merger to sustained below-cost Corp., Zenith Radio 475 U.S. Co. v. reducing healthy aimed at 106 S.Ct. L.Ed.2d 538 monopoly press. market to a In (1986) (holding summary judgment appro the view of the General himself insufficient to priate where evidence over the aim of at one of the least come theoretical economic obstacles to prices to cut so as to eliminate a rival conspiracy), they are and that newspaper, enduring huge “impossible successfully in to maintain” bargain, attaining monopo but thereafter any suppose the absence “reason ly. The notion that intended the especially into the relevant market is Newspaper Preservation Act to condone difficult,” id. at 591 n. 106 S.Ct. at 1359 sufficiently startling is a such result 15; Cargill, also Inc. v. Monfort of require perusal by an court. Colorado, 104, 121 17, 107 to Inc., 479 U.S. Legislative history suggests (1986).4 495 n. 93 L.Ed.2d 427 wisdom, preserve many “reportorially In view of this common believe wanted to as agree predatory pricing urged Cargill 3. Economists is un- the Court in to find inherently unlikely predator expects competi- pricing if schemes so that a dertaken justified "denying competitors entry per se rule was tors to shut down and no new into the See, McGee, Bork, standing challenge acquisitions e.g., on the basis to market to occur. Areeda Turner, predatory pricing analysis of theories.” 479 U.S. at supra. & This is of course available, crucially 107 S.Ct. at 495. past altered if a JOA is as the suggests. newspapers behavior of these A JOA guarantee precisely type poten- "predatory pricing” that a 5. The AU observed that monopolist suggested]” by tial needs to ensure that its will record. “To rival "at least illus- Matsushita, trate, disappear good. infra, question for See it was a close as to whether the designated U.S. at 591 n. 15 and n. 106 S.Ct. at 1359 n. Free Press or News would be (barriers ‘failing paper’ purposes filing n. 16 to can the JOA 15 and secure future profits recoup Finding application. needed to losses sustained in 43. But News’s discounting permanently). from market arose from such severe that Gannett argue expressed potential problem It is not at all "inconsistent" to that it is concern ‘the over possible unprofitable price-cutting illegal advertising into will oc- contracts entered protects during monopoly cur when a JOA a future the News and their advertisers their war ” unlikely protection Report that such behavior is if such for ad volume.' AU at 122-23 n. 303. will be denied. 6. Whether the General would seek to Indeed, Doug- prosecute independently then Assistant such behavior under 4. Ginsburg separate question, las H. and Solicitor General Fried is a antitrust laws arguing government construing for the as amicus curiae need not be answered in the statute. competitive” and independent (congres- SINGER, al., Appellants, 15 U.S.C.A. possible,

as B. Arlene et § but, recogniz- policy), sional declaration markets in which two ing that some & LUCHS SHANNON presently existed could more COMPANY, et al. daily, sought retain only one No. 87-7053. disappearing paper’s voice of the much Where, however, indepen- possible. Appeals, United States Court compete legally stay dent District Columbia Circuit. alive, condoning resort 3, 1989. March distinguish record is hard to which on the in order illegal predatory pricing, JOA, protected by a monopoly secure a

will, ironically, make it even more disappear than newspapers will passed been first

Act had never immunity

place. that kind of “ef- Whether policy purpose” of the

fectuate[s] 1803(b),

Act, 15 U.S.C.A. 15 U.S.C.A. § cf. 1803(c)(immunity preda- not to extend operating newspapers), jointly

tory acts of enough issue to merit a full important

is an reasons, I press.7 For these dissent

court deny

from the decision en

banc. suggests approval Silberman that we cannot con- duct:" General's "[t]he consequence potentially predatory JOA ... rewards sider conduct.” by appel- [interpretation] Newspaper because "it raised "The convert[s] decision was not was, however, appel- preserving a vehicle for lants.” It raised Preservation Act from Appellants journalistic competition lants. stated in their brief "as where would other- explained exist detail in the amicus curiae wise not into a vehicle to assist eliminat- in.more Inc., ing competitive newspapers Newspapers, brief of Little Rock even [the Attor- where both ney General’s otherwise could Act] survive.... danger deep pocket newspaper ap- allow owners to evident from the obtain corporation proval JOA almost at will such here is that it ... endorses [A] Knight-Ridder anticompetitive-tactics could used." Brief Gannett or afford for Amicus losses, 7; purchase Newspapers simply Little short-term could a com- Curiae Rock id. at 13. clearly peting newspaper, result and launch a war "Such a gress.” Reply not intended Con- reducing advertising prices, Appellants at circulation and Brief of It hardly implicates controversy separa- to do which would force its case or Appellants powers point cutting prices As the out that same." Brief for ami- tion of argu- explained primary objective current with the cus brief further in its sustain of elim- Rock) (certainly inating securing monopoly, "preda- ment not limited to Little a rival and Rock, tory Little “The Act Should Not conduct" it was termed Preservation Predatory Encourage presumably illegal Be Construed To Con- under the antitrust laws.

Case Details

Case Name: Michigan Citizens for an Independent Press v. Richard Thornburgh, United States Attorney General

Court Name: Court of Appeals for the D.C. Circuit

Date Published: Feb 24, 1989

Citation: 868 F.2d 1300

Docket Number: 88-5286

Court Abbreviation: D.C. Cir.