MICHIGAN CITIZENS FOR AN INDEPENDENT PRESS, ET AL., PETITIONERS V.
DICK THORNBURGH, ATTORNEY GENERAL OF THE UNITED STATES, ET AL.

   No. 88-1640

   In the Supreme Court of the United States

   October Term, 1989

   On Writ of Certiorari to the United States Court of Appeals for the
District of Columbia Circuit

   Brief for the Federal Respondent

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Statutory provisions involved
   Qestion Presented
   Statement
      A. The background and statutory scheme of the
         Newspaper Preservation Act
      B. The administrative proceedings regarding the
         application of the Detroit Free Press and The
         Detroit News for approval of the joint operating
         arrangement
      C. The decisions of the district court and the
         court of appeals upholding the Attorney
         General's approval of the joint operating
         arrangement
   Summary of argument
   Argument:
      The Attorney General's approval of the application
      filed by the Detroit Free Press and The Detroit
      News for a joint operating arrangement is fully
      consistent with the statutory requirements of the
      Newspaper Preservation Act
        I. The Newspaper Preservation Act authorizes
           the Attorney General to approve an application
           for a joint operating arrangement if at
           least one of the newspaper applicants is a
           "failing newspaper" and approval of the application
           would "effectuate the policy and purpose" of the Act
       II. The Attorney General, applying the statutory
           standards for approval of a JOA, properly
           determined that the Detroit Free Press is a
           failing newspaper and that the proposed JOA
           "would effectuate the policy and purpose" of
           the Newspaper Preservation Act
      III. Because the Attorney General properly applied
           the statutory framework of the
           Newspaper Preservation Act to the particular
           facts of the Detroit market, no Chevron issue
           is presented
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 166a-197a) is
reported at 868 F.2d 1285;  the opinions filed on denial of the
petition for rehearing (Pet. App. 198a-211a) are reported at 868 F.2d
1300.  The opinion of the district court (Pet. App. 149a-163a) is
reported at 695 F. Supp. 1216.  The decision of the Attorney General
(Pet. App. 136a-147a) is unreported.

                             JURISDICTION

   The judgment of the court of appeals was entered on January 27,
1989.  A petition for rehearing was denied on February 24, 1989 (Pet.
App. 198a-199a).  The petition for a writ of certiorari was filed on
April 5, 1989, and was granted on May 1, 1989.  The jurisdiction of
this Court is invoked under 28 U.S.C. 1254(1).

                     STATUTORY PROVISIONS INVOLVED

   Title 15, United States Code, Section 1801, provides:

         In the public interest of maintaining a newspaper press
      editorially and reportorially independent and competitive in all
      parts of the United States, it is hereby declared to be the
      public policy of the United States to preserve the publication
      of newspapers in any city, community, or metropolitan area where
      a joint operating arrangement has been heretofore entered into
      because of economic distress or is hereafter effected in
      accordance with the provisions of this chapter.

   Title 15, United States Code, Section 1802, provides in pertinent
part:

                      * * * * *

         (5) the term "failing newspaper" means a newspaper
      publication which, regardless of its ownership or affiliations,
      is in probable danger of financial failure.

   Title 15, United States Code, Section 1803, provides in pertinent
part:

                      * * * * *

         (b) Written consent for future joint operating arrangements

         It shall be unlawful for any person to enter into, perform,
      or enforce a joint operating arrangement, not already in effect,
      except with the prior written consent of the Attorney General of
      the United States.  Prior to granting such approval, the
      Attorney General shall determine that not more than one of the
      newspaper publications involved in the arrangement is a
      publication other than a failing newspaper, and that approval of
      such arrangement would effectuate the policy and purpose of this
      chapter.

                          QUESTION PRESENTED

   Whether the Attorney General of the United States acted arbitrarily
or capriciously in approving the application filed by the Detroit Free
Press and The Detroit News for a joint newspaper operating arrangement
under the Newspaper Preservation Act, 15 U.S.C. 1801 et seq., after
concluding that the Free Press, "regardless of its ownership or
affiliations, is in probable danger of financial failure" (15 U.S.C.
1802(5)), and that approval of the application would further "the
public interest of maintaining a newspaper press editorially and
reportorially independent and competitive in all parts of the United
States" (15 U.S.C. 1801).

                               STATEMENT

   Petitioners, two citizen groups and six private individuals, filed
this action against the Attorney General of the United States and two
newspapers, the Detroit Free Press and The Detroit News, in the United
States District Court for the District of Columbia.  Petitioners
challenged the Attorney General's approval of the joint operating
arrangement between the Free Press and the News as violating the
Newspaper Preservation Act, 15 U.S.C. 1801 et seq., and the
Administrative Procedure Act, 5 U.S.C. 706.  On cross-motions for
summary judgment, the district court upheld the Attorney General's
decision.  The court of appeals affirmed that judgment, finding that
the Attorney General had properly applied the statutory framework to
the facts presented.

   A. The Background and Statutory Scheme of the Newspaper
Preservation Act

   1. Over the last 80 years, metropolitan newspapers in the United
States have failed at an alarming rate.  As a result, a large majority
of American communities are served today by a single local newspaper.
See H.R. Rep. No. 1193, 91st Cong., 2d Sess. 3-4 (1970);  E. Hynds,
American Newspapers in the 1980s 139 (1980) ("By the late 1970s fewer
than four percent of the nation's cities had competing newspapers.").

   To combat this trend, endangered newspapers began in the 1930s to
form "joint operating arrangements" (JOAs) with their competitors.
Under the typical JOA, each newspaper reduces its costs by combining
the business aspects of publishing, but retains its own editorial and
news staffs and policies.  H.R. Rep. No. 1193, supra, at 3-4.  When
these arrangements were challenged as unreasonable restraints of trade
under the federal antitrust laws, the courts generally upheld the JOA
under the "failing company" defense, a judicially-created doctrine
that permits otherwise illegal business agreements to go forward when
one of the firms involved is on the brink of collapse, its prospects
for reorganization are dim or nonexistent, and no other noncompeting
buyers are available.  See, e.g., American Press Ass'n v. United
States, 245 F. 91, 93-94 (7th Cir. 1917);  see also International Shoe
Co. v. FTC, 280 U.S. 291, 299-303 (1930).  As a consequence, the JOA
mechanism saved a number of otherwise failing newspapers.  By 1966, 22
such joint newspaper operating arrangements existed in the United
States.  H.R. Rep. No. 1193, supra, at 4-5.

   2. In 1968, however, the Department of Justice, in an action filed
in the District of Arizona, challenged the JOA between the two
newspapers serving Tucson, Arizona, claiming that the arrangement
constituted an illegal merger, in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18, as well as a restraint on trade and a
monopoly, in violation of Sections 1 and 2 of the Sherman Act, 15
U.S.C. 1 and 2.  The district court sustained the Department's
challenge and declared the JOA illegal;  the court accordingly ordered
the newspapers to dismantle their joint operations and reestablish two
separate and independent newspapers.  United States v. Citizen
Publishing Co., 280 F. Supp. 978 (D. Ariz. 1968).

   On direct appeal to this Court, the judgment was affirmed.  Citizen
Publishing Co. v. United States, 394 U.S. 131 (1969).  This Court held
that the Tucson JOA constituted an illegal merger under the Clayton
Act, and involved prohibited price fixing, profit pooling, market
allocation, and monopolization under the Sherman Act.  In so holding,
the Court strictly applied the "failing company" defense.  394 U.S. at
136-139.  The Court found no evidence that the allegedly failing
newspaper was considering liquidation, soliciting a purchaser, or
grasping at the JOA as a "last straw" (id. at 137).  Furthermore,
since the failing newspaper's competitor had been willing to join
forces and split future profits, the newspaper could not be considered
to be on "the brink of collapse," and thus could not qualify as a
"failing" company (id. at 137-138).

   3. In the meantime, Congress, in response to the district court's
ruling, had convened hearings to determine the proper standard for
allowing newspapers to enter into JOAs.  /1/ Within two months of the
Court's decision in Citizen Publishing, Congress passed legislation to
overturn that decision.  See H.R. Rep. No. 1193, supra, at 10.  On
July 24, 1970, the President signed into law the Newspaper
Preservation Act, 15 U.S.C. 1801 et seq.

   In enacting the Newspaper Preservation Act, Congress recognized
that unique economic forces affecting the newspaper industry make it
difficult for two major newspapers to coexist in one metropolitan
market.  S. Rep. No. 535, 91st Cong., 1st Sess. 4 (1969).
Specifically, Congress was aware of the interdependence of circulation
and advertising revenue in the newspaper industry.  Increases in
circulation attract additional advertisers;  loss of readership, on
the other hand, pushes advertisers away -- which, in turn, tends to
cause further loss in circulation.  As a result of this phenomenon, in
a two-newspaper market a newspaper that takes a decisive lead over its
rival in circulation and advertising will almost inevitably strengthen
its competitive position.  Conversely, readers and advertisers will
invariably abandon a newspaper that falls markedly behind.  Thus, a
newspaper that loses a significant percentage of market share to its
rival may become trapped in a "downward spiral" of declining
circulation and advertising that eventually leads to financial ruin.
/2/

   Congress determined that these unique economic factors, together
with newspapers' vital role in society, called for specific federal
action to preserve "(f)inancially strong newspapers independent of the
commercial pressures which might inhibit their ability to take
courageous and unpopular stands on public issues * * *." S. Rep. No.
535, supra, at 3.  To accomplish this goal, Congress expressly
permitted newspapers to enter into joint business operations before
they reach the point of dire financial distress required by Citizen
Publishing, provided they receive the prior approval of the Attorney
General of the United States.  See generally Committee for an
Independent P-I v. Hearst Corp., 704 F.2d 467, 473-474 (9th Cir.)
(description of legislative history), cert. denied, 464 U.S. 892
(1983).

   The Act broadly authorizes the Attorney General to approve a new
JOA if not more than one of the newspaper applicants is other than a
"failing newspaper," and approval of a JOA "would effectuate the
policy and purpose of this (Act)." 15 U.S.C. 1803(b).  /3/ The Act
defines "failing newspaper" as one that "regardless of its ownership
or affiliations, is in probable danger of financial failure." 15
U.S.C. 1802(5).  Approval by the Attorney General confers only a
limited exemption from federal antitrust laws.  Newspapers entering
into JOAs must maintain separate "editorial or reportorial staffs" and
independent "editorial policies," 15 U.S.C. 1802(2), and may not
engage in "any predatory pricing, any predatory practice, or any other
conduct * * * which would be unlawful under any antitrust law if
engaged in by a single entity," 15 U.S.C. 1803(c).  The Act, however,
does permit newspapers to take joint action with regard to printing,
time and method of publication, production, advertising and
circulation rates, distribution and solicitation, and revenue
distribution.  15 U.S.C. 1802(2).

   B. The Administrative Proceedings Regarding the Application of the
Detroit Free Press and The Detroit News for Approval of the Joint
Operating Arrangement

   1. In May 1986, the Detroit Free Press and The Detroit News filed
an application with the Attorney General for approval to operate under
a JOA.  That application identified the Free Press as a paper that was
in probable danger of financial failure.  /4/ The proposed JOA
provides that the Free Press will publish a weekday morning edition
and the News will publish a separate weekday afternoon edition;  one
edition will be published on Saturday and Sunday, "with each paper
assuming separate editorial and news responsibilities" (Pet. App. 115a
(footnote omitted)).  The two newspapers will maintain separate
editorial and reportorial staffs, but will form a "partnership * * *
which will control all business, commercial, and production aspects of
publishing" each newspaper (id. at 116a).

   In July 1986, the Assistant Attorney General for the Antitrust
Division recommended against approval of the proposed JOA at that
time, but also suggested that the Attorney General convene an
administrative hearing "to resolve the material issues of fact raised
by the Application" (J.A. 93).  /5/ The Attorney General accepted the
recommendation, assigned the matter to an administrative law judge,
and ordered the ALJ to conduct a hearing in order to develop the
record in several specific areas.  /6/ The Attorney General designated
the major relevant newspaper unions and the Mayor of Detroit as
intervenors in the proceedings.  The two newspapers and the Assistant
Attorney General for the Antitrust Division joined them as parties to
the administrative hearing.  Pet. App. 1a-3a, 150a-151a, 173a.  /7/

   2. The ALJ held a lengthy hearing and developed an extensive
evidentiary record.  The record shows that Detroit is the nation's
fifth largest newspaper market, and that for almost three decades the
Free Press and the News have competed fiercely to become the dominant
paper (Pet. App. 15a, 119a, 139a).  The competition escalated during
the past 15 years;  in 1976, for example, the News began publishing a
morning edition in addition to its afternoon edition, thus challenging
the Free Press head on.  In order to gain an advantage in this direct
competition, each newspaper invested millions of dollars in new
printing facilities at a time when the Detroit metropolitan area was
suffering an economic recession.  Pet. App. 16a-18a.

   This administrative record further indicates that the two papers
competed strenuously not only to increase profits, but also to avoid
the "irreversible downward spiral" that has claimed many "second"
newspapers in metropolitan areas.  Pet. App. 19a, 120a.  Both papers
sought to increase circulation and advertising in order to become the
securely positioned "dominant paper" (id. at 139a).  In part because
this vigorous competition for readers and advertisers occurred during
a period of economic recession in Detroit, the newspapers continued to
charge comparatively low circulation and advertising prices.  As a
result, each paper suffered sizeable and persistent operating losses
throughout the 1980s.  The Free Press's losses, however, were greater.
 Between 1979 and 1986, the Free Press sustained increasing operating
losses amounting in total to $81 million, and consistently trailed the
News "in most circulation, revenue and (advertising) linage measures"
(Pet. App. 140a).  Indeed, in 1986, the News generated $61 million
more in advertising revenue than did the Free Press.  The Free Press
also lost money from adopting market strategies aimed at improving its
market position over the long term.  Pet. App. 17a-19a, 139a-141a.

   The administrative record also shows that, unlike the circumstances
surrounding past JOA applications, the Free Press has not yet fallen
into a "downward spiral" toward inevitable failure (Pet. App. 138a).
Instead, the Free Press and the News are trapped in a stalemate --
each paper shares the market, but each consistently sustains
substantial losses in an effort to maintain its market share (with the
Free Press bearing the brunt of those losses).  Both newspapers could
become profitable if they together raised prices and eliminated
discounting.  The antitrust laws, however, bar independent
competitors, including newspapers, from taking such concerted action
to raise their prices.  Pet. App. 140a, 145a.  Moreover, each paper
reasonably fears that raising its prices unilaterally would shift
readers and advertisers to the opposition.  Id. at 87a-88a, 90a n.182;
 but see id. at 95a-98a.  The record in fact confirms that in the
Detroit market a small unilateral increase in price can cause an
immediate and sizeable decrease in circulation.  J.A. 202, 584;  Exh.
IX 198-Z8.  In sum, the record shows that since neither paper can
raise its prices without regard to the conduct of the other, neither
one is in a position to take unilateral action to become profitable.
Pet. App. 141a.

   3. In December 1987, the ALJ recommended against approving the JOA,
concluding that the newspapers had failed to prove that "losses * * *
are traceable to an irreversible market condition which will probably
lead to domination and the downward spiral" (Pet. App. 129a).  The ALJ
noted the current stalemate, the precarious financial condition of the
Free Press, the testimony of Alvah Chapman, the Chairman of
Knight-Ridder, that he would recommend closing the Free Press if the
JOA were denied, and the testimony of various Gannett officials that
if the JOA were denied, the company would not jeopardize its
circulation and advertising advantage by unilaterally raising prices
at the News.  The ALJ decided, nevertheless, that this evidence did
not establish an irreversible trend towards market dominance by one of
the newspapers.  Id. at 130a-131a.  In his view, "(i)t remains to be
seen whether without a JOA these interdependent firms will modify
their competitive strategies" (id. at 132a).  Under those
circumstances, he recommended that the "free market itself" should be
permitted to take its course (ibid.).

   4. On August 8, 1988, the Attorney General, having "accepted as
accurate the fact findings of the Administrative Law Judge, but
differ(ing) for the reasons stated with his ultimate conclusion as to
where those facts lead" (Pet. App. 147a), approved the JOA.  At the
outset, the Attorney General expressly noted the "two overarching
policy objectives" of the Newspaper Preservation Act:  "(T)he more
general pro-competitive objective of the antitrust laws, and the
specific objective of preserving editorially and reportorially
independent and competitive newspapers" (Pet. App. 144a (internal
quotation marks and citation omitted)).  He further explained that
"Congress recognized that neither of these purposes is advanced when a
single newspaper obtains a monopoly in any given market" (id. at
144a-145a).

   The Attorney General recognized that to qualify for a JOA, at least
one of the two newspapers had to be a "failing newspaper," which the
statute defines as being in "probable danger of financial failure."
Pet. App. 140a-141a.  Following his predecessor's decision, /8/ the
Attorney General stated that this statutory standard "must be
addressed as a matter of probabilities, not certainties" (id. at 141a
(internal quotation marks and citation omitted)).  And, agreeing with
Committee for an Independent P-I v. Hearst Corp., 704 F.2d 467, 474
(9th Cir.), cert. denied, 464 U.S. 892 (1983), the only court of
appeals decision construing the Newspaper Preservation Act, the
Attorney General made clear that although the "danger of financial
failure" standard is less stringent than the "failing company"
standard of Citizen Publishing, it is more exacting than the "not
likely to remain or become financially sound" standard rejected by
Congress during consideration of the Act.  Pet. App. 142a.

   The Attorney General recognized that the Free Press was sustaining
mounting losses.  Pet. App. 141a.  Although acknowledging the absence
of a "'downward spiral,'" the Attorney General found that "it is
unquestionably the case that the Free Press is locked into a loss
situation involving millions of dollars each year for the foreseeable
future, with no realistic prospect of extricating itself" (id. at
142a).  "(W)ere it not for a major infusion of millions of dollars by
its parent," the Attorney General stated, "there is every reason to
assume that the Free Press would have failed long ago" (id. at
142a-143a).

   Turning to the contention that both papers could become profitable
simply by raising prices, the Attorney General noted first that the
Free Press was already the more expensive paper in both circulation
and advertising prices.  Pet. App. 143a.  The Attorney General
explained that the two newspapers could become profitable only by a
concerted price raise that, without the JOA, would be "entirely
improper" (id. at 145a).  He then observed that the owners of the News
had testified that the newspaper would not raise its prices without
joint action with the Free Press.  Although the ALJ had questioned
this testimony by Gannett officials, the Attorney General found that
it "hardly reflects unsound business judgment" (id. at 143a).  To the
contrary, it would be reasonable for the News to hold to its current
pricing strategy in order to maintain its circulation and advertising
advantages over the Free Press (id. at 143a-144a, 147a).

   The Attorney General also noted the testimony of the Chairman of
Knight-Ridder (the firm that owns the Free Press) that he would
recommend closing the newspaper if the JOA were denied.  Although
declining to attach "undue weight" to this testimony, the Attorney
General recognized that it was a "prediction (that) cannot be wholly
disregarded" (Pet. App. 144a).  Since the Free Press had no unilateral
means to extricate itself from its current loss position, the Attorney
General determined that it "would be neither counterintuitive nor
contradictory" for Knight-Ridder to close the Free Press (ibid.).  /9/

   The Attorney General accordingly found that the Free Press had no
reasonable prospect of emerging from its position of intractable
losses, and that, absent the intervention of the JOA, Detroit would
soon have only one editorial voice.  Pet. App. 142a, 145a-146a.  On
this record, the Attorney General determined that "the danger of
financial failure, if not imminent, certainly seems 'probable'" (id.
at 141a), and thus concluded that the Free Press qualified as a
"failing newspaper" (id. at 144a).

   The Attorney General then turned to the question whether approval
of the JOA would effectuate the policy and purpose of the Act.  In
that inquiry, he specifically considered whether the newspapers should
be denied permission to work under the JOA because they "openly
pursued the JOA option over several years and saw it as a means of
avoiding financial failure" (Pet. App. 145a).  He found that the
marketing strategy adopted by the newspapers had been in place for
nearly ten years, and that Knight-Ridder's heavy investment in the
Free Press during that period "belies the notion that it was
principally pursuing any end other than market domination" (id. at
146a).  Furthermore, the Attorney General accepted the ALJ's finding
that the Free Press's situation has not resulted from "improper
marketing practices or culpable mismanagement" (id. at 145a).  The
Attorney General thus determined that the current stalemated loss
position was the result of "(k)een competition aimed at market
domination and future profitability -- competition waged energetically
but both responsibly and properly" (ibid.), and not the result of an
improper quest for the safe harbor of a JOA.

   Finally, the Attorney General concluded that the purposes of the
Act would be served by approving the JOA because two independent
editorial voices would be preserved in Detroit, "an outcome that does
not appear to be in the future otherwise" (Pet. App. 146a).  Having
determined that, on the record presented, the Free Press and the News
had satisfied the statutory criteria, the Attorney General approved
the application for the JOA.

   C. The Decisions of the District Court and the Court of Appeals
Upholding the Attorney General's Approval of the Joint Operating
Arrangement

   1. After the Attorney General rendered his decision, petitioners,
who had not participated in the proceedings before the ALJ or the
Attorney General, filed this action in the United States District
Court for the District of Columbia, seeking judicial review of the
Attorney General's decision under the Administrative Procedure Act
(APA), 5 U.S.C. 551 et seq.  As a threshold matter, the district court
held that the Attorney General's approval of the JOA must be reviewed
under the "arbitrary and capricious standard" set forth in the APA
(Pet. App. 153a).  Under that standard of review, the court upheld the
Attorney General's ruling that a newspaper need not show "the
traditional downward spiral" in order to qualify as a "failing
newspaper" under the Act (id. at 155a).  Similarly, the court
concluded that the Attorney General had "presented ample support * * *
for his finding that the Free Press is both 'suffering losses which
more than likely cannot be reversed' and is in 'probable danger of
financial failure'" (id. at 156a).

   The district court rejected petitioners' contentions that the
Attorney General erred in concluding that the News would not raise its
prices unilaterally if the JOA were denied, and that the Attorney
General gave undue weight to testimony that the Chief Executive
Officer of Knight-Ridder would recommend closing the Free Press under
such circumstances.  The court concluded that, on this record, the
Attorney General acted neither arbitrarily nor capriciously in
determining that closing of the Free Press would be a logical course
of action, given its substantial losses and market position.  Pet.
App. 157a-159a.

   The court next turned to petitioners' argument that the newspapers'
allegedly purposeful losses should have disqualified them from
entering into a JOA.  The court accepted the premise of petitioners'
claim, but found that the losses in this case were primarily the
result of each newspaper's independently seeking a secure, dominant
position in the Detroit market (Pet. App. 159a-161a).  The record
showed that the prospect of a JOA at most played only a secondary role
in the Free Press's strategic decision-making.  As the court stated,
"(i)ndeed, (the facts found by the ALJ) suggest that the newspapers
may have followed the same strategies had the JOA not been available"
(id. at 161a).  The court thus determined that the Attorney General
had acted reasonably in refusing to disqualify the newspapers when the
"losses are primarily the result of acceptable, competitive
strategies, and are only marginally prompted by the prospect of a JOA
should the strategies fail" (id. at 160a-161a).

   Finally, the district court found no merit in petitioners' claim
that the Attorney General's decision was internally inconsistent,
holding that there can be no such conflict where the Attorney General
had accepted only the ALJ's findings of fact, but not the inferences
drawn from such facts (Pet. App. 161a-162a).

   2. A divided panel of the court of appeals affirmed (Pet. App.
166a-197a).  The court first determined that the meaning of the
statutory standard "probable danger of financial failure" is "not
apparent from the statute or the legislative history" (id. at 178a).
The court thus decided that it should defer to the Attorney General's
reasonable reading of that language, which had been taken from the
Ninth Circuit's self-described "commonsense construction" in Committee
for an Independent P-I v. Hearst Corp., supra, namely, "(i)s the
newspaper suffering losses which more than likely cannot be reversed?"
(704 F.2d at 478;  see Pet. App. 175a, 178a-180a).  The court
acknowledged the "interpretive canon (of statutory construction) that
exemptions to antitrust laws -- like all exemptions -- should be
construed narrowly" (id. at 180a).  But the court concluded that this
aid to statutory construction should not be used to overturn a
reasonable agency application of the Act to a particular set of facts
(id. at 180a-181a).

   The court of appeals then examined the Attorney General's decision
and found it reasonable on the record presented.  It accordingly
upheld the Attorney General's conclusions that the News had achieved a
competitive advantage, that the News would not likely ease competitive
pressure on the Free Press by raising prices in the future if the JOA
were denied, and that there was a significant probability that the
Free Press would close in the absence of a JOA.  Pet. App. 183a-189a.
As the court stated, the Attorney General "obviously was concerned
that if he gambled on the ALJ's prediction that both newspaper(s) were
bluffing, Detroit would lose a newspaper" (id. at 187a).

   Lastly, the court of appeals concluded that the Attorney General
had sufficiently considered the potential problem that concerned the
ALJ:  that "(n)ewspapers in two newspaper towns will compete
recklessly because of a recognition that the loser will be assured a
soft landing" in the form of an approved JOA (Pet. App. 189a).  In the
court's view, the Attorney General reasonably concluded that the
present financial distress of the newspapers was the result of a long
history of fierce competition, and that the prospect of a future JOA
was neither an initial nor a principal motivating factor.  /10/ Thus,
the court held that the Attorney General had acted reasonably in
finding that market success was the principal goal of each newspaper,
and that the approval of the JOA was therefore within the purposes of
the Act.  Pet. App. 189a-190a.  /11/

   The court of appeals later denied a petition for rehearing and
suggestion for rehearing en banc (Pet. App. 198a-199a).  /12/

                          SUMMARY OF ARGUMENT

   I. The Newspaper Preservation Act, 15 U.S.C. 1801 et seq., by its
terms establishes the framework guiding the Attorney General's
consideration of an application for a joint operating arrangement.
That framework requires the Attorney General to make two independent
determinations:  first, that at least one of the newspaper applicants
is a "failing newspaper" (15 U.S.C. 1803(b)), which the Act
specifically defines as "a newspaper publication which, regardless of
its ownership or affiliations, is in probable danger of financial
failure" (15 U.S.C. 1802(5));  and second, that approval of the
application "would effectuate the policy and purpose of (the Act)" (15
U.S.C. 1803(b)).

   A. The first statutory criterion is "primarily an economic
standard:  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 (1983).  That
standard does not require the Attorney General to consider additional
non-economic policy factors such as whether granting a JOA would
reward conduct contrary to the purpose of the Act or whether approval
of the JOA would create a "roadmap" for other newspapers to follow.
To the extent such non-economic policy factors inform the Attorney
General's decision, Congress intended those factors to be taken into
account at the second stage of the inquiry, namely, where the Attorney
General determines whether approval of the application "would
effectuate the policy and purpose" of the Act (15 U.S.C. 1803(b)).

   B. Apart from the statutory prerequisite of a "failing newspaper,"
the Act calls for the Attorney General to make the discretionary and
fact specific judgment whether approving a particular application for
a JOA would further the "policy and purpose" of the Act.
Specifically, the second statutory directive requires the Attorney
General to determine whether the proposed arrangement would further
"the public interest of maintaining a newspaper press editorially and
reportorially independent and competitive" (15 U.S.C. 1801).  Thus, he
must not only weigh whether the JOA would preserve an independent
source of news and commentary in the affected newspaper market;  he
must also consider the consequences of the JOA, such as its effect on
otherwise open competition in that market.

   II. A. Petitioners do not dispute the narrow scope of review
applicable to the Attorney General's decisionmaking under the
Newspaper Preservation Act -- the "arbitrary and capricious" standard
under the Administrative Procedure Act, 5 U.S.C. 706(2)(A).  Under
that standard, a reviewing court may not substitute its judgment for
that of the congressionally designated decisionmaker;  the court must
determine only whether, within the statutory framework, there is a
"rational connection between the facts found and the choice made."
Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Auto. Ins. Co., 463
U.S. 29, 43 (1983).  This limited standard of review requires that the
Attorney General's considered decision to approve the application for
the JOA be sustained.  On the record presented, petitioners have
offered no sound basis for this Court to depart from its established
practice of accepting the concurrent assessments of an administrative
record by two lower courts.  See Universal Camera Corp. v. NLRB, 340
U.S. 474, 491 (1951).

   B. There can be no serious doubt that the Attorney General applied
the proper statutory standard to determine whether the Free Press is a
"failing newspaper" under the Newspaper Preservation Act.  In applying
this primarily economic standard, the Attorney General recognized that
he must not only examine whether current management could stave off
financial failure, but also whether there is a "probable danger of
financial failure" even with a new management team.

   Nor can it be credibly maintained that the Attorney General acted
arbitrarily and capriciously in finding that the Free Press was in
probable danger of financial failure.  He found that "the Free Press
is locked into a loss situation involving millions of dollars each
year for the foreseeable future, with no realistic prospect of
extricating itself" (Pet. App. 142a).  The Attorney General noted that
the Free Press could become profitable if the News raised its prices.
But since both newspapers were determined to maintain their market
share, the owners of the News, without the protection of a JOA with
the Free Press, would rationally refuse to raise prices (an action
which would jeopardize the paper's competitive advantage in
circulation and advertising revenue).  The Attorney General also
considered whether a change in management could prevent the Free
Press's probable financial collapse.  He found, however, that "given
the market reality in Detroit under present circumstances," the best
any management team could accomplish would be to "forestall the
financial failure of the (Free Press), not prevent it altogether" (id.
at 144a).  Fully recognizing that the Free Press has no reasonable
prospect of emerging from its position of incurring intractable
substantial losses, the Attorney General properly determined that the
newspaper satisfied the "failing newspaper" standard of the Act.

   C. The second statutory directive, which petitioners do not
seriously dispute, requires the Attorney General to weigh whether the
JOA would preserve independent and competitive editorial voices in the
affected newspaper market.  Again, no serious claim can be made that
the Attorney General acted in an arbitrary and capricious manner in
determining, on the record presented, that the JOA between the Free
Press and the News "would effectuate the policy and purpose" of the
Newspaper Preservation Act.

   Given that the Free Press is a "failing newspaper," and that the
Free Press's losses cannot be reversed except by an unlawful
collaborative price increase with the News, the Attorney General
reasonably concluded that "approval of the JOA will plainly further
the legislative purpose of preserving editorial voices in Detroit --
an outcome that does not appear to be in the future otherwise" (Pet.
App. 146a).  The Attorney General also expressly considered whether
the business strategies or practices of the Free Press and the News
should preclude approval of the JOA.  Recognizing that a JOA should
not be approved where the prospect of that safe harbor accounts for
the newspaper's demise, the Attorney General explained that the Free
Press was not brought to the "brink of financial failure through
improper marketing practices or mismanagement," but rather by "(k)een
competition aimed at market domination and future profitability" (id.
at 145a).  Furthermore, the prospect of obtaining a JOA has not fueled
the newspapers' fierce competition.  The Attorney General thus
determined that neither the Free Press nor the News had adopted
impropr business strategies or practices that would call for rejecting
their otherwise meritorious application for a JOA.

   D. Petitioners, grasping at the fact that the Free Press lowered
its prices while competing with the News, challenge the Attorney
General's decision as inconsistent with the policy and purpose of the
Act.  However, petitioners' belated focus on this element of the
record fails for several reasons.

   First, the Attorney General expressly found that the price
competition between the Free Press and the News, although fierce, was
entirely legitimate and not the result of maneuvering to qualify for a
JOA in the future.  Second, contrary to petitioners' suggestion, the
Attorney General's decision scarcely resembles a "roadmap" for
newspapers to follow to obtain JOAs by lowering their prices in order
artificially to create losses and a competitive stalemate.  Finally,
petitioners' attack on the Free Press's decision to cut prices flies
in the face of Congress's assessment of the economic factors governing
the newspaper industry.

   III. A. Contrary to petitioners' broad contention, the court of
appeals' decision upholding the Attorney General's approval of the JOA
does not misapply the principles of Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984).  Although the
court of appeals discussed the application of the Chevron doctrine to
this case, on consideration we do not believe that any Chevron issue
is presented.  In this case, the Attorney General simply set forth the
terms of the Newspaper Preservation Act, noted with approval the
common-sense interpretation given by the Ninth Circuit in Hearst, and
then proceeded to apply the Act to the particular setting surrounding
the Detroit newspaper market.  In these circumstances, there has been
no controverted interpretation of a statute by an administrative
agency that calls for application of the Chevron framework.

   B. Even if an issue regarding the proper interpretation of the Act
were presented here, the Attorney General's sound construction of the
statute, which was adopted from the Ninth Circuit's decision in
Hearst, should be upheld.  Petitioners suggest that a court should not
defer to the Attorney General's decision because he "has no technical
expertise in interpreting (the Newspaper Preservation Act)" (Br. 38).
However, since the Attorney General merely adopted the construction
initially offered by a court, that issue is not presented.  In any
event, as the court of appeals correctly recognized, Chevron is not
based solely on agency expertise (Pet. App. 182a).  As that decision
makes clear, the doctrine of deference is also based on the
established principle that the political branches of the government
should make policy choices.  See 467 U.S. at 865-866.

   Finally, petitioners claim that the court of appeals erroneously
upheld the Attorney General's decision without first requiring him to
explain that he had applied the recognized canon of statutory
construction that exceptions to antitrust laws must be narrowly
construed.  That claim is irrelevant here;  as even petitioners
concede, the Attorney General "never indicated that he intended to
reject (the canon), or that he believed he would have had the
authority to do so" (Br. 30).

                               ARGUMENT

   THE ATTORNEY GENERAL'S APPROVAL OF THE APPLICATION FILED BY THE
DETROIT FREE PRESS AND THE DETROIT NEWS FOR A JOINT OPERATING
ARRANGEMENT IS FULLY CONSISTENT WITH THE STATUTORY REQUIREMENTS OF THE
NEWSPAPER PRESERVATION ACT

   I. The Newspaper Preservation Act Authorizes The Attorney General
To Approve An Application For A Joint Operating Arrangement If At
Least One Of The Newspaper Applicants Is A "Failing Newspaper" And
Approval Of The Application Would "Effectuate The Policy And Purpose"
Of The Act

   The Newspaper Preservation Act, 15 U.S.C. 1801 et seq., by its
terms establishes the framework guiding the Attorney General's
consideration of an application for a joint operating arrangement.
That framework requires the Attorney General to make two independent
determinations:  first, that at least one of the newspaper applicants
is a "failing newspaper" (15 U.S.C. 1803(b)), which the Act
specifically defines as "a newspaper publication which, regardless of
its ownership or affiliations, is in probable danger of financial
failure" (15 U.S.C. 1802(5));  and second, that approval of the
application "would effectuate the policy and purpose of (the Act)" (15
U.S.C. 1803(b)).  At each stage of the lengthy proceedings in this
case, the reviewing authority has recognized this statutory standard
and expressly applied it to the application filed by the Detroit Free
Press and The Detroit News.  /13/ Despite their scattershot attack on
the Attorney General's approval of the JOA, petitioners' challenge
boils down to a disagreement over the application of the established
statutory standard to actions of the two newspapers and the particular
facts of the Detroit newspaper market.

   A. 1. The Act expressly defines a "failing newspaper" as one
"which, regardless of its ownership or affiliations, is in probable
danger of financial failure" (15 U.S.C. 1802(5)).  As the Ninth
Circuit has correctly observed, "(t)he probable danger standard is, by
the plain meaning of its words, primarily an economic standard:  Is
the newspaper suffering losses which more than likely cannot be
reversed?" Committee For An Independent P-I v. Hearst Corp., 704 F.2d
at 478.  That standard, however, does not limit the Attorney General's
focus to the so-called "bottom line" of a newspaper's financial
statements.  In addition, the Attorney General must scrutinize the
performance of existing management in order to determine whether new
ownership or management, without resorting to a JOA, could convert the
newspaper into a profitable enterprise.  In other words, in weighing
whether a newspaper is failing, the Attorney General must not merely
examine whether current management could stave off financial failure,
but also whether there is a "probable danger of financial failure"
even with a new management team.  See Hearst, 704 F.2d at 478-479 &
n.10.

   2. Petitioners do not seriously dispute this straightforward
definition of the "failing newspaper" standard of the Act.
Petitioners do appear to suggest (Br. 25-28) that the Attorney General
must interpret that standard to include additional non-economic policy
factors, such as whether granting a JOA would reward conduct contrary
to the purpose of the Act or whether approval of the JOA would create
a "roadmap" for other newspapers to follow (Br. 25).  This suggestion,
however, is inappropriate for two reasons.

   First, any attempt to engraft additional elements onto the "failing
newspaper" standard (as opposed to providing content to the second
statutory requirement under 15 U.S.C. 1803(b)) ignores the fact that
Congress, after debating several possible standards, specifically
defined the term "failing newspaper" as a newspaper in "probable
danger of financial failure." Indeed, petitioners themselves, in
recounting the pertinent legislative history (Br. 16-19), concede that
Congress wrestled with the question of an appropriate standard and
ultimately adopted a definition of failing newspaper less stringent
than that used by this Court in Citizens Publishing, but more exacting
than other proposed standards.  Where Congress has specifically
considered alternative definitions and has settled on a statutory
definition solely in economic terms, it would be inappropriate for a
court to impose other, non-economic factors onto that definition.
/14/

   Second, to the extent that such non-economic policy factors inform
the Attorney General's decision, Congress clearly intended these
factors to be taken into account at the second stage of the inquiry,
namely, where the Attorney General determines whether approval of the
application "would effectuate the policy and purpose" of the Act (15
U.S.C. 1803(b)).  We fully agree with petitioners that the Attorney
General must not "reward" newspapers that purposefully suffer
substantial losses over the short term in order to obtain a
potentially lucrative JOA in the long term.  This factor, however, is
appropriately considered by the Attorney General at the second stage
of the statutory determination, after he has concluded that at least
one of the newspaper applicants is in probable danger of financial
failure.

   B. Apart from the statutory prerequisite of one or more "failing
newspapers," the Newspaper Preservation Act calls for the Attorney
General to conclude that approval of the application for a joint
operating arrangement "would effectuate the policy and purpose of (the
Act)" (15 U.S.C. 1803(b)).  Under 15 U.S.C. 1801, entitled
"Congressional declaration of policy," Congress stated broadly that,
in the interest of maintaining an independent and competitive press,
it is the public policy of the United States to preserve newspapers in
"economic distress" by allowing joint operating arrangements "in
accordance with the provisions of this (Act)." This second inquiry
under the Act thus calls for the Attorney General to take into account
a number of policy factors, including whether approving a JOA would
further "the public interest of maintaining a newspaper press
editorially and reportorially independent and competitive in all parts
of the United States" (15 U.S.C. 1801).  /15/

   Given this broad statutory mandate, Congress deliberately vested
one governmental official, the Attorney General, with the
responsibility of undertaking the discretionary and fact specific
judgment of whether approving a particular application for a JOA would
further the goals of the Act.  Accordingly, the statutory directive
requires the Attorney General, in passing on an application for a JOA,
to undertake a careful policy determination.  He must not only weigh
whether the JOA would preserve an independent source of news and
commentary in the affected newspaper market;  he must also consider
the consequences of the JOA, such as its effect on otherwise open
competition in that market.

   II. The Attorney General, Applying The Statutory Standards For
Approval Of A JOA, Properly Determined That The Detroit Free Press Is
A Failing Newspaper And That The Proposed JOA "Would Effectuate The
Policy And Purpose" Of The Newspaper Preservation Act

   A. In enacting the Newspaper Preservation Act, Congress did not
include a provision for judicial review of the Attorney General's
decision either to approve or disapprove an application for a JOA.
See S. Rep. No. 535, supra, at 7.  As a result, judicial review of
that decision is available only under the Administrative Procedure
Act.  As both the district court and court of appeals correctly
concluded, since the Newspaper Preservation Act itself does not
require a hearing, the "substantial evidence" test does not apply.  5
U.S.C. 706(2)(E);  United States v. Florida East Coast Ry., 410 U.S.
224 (1973);  see Pet. App. 153a, 176a-177a & n.6.  Accordingly, as the
lower courts held, the Attorney General's decision is subject only to
review under the "arbitrary and capricious" standard, 5 U.S.C.
706(2)(A).  Pet. App. 153a, 176a-177a & n.6.

   The arbitrary and capricious standard is especially appropriate
where, as here, the decisionmaker must weigh competing statutory
commands in making his policy determination.  Under that standard, the
challenged decision must be upheld unless it conflicts with the
statute itself or is arbitrary and irrational.  5 U.S.C. 706(2)(A).
In other words, a reviewing court may not substitute its judgment for
that of the congressionally designated decisionmaker;  the court must
determine only whether, within the statutory framework, there is a
"rational connection between the facts found and the choice made."
Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Auto. Ins. Co., 463
U.S. 29, 43 (1983).  And the decision must be upheld if it "'was based
on a consideration of the relevant factors and (does not amount to) a
clear error of judgment * * * .'" Bowman Transp., Inc. v.
Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974) (quoting
Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971)).

   Moreover, this Court has long held that the responsibility for
assessing a record to determine whether an agency's decision is
reasonable lies primarily with the lower courts.  See, e.g., Mobil Oil
Corp. v. FPC, 417 U.S. 283, 310 (1974);  Universal Camera Corp. v.
NLRB, 340 U.S. 474, 491 (1951).  Thus, in Universal Camera the Court
made clear that it "will intervene only in what ought to be the rare
instance when the (substantial evidence) standard appears to have been
misapprehended or grossly misapplied" (340 U.S. at 491).  That
prudential principle should apply a fortiori to instances where both
the district court and the court of appeals concur in sustaining the
agency's decision under the more deferential arbitrary and capricious
standard.  On the record presented, petitioners have offered no sound
basis for this Court to depart from its practice of accepting the
concurrent assessments of an administrative record by two lower
courts.

   B. 1. There can be no serious doubt that the Attorney General
applied the proper statutory standard to determine whether the Free
Press is a "failing newspaper" under the Newspaper Preservation Act.
Not only did the Attorney General explicitly cite and apply the
specific statutory language that the newspaper must be "in 'probable
danger of financial failure'" (Pet. App. 140a-141a, quoting 15 U.S.C.
1802(5)), he also agreed with the formulation adopted by the Ninth
Circuit in Hearst, 704 F.2d at 478 (Pet. App. 142a).  Accordingly, in
applying this primarily economic standard, the Attorney General
recognized that, in weighing whether a newspaper is failing, he must
examine not only whether current management could stave off financial
failure, but also whether there is a "probable danger of financial
failure" even with a new management team.  See Hearst, 704 F.2d at
478-479 n.10;  Pet. App. 142a-144a.  /16/

   2. Nor can it be credibly maintained that the Attorney General
acted arbitrarily and capriciously in finding that the Free Press was
in probable danger of financial failure.  Pet. App. 141a, 143a, 147a.
The Attorney General found that "the Free Press is locked into a loss
situation involving millions of dollars each year for the foreseeable
future, with no realistic prospect of extricating itself" (Pet. App.
142a).  Although a concerted price increase could save the Free Press,
the Attorney General recognized that the Free Press actually has no
means to "reverse the unbroken pattern of annual operating losses"
(id. at 145a), because a collaborative price raise with the News would
be illegal without the JOA.

   Similarly, the Attorney General noted that the Free Press could
become profitable if the News itself raised prices.  Based on the
record testimony, /17/ however, the Attorney General determined that
since both newspapers were determined to preserve their respective
market shares, the owners of the News, without the protection of a JOA
with the Free Press, would rationally refuse to raise prices (an
action which would jeopardize the paper's competitive advantage in
circulation and advertising revenue).  Pet. App. 143a-144a, 147a;  see
id. at 187a.  Indeed, a unilateral price increase would drive down the
newspaper's circulation and profits since the Detroit newspaper market
is unusually price sensitive.  See J.A. 202, 307-308, 584;  Exh. IX
198-Z8.

   Finally, the Attorney General considered whether a change in
management could prevent the Free Press's probable financial collapse.
 But not even petitioners have suggested that the Free Press could
fare better with different management.  Indeed, the Attorney General
specifically found that, given "the market reality in Detroit under
present circumstances," the best any management team could accomplish
would be to "forestall the financial failure of the (Free Press), not
prevent it altogether" (Pet. App. 144a).

   In sum, the Attorney General correctly found that the facts
surrounding the Detroit newspaper market paint a vivid picture of a
newspaper, the Free Press, whose demise "is not just speculative, or
likely, but indeed 'probable'" (Pet. App. 144a).  /18/ The Attorney
General recognized that the Free Press has no reasonable prospect of
emerging from its current position of intractable and substantial
losses.  He thus properly determined that the newspaper satisfied the
"failing newspaper" standard of the Act.

   C. 1. The Newspaper Preservation Act also calls for the Attorney
General, before approving an application for a joint operating
arrangement, to make the discretionary and fact-specific judgment of
whether the particular application "would effectuate the policy and
purpose of (the Act)" (15 U.S.C. 1803(b)).  Before this Court,
petitioners do not seriously dispute the content of this inquiry.  See
Br. 18-19, 25-28.  Indeed, petitioners do not expressly disagree with
the Attorney General's description of the statutory standard:

         Undergirding the Act are two overarching policy objectives:
      the more general pro-competitive objective of the antitrust
      laws, and the specific objective of preserving "editorially and
      reportorially independent and competitive" newspapers (15 U.S.C.
      1801).  Congress recognized that neither of these purposes is
      advanced when a single newspaper obtains a monopoly in any given
      market.  The alternative of a JOA is in the nature of a
      legislative trade-off:  an incremental elimination of
      competition as to the newspapers' production activities in
      exchange for the assurance that the existing array of editorial
      and reporting voices will remain fiercely competitive and
      independent.

   Pet. App. 144a-145a.

   2. Again, no serious claim can be made that the Attorney General
acted in an arbitrary and capricious manner in determining, on the
record presented, that the JOA between the Free Press and the News
"would effectuate the policy and purpose" of the Newspaper
Preservation Act.  Given that the Free Press is a "failing newspaper,"
and that the Free Press's losses cannot be reversed except by an
unlawful collaborative price increase with the News, the Attorney
General reasonably concluded that "approval of the JOA will plainly
further the legislative purpose of preseving editorial voices in
Detroit -- an outcome that does not appear to be in the future
otherwise" (Pet. App. 146a);  see id. at 145a.

   In making this determination, the Attorney General expressly
considered whether the business strategies or practices of the Free
Press and the News should preclude approval of the JOA.  He recognized
(anticipating petitioners' concern (e.g., Br. 25)) that a JOA should
not be approved where the prospect of that safe harbor accounts for
the newspaper's demise.  Pet. App. 146a.  He nevertheless declined to
announce any sweeping rule to govern such a case, because this record
"offers a much different picture" (ibid.).  /19/ The Attorney General
explained that the Free Press was not brought to the "brink of
financial failure through improper marketing practices or culpable
mismanagement," but rather by "(k)een competition aimed at market
domination and future profitability" (id. at 145a).  Furthermore, the
prospect of obtaining a JOA had not fueled the newspapers' fierce
competition.  The Attorney General stated that the competitive
strategies followed by both newspapers for almost a decade and "the
heavy expenditure of investment capital by Knight-Ridder (owner of the
Free Press) over that period of time belie() the notion" that the
newspapers were pursuing any end other than a stable, dominant,
profitable position in the Detroit market (id. at 146a).  /20/ And the
Attorney General specifically found that only when the Free Press and
the News found themselves caught in a "no win" stalemate did they look
to the JOA as an available option (ibid.).  /21/

   D. Petitioners, grasping at the fact that the Free Press lowered
its prices while competing with the News, challenge the Attorney
General's decision as inconsistent with the policy and purpose of the
Newspaper Preservation Act.  In particular, petitioners apparently
assert (Br. 27) that, if the JOA had not been in the offing, the Free
Press would not have cut prices as part of its effort to achieve
market dominance.  According to petitioners, since rational firms
purportedly do not price below their competitors, the Attorney
General's approval of the JOA where the failing newspaper lowered its
prices amounts to a "reward or encourage(ment of) such behavior"
inconsistent with the Act itself (Br. 27).  Petitioners' belated focus
on this element of the record, however, although couched in terms of a
legal dispute, is nothing more than either a thinly veiled challenge
to the factual findings made below, or an attack on the findings about
the unique economic characteristics of the newspaper industry that
motivated Congress to enact the Newspaper Preservation Act.

   1. As we have explained (see pp. 34-36, supra), the Attorney
General expressly found that the competition between the Free Press
and the News, although fierce, was entirely legitimate and not the
result of maneuvering to qualify for a JOA in the future.  See Pet.
App. 145a-146a.  Those factual findings are amply supported by the
record.  Cf. United States v. Doe, 465 U.S. 605, 614 (1984).

   Moreover, contrary to petitioners' suggestion (Br. 25-26), the
Attorney General's decision scarcely resembles a "roadmap" for
newspapers to follow to obtain JOAs by encouraging papers to lower
their prices in order artificially to create losses and a competitive
stalemate.  The Attorney General determined that the Free Press and
the News had engaged in legitimate competition to achieve market
dominance, not the consolation prize of a JOA, and that the newspapers
considered the JOA as an alternative only after they became locked
into a loss stalemate.  Pet. App. 146a.  /22/ As the court of appeals
correctly observed, this case does not involve the situation where the
"initial and principal motivating factor behind a price war is the
prospect of a future JOA" (id. at 190a n.13).  For that reason alone,
no rational newspaper could reasonably rely on the Attorney General's
decision as a guarantee that he would approve a JOA after the paper
intentionally pursued that goal.  /23/

   Furthermore, the setting of the Attorney General's decision -- the
Detroit newspaper market -- has its own particular characteristics
that are not likely to be replicated elsewhere.  The circulation rates
of both the Free Press and the News are apparently highly price
sensitive.  This factor may result in part from weak consumer loyalty
to either paper -- almost 40% of each newspaper's regular readership
also reads the competition's paper on a regular basis.  Pet. App. 35a,
89a, 103a n.238;  J.A. 584.  /24/ In addition, the record shows that
the Free Press and the News waged their battle for market dominance at
a time when the Detroit economy was falling deeply into recession.
While the newspapers were competing for market share, consumers
therefore had less disposable income to spend and Detroit's
businesses, in turn, were spending fewer dollars on advertising.  Pet.
App. 14a-18a.  In these circumstances, reducing prices was in fact a
rational means for the newspapers to increase circulation and attract
more advertisers.

   The record offers no basis for assuming that these peculiar
circumstances exist in other cities.  Accordingly, the assertion that
newspapers in market areas without Detroit's particular
characteristics either could duplicate the stalemate the Free Press
and the News face or would be tempted to risk millions of dollars to
try to do so, blinks reality.  /25/ To the extent petitioners'
"roadmap" metaphor is even apt, the Attorney General's decision would
not lead inevitably to a JOA, but much more probably to a dead end.

   2. Petitioners' attack on the Free Press's decision to cut prices
also flies in the face of Congress's assessment of the economic
factors governing the newspaper industry.  Congress recognized that
newspapers have engaged and will continue to engage in legitimate
fierce competition of the sort that led to the Free Press's financial
woes.  Congress accordingly determined that the unique economic
factors of the newspaper industry require the safety net of a JOA in
appropriate instances.  See H.R. Rep. No. 1193, supra, at 3 (JOAs are
necessary because "vigorous competition" has often resulted in
newspapers' financial failure);  S. Rep. No. 535, supra, at 3-4
("Allowing newspapers in competitive financial difficulty to work out
agreements with a healthy newspaper * * * will give the newspaper
under competitive pressure the financial security and stability
necessary for independent behavior.").

   "(T)he economic mainstay of the newspaper business," as this Court
has noted, is not circulation, but advertising.  Times-Picayune
Publishing Co. v. United States, 345 U.S. 594, 604 (1953).  In fact,
70 to 75% of the typical newspaper's revenue derives from advertising
revenue;  circulation revenues generally ranks even below revenue from
classified advertisements.  See S. Oppenheim & C. Shields, Newspapers
and the Antitrust Laws 5 (1981).  /26/ As a result, newspaper
publishers are primarily concerned with maintaining a profitable flow
of advertising revenue.  See Knutson v. Daily Review, Inc., 383 F.
Supp. 1346, 1362-1364 (N.D. Cal. 1974), modified, 401 F. Supp. 1374
(N.D. Cal. 1975), aff'd in part and rev'd in part, 548 F.2d 795 (9th
Cir. 1976), cert. denied, 433 U.S. 910 (1977).

   Moreover, given that circulation price affects the demand for
newspapers and the number of papers sold, "an increase in the
subscription price may ultimately reduce the publisher's profits."
Knutson, 383 F. Supp. at 1363-1364.  /27/ Here, the Free Press and the
News reasonably feared that unilaterally raising their prices would
adversely affect circulation, and thus decrease advertising revenue.
Pet. App. 87a-88a, 90a n.182;  J.A. 202, 307-308, 584;  Exh. IX
198-Z8.  On the other hand, a newspaper might quite reasonably lower
its circulation price to drive up circulation, or lower advertising
rates to attract new business, and thus increase advertising revenue
and long-term profits.  Such a strategy can be economically sound
given the interrelationship between circulation and advertising
revenue.

   There is an additional compelling reason that may justify the
newspaper's price cuts.  While up and down swings are the usual fare
in other businesses, for a newspaper even a small downturn can
snowball into an irreversible slide ultimately leading to ruin:

         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 short on advertising, so circulation drops
      even further.  The result of this interrelationship is an
      apparently irreversible downward plunge that ends in business
      failure.

   Pet. App. 171a.  /28/ This "downward spiral" syndrome has claimed
literally hundreds of newspapers, with the result that most cities in
the United States are served only by one newspaper.  /29/ Given this
pattern endemic to the industry, it is economically rational for a
publisher to try to avoid the downward spiral by entrenching his paper
as the stable dominant newspaper in the city.  This concern explains
precisely why the two Detroit newspapers were battling so fiercely.
Pet. App. 19a;  J.A. 212, 405, 510.  By lowering prices, the Free
Press sought to increase circulation and advertising in order to avoid
becoming the junior newspaper susceptible to the downward slide.  The
paper was well aware of the recent failures of the junior newspapers
in Baltimore, Washington, D.C., Buffalo, Cleveland, and Philadelphia,
and was attempting to entrench its market position in order to avoid a
similar fate.  See, e.g., Pet. App. 99a;  J.A. 212.

   In sum, the Attorney General properly determined that the fact that
the Free Press lowered its prices as part of its fierce competition
for market dominance should not preclude it from securing a JOA.

   III. Because The Attorney General Properly Applied The Statutory
Framework Of The Newspaper Preservation Act To The Particular Facts Of
The Detroit Market, No Chevron Issue Is Presented

   Petitioners broadly contend (Br. 29-39) that the court of appeals'
decision misapplied the principles of Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984), requiring courts
to defer to an agency's reasonable interpretation of a statute
Congress has entrusted it to administer.  That argument is wide of the
mark for several reasons.

   A. Although it is true that the court of appeals discussed the
application of the Chevron doctrine to this case, on consideration we
do not believe that any Chevron issue is in fact presented.  This
Court's decision in Chevron sets forth a framework for judicial review
of disputes concerning an agency's construction of the meaning of a
statute that it is charged with administering.  Chevron, 467 U.S. at
842-844;  see, e.g., INS v. Cardoza-Fonseca, 480 U.S. 421, 448 (1987).
 As we have shown above, however, although petitioners quarrel with
the Attorney General's decision, they do not object to any material
interpretation of the Newspaper Preservation Act adopted by the
Attorney General.  Nor could they, for the Attorney General did not
purport to adopt a new construction of the statute.  He simply set
forth the terms of the Act, noted with approval the common-sense
interpretation given by the Ninth Circuit in Hearst, 704 F.2d at 478,
and then proceeded to apply the Act to the particular situation in the
Detroit newspaper market.  In these circumstances, there has been no
controverted interpretation of a statute by an administrative agency
that calls for application of the Chevron framework.

   B. Even if an issue regarding the proper interpretation of the
Newspaper Preservation Act were presented here, the Attorney General's
sound construction of the statute, which was adopted from the Ninth
Circuit's decision in Hearst, should be upheld.  Petitioners suggest
that a court should not defer to the Attorney General's decision
because he "has no technical expertise in interpreting (the Newspaper
Preservation Act)" (Br. 38).  Again, however, this issue is not
presented, since the Attorney General merely adopted the construction
initially offered by a court.  In any event, as the court of appeals
correctly recognized, Chevron is not based solely on agency expertise
(Pet. App. 182a).  As that decision makes clear, the doctrine of
deference is also based on the established principle that the
political branches of government, rather than the courts, should make
policy choices.  See 467 U.S. at 865-866.  Congress may decide which
agency or official within the Executive Branch should be responsible
for implementing particular legislation and resolving conflicting
policies within a statutory framework.  If the Attorney General's
decision "represents a reasonable accommodation of conflicting
policies that were committed to (his) * * * care by statute, * * * (it
should not be disturbed) unless it appears from the statute or its
legislative history that the accommodation is not one that Congress
would have sanctioned." Id. at 845;  see Pet. App. 181a.

   Here, Congress vested responsibility for ascertaining whether a
newspaper is "failing" and certain policy determinations on the
shoulders of the Attorney General -- a Cabinet official who, with
access to all the resources of the Department of Justice, is fully
capable of discharging that duty.  Consequently, there is no basis for
petitioners' suggestion that this Court should try to second-guess
Congress's considered decision and examine the designated
administrative decisionmaker's credentials before accepting his
reasonable decision.

   Finally, petitioners err in claiming (Br. 29-33) that the court of
appeals erroneously upheld the Attorney General's decision without
first requiring him to explain that he had applied the recognized
canon of statutory construction that exceptions to the antitrust laws
must be narrowly construed.  As petitioners concede, the Attorney
General "never indicated that he intended to reject (the canon), or
that he believed he would have had the authority to do so" (Br. 30).
Indeed, the Attorney General explicitly adopted the reading of the
Newspaper Preservation Act set forth by the Ninth Circuit in Hearst,
704 F.2d at 473, which specifically stated that courts and the
Attorney General, in applying the Act, must be guided by the canon of
construction governing application of the antitrust laws.  See Pet.
App. 141a-142a.  In any event, as is the case with other canons of
statutory construction, that maxim does not dictate the outcome of a
particular application of a statute to the record presented.  The
court of appeals did not ignore the maxim;  it only recognized that
this canon of construction did not compel the Attorney General to
reach a different result.  /30/

                              CONCLUSION

   The judgment of the court of appeals should be affirmed.

   Respectfully submitted.

   LAWRENCE G. WALLACE

      Acting Solicitor General /31/

   STUART E. SCHIFFER

      Acting Assistant Attorney General

   THOMAS W. MERRILL

      Deputy Solicitor General

   MICHAEL R. LAZERWITZ

      Assistant to the Solicitor General

   DOUGLAS LETTER

   ROBERT M. LOEB

      Attorneys

   AUGUST 1989

   /1/ During the pendency of the case, the 90th and 91st Congresses
heard testimony from 168 witnesses, amassed a 5200-page hearing
record, and engaged in extensive floor debates that fill some 150
pages in the Congressional Record.  See, e.g., H.R. Rep. No. 1193,
supra, at 6-7;  Martel & Haydel, Judicial Application of the Newspaper
Preservation Act:  Will Congressional Intent Be Relegated to the Back
Pages, 1984 B.Y.U. L. Rev. 123, 135.

   /2/ See, e.g., 116 Cong. Rec. 1783 (1970) (statement of Sen.
Hruska);  id. at 1785 (statement of Sen. Inouye);  id. at 1788
(statement of Sen. Bennett);  see also Knox, Antitrust Exemptions for
Newspapers:  An Economic Analysis, 1971 Law & Soc. Order 3, 13-16
(describing the special economic characteristics of the newspaper
industry);  S. Oppenheim & C. Shields, Newspapers and the Antitrust
Laws 5-6 (1981) (same).

   /3/ The Act further provides that a JOA entered into before July
24, 1970 (the effective date of the statute) may remain in effect "if
at the time at which such arrangement was first entered into, * * *
not more than one of the newspaper publications involved in the
performance of such arrangement was likely to remain or become a
financially sound publication * * * ." 15 U.S.C. 1803(a).

   /4/ Knight-Ridder, Inc., owns the Free Press;  Gannett Co. owns the
News.  Those firms are the country's two largest newspaper groups.
Pet. App. 150a.

   /5/ Under the Justice Department's regulations, an application for
a JOA will be referred first to the Assistant Attorney General for the
Antitrust Division.  That official may recommend approving or
rejecting the application.  Alternatively, he may recommend that a
hearing be held before an administrative law judge.  28 C.F.R. 48.7.
If the Attorney General so orders, an administrative law judge
conducts a hearing, at which the applicants, the Assistant Attorney
General for the Antitrust Division, and other persons who properly
intervene become parties to the administrative proceedings.  28 C.F.R.
48.10(b), 48.11.  After the hearing, the administrative law judge
makes recommendations to the Attorney General, who then issues the
final agency decision concerning the JOA application.  28 C.F.R.
48.13(b).  The Attorney General may not delegate his decisionmaking
responsibility to the Assistant Attorney General for the Antitrust
Division or to any other employee of the Antitrust Division.  28
C.F.R. 48.2(a).

   /6/ The Attorney General directed the ALJ to examine seven issues:
the relevance of economies of scale, the possible segmentation in the
Detroit market, the effect of the Detroit economy's depressed state,
the Free Press's financial history, the cause of the New's financial
losses, the Free Press's expenses, and the Free Press's long-term
prospects.  Pet. App. 2a-3a.

   /7/ The Mayor and the unions originally opposed the JOA.  After the
Free Press management announced in January 1988 that it would be
forced to close the newspaper if the JOA application were denied, they
withdrew that opposition.  See J.A. 126-139.

   /8/ See Opinion and Order Regarding Application of Seattle Times
Co. and Hearst Corp. for Approval of Joint Operating Arrangement, 47
Fed. Reg. 26,472, 26,473 (1982) (Attorney General William French
Smith).

   The Attorney General also noted the formulation used in Committee
For An Independent P-I v. Hearst Corp., 704 F.2d at 478, where the
court of appeals upheld Attorney General Smith's approval of the
Seattle JOA:  "'(t)he probable danger standard is, by the plain
meaning of the words, primarily an economic standard:  Is the
newspaper suffering losses which more than likely cannot be
reversed?'" (Pet. App. 142a (brackets in original)).

   /9/ The Attorney General observed that after the ALJ had issued his
recommendation, Knight-Ridder had submitted information confirming
that the company would close the Free Press if the JOA were not
approved.  Because this information was submitted after the record was
closed, the Attorney General did not consider it.  See J.A. 150 n.4
(this footnote was mistakenly omitted from the reprint of the Attorney
General's opinion in the appendix to the petition for a writ of
certiorari).

   /10/ The court noted that the Attorney General had recognized that
it would be impossible to preclude competing newspapers from factoring
the prospect of a JOA into their business strategies (Pet. App. 189a).
 The court made clear, however, that there was no need to "consider
the hypothetical situation where the initial and principal motivating
factor behind a price war is the prospect of a future JOA * * * (since
the Attorney General reasonably concluded) that this record did not
present such a situation" (id. at 190a n.13).

   /11/ Judge Ruth Bader Ginsburg dissented (Pet. App. 191a-197a),
concluding that the matter should be remanded to the Attorney General
for further explanation of the different standards governing approval
of new and existing JOAs, and to address more precisely whether the
two newspapers could actually become profitable on their own without
the aid of a JOA.

   /12/ Chief Judge Wald and Judges Mikva, Edwards, and Ruth Bader
Ginsburg dissented (Pet. App. 198a-199a).  Chief Judge Wald, joined by
Judges Mikva and Edwards, took issue with the Attorney General's
conclusion concerning the likelihood that the News would unilaterally
raise its prices if a JOA were denied (thereby allowing the Free Press
to do the same) (id. at 205a-211a).  According to the dissent, the
Attorney General's conclusion was contrary to "(c)lassic economic
principles" (id. at 207a), and continued low pricing by the News would
be "perilously close" to prohibited predatory pricing (id. at 209a).
The dissent therefore favored "perusal by an en banc court" (ibid.).

   After rehearing was denied, petitioners filed an application for a
stay of the Attorney General's decision pending the filing and
disposition of a petition for a writ of certiorari.  On March 3, 1989,
the Chief Justice, sitting as Circuit Justice, denied the application
for a stay.  The next day, petitioners resubmitted the application to
Justice Brennan, who granted a stay pending a further order by him or
the Court.  On March 20, the Court denied the application for a stay;
Justices Blackmun and Stevens dissented.  The Free Press and the News
nevertheless determined that they would not immediately close the JOA
transaction.  On May 1, this Court granted the petition for a writ of
certiorari.

   /13/ See Pet. App. 119a (administrative law judge);  id. at
136a-137a (Attorney General);  id. at 152a-153a (district court);  id.
at 168a-169a (court of appeals).

   /14/ Petitioners suggest in passing (Br. 19-20) that the "failure"
standard embodied in the Bank Merger Act, 12 U.S.C. 1828(c)(5)(B),
which this Court construed in United States v. Third National Bank,
390 U.S. 171 (1968), should be the benchmark for the Newspaper
Preservation Act's "probable danger of financial failure" standard.
To be sure, as petitioners point out (Br. 19), Congress did refer to
the Bank Merger Act and Third National Bank in the legislative history
of the Newspaper Preservation Act.  The failing newspaper standard
ultimately enacted into law, however, is quite different from the bank
merger standard.  Under the terms of the Newspaper Preservation Act,
the Attorney General must undertake two separate inquiries;  first,
the economic determination of whether the newspaper is in probable
danger of financial failure;  and second, the discretionary policy
judgment of whether the joint operating arrangement will effectuate
the policy and purpose of the Act.  In contrast, the Bank Merger Act
requires a balancing of the anticompetitive effects of the proposed
merger against the particular needs of the affected community.  Under
the latter statutory scheme, if there is sufficient "public interest,"
a bank merger could be approved even if neither of the merging banks
is failing.  See 12 U.S.C. 1828(c)(5)(B).  Indeed, the "probable
failure" language in the Bank Merger Act relates only to whether the
agency can waive certain notice and waiting periods.  12 U.S.C.
1828(c)(3), (4) and (6).  Accordingly, as commentators have observed,
"the fact that Congress provided for exemptions to the antitrust laws
in two different industries does not imply the same test should be
applied * * * particularly when neither the industries nor the
standards articulated by the Acts bear the slightest resemblance to
each other." Martel & Haydel, Judicial Application of the Newspaper
Preservation Act:  Will Congressional Intent Be Relegated to the Back
Pages, 1984 B.Y.U. L. Rev. 123, 164.

   In any event, the issue petitioners appear to raise is not
presented by this case.  Petitioners themselves acknowledge (Br.
19-20) that the Antitrust Division has referred to Third National Bank
in ruling on JOAs (see, e.g., J.A. 146-147), that the ALJ did so in
this case (Pet. App. 125a-126a), and that the Ninth Circuit considered
that standard in Hearst, 704 F.2d at 476.  Here, the Attorney General
specifically agreed with and followed Hearst, and thus took into
account Third National Bank.  Pet. App. 142a.  Moreover, to the extent
that "(t)he Third National Bank standard required (the) Attorney
General * * * to look behind the losses that the Free Press had
suffered and to consider whether the losses were caused by
mismanagement and whether there were reasonable alternatives to the
JOA that could avoid the necessity of joint operation" (Pet. Br. 20),
the record shows quite clearly that the Attorney General did so.  See
Pet. App. 142a-146a.

   /15/ Petitioners suggest (Br. 38) that the Attorney General's
inquiry at the second stage is mechanical, because the Act expressly
defines its "policy" in 15 U.S.C. 1801.  But the broad declaration of
policy contained in Section 1801 hardly lends itself to any such
perfunctory application.  Moreover, petitioners themselves recognize
(Br. 25-28) that certain factors not enumerated in the statute, such
as whether approval of the JOA would create a "roadmap" for future
newspapers to follow, should be taken into account before the Attorney
General approves a JOA.

   /16/ Petitioners take pains to point out that the "probable danger
of financial failure" standard is stricter than the "(un)likely to
remain or become a financially sound publication" standard rejected by
Congress.  See Br. 16-19.  Petitioners' observation, although entirely
accurate, is beside the point precisely because it has never been a
matter of dispute.  Indeed, the Attorney General expressly agreed with
that proposition and, following the statutory language, applied the
more stringent test, namely, requiring the newspapers to show that the
failure of the Free Press is "probable".  See Pet. App. 142a, 144a.

   To the extent petitioners implicitly criticize the Attorney General
for not explaining the difference between the "probable danger of
financial failure standard" that governs a new JOA application and the
less stringent "(un)likely to remain or become a financially sound"
standard that governs an application to continue an existing JOA (15
U.S.C. 1803(a)), that charge is irrelevant.  This case involved an
application for a new JOA.  On this record, therefore, the Attorney
General had no occasion to issue an advisory opinion regarding the
standards applicable for continuation of an existing JOA.

   /17/ See, e.g., J.A. 238-239 (testimony of Alen Neuarth, the Chief
Executive Officer of Gannett);  J.A. 347 (testimony of Robert Nelson,
a Gannett official).

   /18/ Petitioners contend (Br. 23) that since the proposed JOA
contains a "50/50 profit split" between the two newspapers, that fact
alone is "persuasive evidence" that the Free Press is not "in probable
danger of financial failure." That assertion ignores both the facts of
this case and the governing legal standard.  First, the parties'
agreement to share profits reflected their recognition that the Free
Press's corporate parent, Knight-Ridder, had the financial resources
and the competitive will to continue publishing the Free Press, and
thus effectively to force the News to sustain its own losses.  See
J.A. 228-229, 421, 443, 444.  Second, petitioners' argument hearkens
back to the analysis used in Citizen Publishing Co. v. United States,
394 U.S. 131, 137-138 (1969).  In that decision, the Court stated that
since a competitor's willingness to enter into an agreement that
splits future profits shows that the newspaper is not on "the brink of
collapse," that newspaper does not qualify as a "failing company." In
enacting the Newspaper Preservation Act, however, Congress
specifically jettisoned the Citizen Publishing approach.  See, e.g.,
S. Rep. No. 535, 91st Cong., 1st Sess. 4-5 (1969);  H.R. Rep. No.
1193, 91st Cong., 2d Sess. 3 (1970).  Even petitioners' recitation of
the pertinent legislative history concedes as much.  See Br. 15-16.
Accordingly, petitioners' attempt to resurrect the approach rejected
by Congress must fail.

   /19/ The court of appeals agreed that the Attorney General
reasonably concluded that this case does not present "the hypothetical
situation where the initial and principal motivating factor behind a
price war is the prospect of a future JOA" (Pet. App. 190a n.13).  See
also id. at 160a-161a.

   /20/ The record makes clear that the Free Press and the News have
been intense rivals battling over the Detroit market for almost 30
years -- rivals that have escalated the level of competition in the
last 15 years.  In 1976, for example, the News began publishing a
morning edition in addition to its afternoon edition, thus tackling
the Free Press head on.  Once this direct competition began, both
newspapers invested millions of dollars in new printing facilities in
order to gain an advantage.  These actions, in turn, spurred further
heated competition for increased circulation.  Pet. App. 15a-18a.

   /21/ As the Attorney General explained, the newspapers reasonably
recognized that a JOA was an available option after realizing that
they were in a competitive stalemate with market dominance "no longer
within the grasp of either paper" (Pet. App. 146a).  At that stage,
there was nothing improper about considering a JOA, since newspapers
"cannot be faulted for considering and acting upon an alternative that
Congress has created" (ibid.).

   /22/ Petitioners claim that the Attorney General found that the
Free Press had no unilateral means of breaking the stalemate "as long
as the News was willing to continue to incur heavy losses" (Br. 25).
That claim misreads the Attorney General's decision.  He specifically
determined that the Free Press could become profitable only through a
collusive or collaborative price raise -- an action that would be
entirely improper without a JOA (Pet. App. 143a, 145a).  The record
shows that a unilateral price increase by either the Free Press or the
News could cause the newspaper to lose circulation to its rival, and
perhaps even lose revenue.  Id. at 87a-88a (the News did not follow
the Free Press's 1979 price increase "because it fears loss of the
circulation lead if the papers sold at the same price");  see id. at
90a n.182 ("it is clear that any additional unilateral price increases
by either paper would mean the loss of some circulation which in turn
may require still additional promotional expenses including perhaps
discounts off the increased circulation price").

   /23/ Should a newspaper, motivated by the prospect of obtaining a
JOA, deliberately cut its prices to generate short-term losses,
approval of the application for a JOA presumably would not further the
policy or purpose of the Newspaper Preservation Act.

   /24/ Such "duplicate" readers are apt to be more sensitive to price
changes than "exclusive" readers.  Testimony in the record suggests
that a 25-cent per week price increase would cause the Free Press to
lose almost 40% of its duplicate readers.  See Exh. IX 198H-198I.

   /25/ Indeed, we seriously doubt whether other newspapers could ever
replicate the material factors supporting the Attorney General's
decision to approve the JOA here, which include the following:  the
failing newspaper's sustained and mounting losses for a period of
seven years (Pet. App. 141a);  the rival newspaper's significant
competitive advantage in circulation and advertising (id. at
141a-142a);  the history of nearly 30 years of intense competition
(id. at 15a);  the relevant market that prevents the failing newspaper
from becoming profitable by raising its prices (id. at 141a-142a);
and legitimate fierce competition during an economic recession (id. at
18a).

   /26/ The administrative record in this case shows that advertising
revenue accounts for 72% of the Free Press's total revenues and 81% of
the News's total revenues.  Pet. App. 58a.

   /27/ As explained in the Knutson decision, 383 F. Supp. at 1363:

         Circulation, and hence the newspaper's rate of penetration,
      may vary with the subscription price of the newspaper.
      Circulation generally will decrease after an increase in the
      subscription price unless the publisher or someone else
      reallocates his resources in order to influence or control such
      a result, for example, by increasing expenditures for the
      solicitation of new subscriptions or increasing the quality of
      the product.  Assuming that such a reallocation cannot be
      profitably undertaken or that it is ineffective, circulation
      will decline when the subscription price increases and
      advertising demand will therefore decline resulting in a
      reduction of the advertising space carried by the newspaper.
      This reduction will make the newspaper less desirable to
      subscribers which in turn will decrease circulation and lead to
      a further loss of advertising demand.

   /28/ See S. Rep. No. 535, supra, at 4 ("the economics of the
newspaper industry make it more likely for newspapers to fail when
faced with competition than other businesses;  * * * when a newspaper
is failing it is harder to reverse the process and it is almost
impossible to find an outside buyer").

   /29/ See E. Hynds, supra, at 139;  S. Oppenheim & C. Shields,
supra, at 6-7;  Martel & Haydel, supra, 1984 B.Y.U. L. Rev. at
128-130.

   /30/ As this Court has made clear, the first stage of the Chevron
framework requires a reviewing court to determine "whether Congress
has spoken directly to the precise question at issue." Chevron, 467
U.S. at 842.  This question must be answered by "employing traditional
tools of statutory construction." Id. at 842 n.9;  see NLRB v. United
Food & Commercial Workers Union, Local 23, 108 S. Ct. 413, 421 (1987).
 Thus, as the court of appeals here correctly recognized, courts
should and often do use canons of construction as intrinsic aids at
the first stage of the Chevron analysis, insofar as those canons
assist in the process of discerning congressional intent.  Pet. App.
180a-181a.

   At the second stage of the Chevron framework, where a reviewing
court determines whether the agency has adopted a reasonable
interpretation of an otherwise ambiguous statute, we believe somewhat
greater caution in relying on canons would be in order.  As the court
of appeals observed, "Chevron implicitly precludes courts picking and
choosing among various canons of statutory construction to reject
reasonable agency interpretations of ambiguous statutes" (Pet. App.
180a (emphasis in original)).  However, since it is undisputed that
the Attorney General applied the pertinent canon in construing the
Newspaper Preservation Act, and both the district court and the court
of appeals accepted his reasonable and uncontroverted interpretation,
this case presents no occasion to address the role of canons of
construction at the second stage of the Chevron framework.

   /31/ The Solicitor General is disqualified in this case.