Application for Approval of a Joint Operating Arrangement

Under the Newspaper Preservation Act

The Attorney General is not required as a matter of law to disapprove an application for a joint

operating arrangement under the Newspaper Preservation Act because the allegedly failing

participant in the, proposed arrangement has not been offered for sale, and no good faith efforts

have been made to find a purchaser ready, willing, and able to operate it independently.

May 7, 1982

MEMORANDUM OPINION FOR THE ATTORNEY GENERAL

In connection with your consideration of the application by the Seattle Times 

Company and the Hearst Corporation for approval of a Joint Newspaper Operating Arrangement pursuant to the Newspaper Preservation Act, 15 U.S.C. 

§§ 1801-04 (1976), you have requested that this Office advise you whether 

approval must, on a per se basis, be denied if the allegedly failing participant in 

the proposed arrangement has not been offered for sale or if good-faith efforts to 

find a purchaser ready, willing, and able to operate it independently have not been 

made. We conclude that no such per se rule pertains.

I. Background

On March 27, 1981, pursuant to the Newspaper Preservation Act (Act), 15 

U.S.C. §§ 1801-04 (1976), the Seattle Times Company, as owner of the Seattle 

Times, and the Hearst Corporation, as owner of the Seattle Post-Intelligencer, 

(hereinafter Applicants) applied to the Attorney General for approval of a joint 

newspaper operating arrangement.1 The Assistant Attorney General in charge of 

the Antitrust Division, acting under 28 C.F.R. § 48.7 (1980) and aftera review of 

documents and information submitted in support of the Application, recommended that a hearing be held under 28 C.F.R. § 48.10 to resolve material issues 

of fact. Such a hearing was ordered. Attorney General Order No. 953-81, 46 

Fed. Reg. 41230. Petitions for intervention were entertained and granted under

1 The Act provides, inter aha, a limited antitrust exemption for such arrangements entered into subsequent to Ju ly 

24, 1970, with the prior written consent of the Attorney General. 15 U.S.C. § 1803(b). Approval of the Attorney 

General is dependent upon his determination that “ (n]ot 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 [the Act)” Id. “ Failing newspaper” is a defined term under the Act, 15 U.S.C. § 1802(5), 

and the Act contains a congressional declaration of policy. 15 U.S C. § 1801.

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28 C.F.R. § 48.11, Attorney General Order No. 959-81, 46 Fed. Reg. 49228, 

and a hearing was held. The Administrative Law Judge who conducted the 

hearing has issued his Recommended Decision, including findings of fact and 

conclusions of law, pursuant to 28 C.F.R. § 48.10(d). Intervenors and the Antitrust Division (hereinafter Opponents) have filed exceptions to the Recommended Decision, and Applicants have filed a response. 28 C.F.R. § 4 8 .10(e). 

The Application is now ripe for Attorney General consideration and decision 

under 28 C.F.R. § 48.14.

It is conceded that the Seattle Times is not a failing newspaper under the 

definition of the Act, 15 U.S.C. § 1802(5). Applicants contend that the Seattle 

Post-Intelligencer does fall within the statutory definition. The burden of proving 

this fact is on the Applicants. 28 C.F.R. § 48.10(4). The Administrative Law 

Judge concluded, as a matter of fact and law, that Applicants have satisfied this 

burden. Recommended Decision at 103. Opponents contend as a matter of law 

that, because Hearst has not offered the Post-Intelligencer for sale and has not 

made a good-faith effort to find a ready, willing, and able purchaser, Applicants 

have failed to carry their burden of demonstrating that the Seattle Post-Intelligencer is failing.

You have asked us to consider Opponents’ position and advise you concerning 

it. Our analysis is set forth below.2

II. Analysis

The Opponents urge that the definition of “ failing newspaper” under the Act 

contains a p er se “ salability” rule. This rule, they say, requires denial of an 

application for approval of a joint newspaper operating arrangement if the 

allegedly failing participant has not been offered for sale or if good-faith efforts 

have not been made to find a purchaser (other than a competing newspaper) ready, 

willing, and able to operate it independently. Based on findings 156-158 of the 

Administrative Law Judge, this rule, the Opponents contend, mandates denial of 

the present application.

2 We note that O pponents, particularly th e Antitrust D ivision, urge, in addition, that the Administrative Law 

Judge com m itted an erro r o f law in failing to adm it and fully to consider their proffered evidence on incremental 

analysis. W hile we agree w ith your prior ru lin g , expressed in Attorney G eneral O rder N o. 962-81 (unpublished) of 

N ovem ber 9 , 1981, that “ the terms of the N ew spaper Preservation Act certainly do not preclude all inquiry into 

financial relationships betw een parent corporations and th eir new spaper subsidiaries,” we also agree with the 

conclusion o f the A dm inistrative Law Ju d g e that the inclusion of the phrase “ regardless of its ow nership or 

affiliations'' in the definition o f “ failing new spaper” precludes application of increm ental analysis, as urged by 

O pponents, in m aking the determination w hether a new spaper is “ failing” under the A ct. The legislative history of 

the A ct m akes clear that financial interrelationships may be investigated for the purposes of determ ining w hether a 

parent corporation has ” create[d] [a ]‘failing new spaper’ by artificial bookkeeping entries ” S Rep N o 5 3 5 ,9 1 st 

C o n g ., 1st. Sess. 5 (1969). However, the legislative history m akes equally clear, passim, th at, aside from the issue of 

creative bookkeeping, “ w hether a new spaper is failing should be determ ined on the basis of the operation in the 

particular city rather than on the basis of the sw eep of the new spaper ow ner's business interests.” Id. See also, e.g.,

116 C ong. Rec 23147 (question of Rep. Eckhardt and response by Rep. K astenm eier); 116 Cong. Rec. 2006 

(statem ent o f Sen. H ruska) Incremental an aly sis, however packaged, w ould require investigation o f the economic 

position of the P ost-Intelligencer not as an independent entity but as a contributor to the overall H earst corporate 

structure. M oreover, it w ould require that expenses of the Post-Intelligencer found legitim ate by the A dministrative 

Law Judge be disregarded and thus effectively absorbed by the rem ainder o f the Hearst ch a in . This w ould be a form 

o f subsidy and, as the legislative history m ak es clear, the A ct is intended to elim inate any requirem ent that ow ners, 

particularly new spaper chains, subsidize th e ir failing new spapers from external resources

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It is clear that the rule urged by Opponents does not appear either in the plain 

language of the Act generally or in its definition of “ failing newspaper” specifically. That definition states that

The term “ failing newspaper” means a newspaper publication 

which, regardless of its ownership or affiliations, is in probable 

danger of financial failure.

15 U.S.C. § 1802(5).

Nor does this rule appear in the regulations issued by the Attorney General to 

implement the Act. See 28 C.F.R. Part 48. Opponents contend, nevertheless, that 

the legislative history of the Act demonstrates that the rule urged was within the 

contemplation of Congress when the definition of “ failing newspaper” was 

framed. This, however, does not seem to be the case. To the contrary, those 

references in the legislative history specific to a sales requirement indicate that 

Congress intended that the definition of “ failing newspaper” would contain no 

such per se rule.

Examination of the legislative history3 of the definition of “ failing newspaper” 

must be approached with two considerations in mind. The first is that the 

definition underwent a metamorphosis during the legislative process; the second 

is that statements made concerning the characteristics of failing newspapers refer, 

alternately, depending on the context, either to such newspapers when considered 

under the “ failing company” doctrine established by the Supreme Court in 

International Shoe Co. v. FTC, 280 U.S. 291 (1930), and applied to newspapers 

in Citizen Publishing Co. v. United States, 394 U.S. 131 (1969), or to such 

newspapers viewed under the less stringent definition to be enacted. Both of these 

considerations bear on Opponents’ legislative history argument.

Opponents have pointed to a number of statements, made during hearings, 

made on the floor of the House and Senate, and contained in the committee

3 The legislative history of the Act is extensive. It consists of four sets of hearings, a House and a Senate report, 

and floor debates in both Houses. Although the two bodies initially passed varying versions of the A ct, there is no 

conference report The Senate adopted the House version without necessity for a conference 116 Cong. Rec 

24435

The first version of w hat eventually becam e the Act was S 1312. 90th Cong , 1st Sess (1967) Hearings were 

held on this bill, know n as the Failing New spaper A ct, in July and A ugust of 1967 and in February, M arch, and April 

of 1968. See Hearings on S. 1512, the Failing Newspaper Act, Before the Subcomm. on Antitrust and Monopoly c f

the Senate Comm on the Judiciary (I^rts 1-7), 90th C ong., 1st and 2d Sess. (1967-68) (hereinafter Senate

Hearings (90th)). A lthough the bill was favorably reported by the subcom m ittee, it was not acted upon by the full 

Senate Judiciary C om m ittee The House also held hearings on a num ber of predecessors of the Act dunng the 90th 

C ongress. See Hearings on H R 19123 and Related Bills to Exempt from the Antitrust Laws Certain Joint

Newspaper Operating Arrangements, Before the Antitrust Subcomm (Subcomm No 5 )c f the HouseComm on the

Judiciary, 90th C ong , 2d Sess. (1968) (hereinafter H ouse Hearings (90th)). H R. 19123 was not reported, and the 

House did not act on it D unng the 91st C ongress, after the Suprem e C ourt’s decision in Citizen Publishing Co v 

United States, 394 U .S. 131 (1969), additional hearings were held in both the H ouse and the Senate. See Hearings

onS 1520, the Newspaper Preservation Act, Before the Subcomm on Antitrust and Monopoly c f the Senate Comm,

on the Judiciary, 91st C o n g ., 1st Sess (1969) (hereinafter Senate Hearings (91st)) and Hearings on H R 279 and

Related Bills to Exempt from the Antitrust Laws Certain Joint Newspaper Operating Arrangements. Before the

Antitrust Subcomm. (Subcomm No. 5) o f the House Comm on the Judiciary, 91st C ong., 1st Sess. (1969) 

(hereinafter House Hearings (91st)) S. 1520, as am ended, was reported favorably by the Senate C om m ittee on the 

Judiciary in S. Rep. N o. 535, 91st C ong , 1st Sess. (1969) (hereinafter Senate Report) as was H .R 2 79, as 

am ended, by the H ouse Com m ittee on the Judiciary in H R Rep No 1193, 91st C o n g ., 2d Sess. (1970) 

(hereinafter House Report)

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reports4 which suggest that Congress believed that one of the essential characteristics of a failing newspaper is that no one (except a competitor) wants to buy 

i t.E .g ., 116Cong. Rec. 1786 (“ There is no market for independent ownership of 

a failing newspaper. . . .”) (statement of Sen. Inouye). They argue from this that 

the willingness of “ outsiders” to consider purchasing the Post-Intelligencer 

(Finding 157) is strong evidence that that newspaper is not “ failing” within the 

congressional contemplation of the Act’s definition. This argument, however, 

ignores the second consideration. When viewed in context, it is equally likely 

that the statements cited by Opponents refer to the unwillingness of outsiders to 

purchase newspapers that meet the Supreme Court’s “ failing company” test as it 

is that they refer to their unwillingness to purchase newspapers that might satisfy 

the Act’s definition.5 This ambiguity is in sharp contrast to those instances in the 

legislative history in which a requirement, under the proposed definition, to seek 

an alternate purchaser was discussed directly. In each such case the unequivocally expressed view was that no such requirement would exist.

In a letter addressed to Senator Eastland as Chairman of the Senate Committee 

on the Judiciary, which is included in the Senate Report, the Chairman of the 

Federal Trade Commission, an opponent of the Act, observed that under it 

“ [NJewspapers in economic distress may seek an exempt joint arrangement 

without search for an available purchaser who could truly continue an independent newspaper operation.” Senate Report at 10. A similar objection was raised 

by Donald F. Turner, then Assistant Attorney General in charge of the Antitrust 

Division. It was his view that

[A] more vital issue is at stake, and I stress this. Under present 

law, a company may not invoke the “ failing company” defense if 

there are purchasers available who are not direct competitors . . . 

yet, this bill contains no such requirement.

Senate Hearings (Part 7) (90th) at 3110-11. His successor, Assistant Attorney 

General McLaren, evinced a similar concern. He believed that

S. 1520 would establish a special definition for and a special 

failing company defense for newspapers. This definition falls 

short of the requirements adopted by the court in the Tucson 

newspaper case [Citizen Publishing Co. v. United States, supra].

There the court disallowed the failing company defense on the 

finding that the allegedly failing newspaper was “ not on the verge 

of going out of business” and it had not been established that there 

were no alternative purchasers. Even assuming justification for 

preserving a failing newspaper through a price-fixing and profitpooling arrangement, certainly this could not be justified . . . if 

there were a purchaser available who would continue independent 

operations.

4 See Intervenor’s E xceptions at 6-7, A ntitrust D ivision’s Exceptions at 12-13

5 £ S enate Report at 4.

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Senate Hearings (91st) at 296-97. Mr. McLaren expressed the same concern in 

the House hearings. House Hearings (91st) at 360. Nongovernment opponents of 

the Act held similar views. E .g., House Hearings (91st) at 419 (“ H.R. 279, 

however, contains no requirement that an allegedly failing newspaper must seek a 

purchaser other than a competitor” ) (statement of Thomas E. Harris, Associate 

General Counsel, AFL-CIO). Nor were opponents of the Act the only ones to 

make these observations. Arthur B. Hanson, General Counsel, American Newspaper Publisher Association, a principal architect of and lobbyist for S. 1312, 

described that bill’s intended effect on the alternate purchaser requirement as 

follows:

In merger cases under section 7 of the Clayton Act, some courts 

have added to the requirement of proof of a “failing company” 

evidence of the absence of a purchaser alternative to the one 

seeking to acquire the stock or assets of the failing company. This 

limitation is not applicable to S. 1312 . . . any other newspaper 

would be free to become a party to the joint arrangement or to 

acquire ownership of the failing newspaper. . . . Under the bill 

there would be no obligation on the part of the failing newspaper 

to accept an offer from a source other than a competitor.

Senate Hearings (90th) at 58.6

An additional and persuasive indication that Congress did not believe that the 

Act’s definition of “ failing newspaper” would contain the per se rule advanced 

by Opponents is that Senator Brooke found it necessary to propose virtually the 

identical rule as an amendment to S. 1520. His amendment would, inter alia,

have imposed, as a prerequisite to qualification as a failing newspaper, the 

requirement that “ active efforts made in good faith by the managers thereof to 

obtain a purchaser of such newspaper publication who is willing and able to 

continue it in operations as a separate and independent newspaper publication 

have been unsuccessful.” 115 Cong. Rec. 10625.7 It seems unlikely that Senator 

Brooke would have offered such an amendment had there been general consensus 

that such a requirement was already contained in the definition of “ failing 

newspaper.” Indeed, the Brooke amendment was considered to so have the 

potential to work such a change that even after it had been withdrawn it was 

opposed as “ most objectionable” by one of the principal lobbyists in favor of the 

Act. Senate Hearings (91st) at 321 (Statement of Mr. Levin).

The legislative history detailed above admittedly pertains to definitions of 

“failing newspaper” different from that which was finally enacted. As Opponents point out, modifications to the definition made by the House Judiciary 

Committee were intended to make it more stringent than the definition as

6 S 1312, the predecessor of S . 1520, the Senate version of the A ct, see note 3, supra, would have provided an 

antitrust exem ption for m ergers involving failing new spapers as well as for joint new spaper operating arrangem ents. 

S 1312, 90th C ong , 1st Sess. §§ 3(2) and (3), 4.

7 A sim ilar proposal had been put forward by a representative of the American N ew spaper G uild early in the 

Senate hearings Senate Hearings (90th) (Part 1) at 219 (Statem ent of M r Parson)

247
originally proposed and as passed by the Senate.8 116 Cong. Rec. 23154-55 

(Statement of Rep. Railsback). In view of this, it could be argued that the final, 

more stringent definition incorporated the per se rule advanced by Opponents, 

even though the statements cited above indicate that the earlier versions under 

consideration would not have. We regard this as a dubious conclusion. In our 

view, it is not supported by anything specific in the legislative history, and it 

seems unlikely that such a sweeping (but specific) change of intent would have 

incorporated sub silencio. This is particularly so since the Act, as a whole, as is 

recognized by Opponents, was clearly intended to ameliorate, both as to existing 

and future joint newspaper operating arrangements, the Supreme Court’s decision in Citizen Publishing Co. v. United States, supra, that the traditional 

“ failing company” doctrine applied in full force to such arrangements. One of 

the major features of that doctrine found objectionable by the proponents of the 

Act when applied to joint newspaper operating agreements was its strict “ alternate purchaser” requirement. We doubt that Congress would have intended to 

impose any new per se requirement in this regard, even a less stringent one, 

without saying so.

Opponents argue that certain statements made in the Senate Report and during 

the House and Senate debates relating the language “in probable danger of 

financial failure” (contained in the final definition of “ failing newspaper” ) to the 

Bank Merger Act of 1966,12U.S.C. § 1828 (c) (1976) and to the case of United

States v. Third National Bank, 390 U.S. 171 (1968), interpreting that Act, are 

specific indicators of a congressional intent to incorporate their per se rule into 

the final definition. We do not agree. First, as the Administrative Law Judge 

points out (Recommended Decision at 91), the House Report contains no 

reference to either the Bank Merger Act of 1966 or to the Third National Bank

case.9 This is significant because the House Judiciary Committee was the source 

of the final version of the definition. More important than this omission, however, 

is the inevitable conclusion to be drawn from a full tracing of the references in the 

legislative history to the Bank Merger Act of 1966 and to the Third National Bank

decision.

Reference was first made to the Bank Merger Act of 1966 and to the Third

National Bank case before the phrase “ in probable danger of financial failure” 

was added to the definition of “ failing newspaper.” 10 House Hearings (90th) at

8 In S . 1312 and H R. 19123, see note 3 supra, and in S 1520 and H R. 279, as originally introduced, the 

definition of “ failing new spaper” read “ th e term ‘failing new spaper' m eans a new spaper publication w hich, 

regardless o f its ow nership o r affiliations, ap p ears unlikely to rem ain o r becom e a financially sound publication.” 

T h e Senate subcom m ittee considering S 1520 am ended the definition by adding in the disjunctive the phrase “ is in 

probable danger o f financial failure or” befo re “ appears unlikely to . . . ” Senate Hearings (91st) at 7 In the 

House Judiciary C om m ittee, the phrase “ ap p ears unlikely to rem ain o r becom e a financially sound publication” 

was deleted from the definition. 116 C ong. Rec. 2 3 1 5 4 -5 5 (Statem ent o f Rep Railsback) That standard, 

considered to be m ore lenient, w as, however, retained w ith respect to judging joint new spaper operating arrange* 

merits already in effect. 15 U S .C . § 1803(a); House Report at 10. A s a result, the A ct’s definition o f “ failing 

new spaper” is relevant only in the case of jo in t new spaper operating arrangem ents entered into after July 25, 1970, 

which require A ttorney G eneral approval Compare 15 U S .C § 1803(a) with 15 U .S .C § 1803(b).

9 The A dm inistrative Law Judge is also c o rrec t in his observation that the Bank M erger Act of 1966 does not, 

itself, contain the quoted phrase o r an approxim ation o f it.

10 See fn 8. supra, for a discussion of th e developm ent o f the definition o f “ failing new spaper”

248
74. More extensive references to that Act and that case were made after the 

definition had been modified in the Senate subcommittee to include the phrase 

“ in probable danger of financial failure” in the disjunctive along with the phrase 

“ appears unlikely to remain or become a financially sound publication.” Significantly, most references to the Bank Merger Act of 1966 and to the Third National

Bank case were made while the proposed legislation contained both the “ in 

probable danger” and the “ unlikely to remain or become” language. In most of 

these references each phrase, not simply “ in probable danger of financial 

failure,” is tied to the Bank Merger Act of 1966 and the Third National Bank

case. E.g., Senate Hearings (9 1 st) at 7-8, 319; House Hearings (91st) at 13, 96.

It seems clear from the legislative history (apart from the references to the 

Bank Merger Act of 1966 and the Third National Bank case) outlined above that 

the unanimous interpretation of the definition of “ failing newspaper,” while it 

contained only the phrase “ appears unlikely to remain or become a financially 

sound publication” (and while parallels were already being drawn between that 

definition and that act and case), was that it did not include the per se rule argued 

for by Opponents. By introducing the phrase “ in probable danger of financial 

failure” in the disjunctive and relating both it and the phrase “ appears unlikely to 

remain or become a financially sound publication” to the Bank Merger Act of 

1966 and the Third National Bank case, the Senate subcommittee intended “ to 

broaden the scope of the definition and not to narrow it.” Senate Hearings (91 st) 

at 8. Given this progression and these understandings, it hardly seems likely that 

references to the Bank Merger Act of 1966 and to the Third National Bank case 

were intended to serve to incorporate a per se rule concerning salability derived 

from either into the language “ in probable danger of financial failure.” Rather, it 

is our view that, taken as a whole, the references in the legislative history to the 

Bank Merger Act of 1966 and the Supreme Court’s interpretation of it in Third

National Bank indicate a general rather than a specific congressional intent. This 

is that the loss of newspapers (like the loss of banks) is of such serious detriment 

to the public that the risks entailed in applying the normal “ failing company” 

doctrine to them cannot be tolerated. See United States v. Third National Bank,

390 U.S. at 187.

Even if Congress had intended to import the entire holding of Third National

Bank into the Act’s definition of “ failing newspaper,” Opponents’ position could 

not be sustained on a per se basis. In Third National Bank the Supreme Court 

required the investigation of the possibility of a sale as one means of establishing 

the “ unavailability of alternate solutions to the [management] woes of the 

Nashville Bank and Trust Co.” United States v. Third National Bank, 390 U.S. at 

190-191. It went on to hold that

The burden of showing that an anticompetitive bank merger 

would be in the public interest because of the benefits it would 

bring to the convenience and needs of the community to be served 

rests on the merging banks. Houston Bank, supra. A showing that 

one bank needed more lively and efficient management, absent a

249
showing that the alternative means for securing such management 

without a merger would present unusually severe difficulties, 

cannot be considered to satisfy that burden.

Id. at 192. Thus it would appear that the requirements of the Third National Bank

case, as applied to an allegedly failing newspaper, could be satisfied by proof that 

the introduction of new management (whether or not under a new owner) would 

not improve the situation. The Administrative Law Judge seems to have made 

such a finding (Finding 109).“

Conclusion

The legislative history of the Act does not support the proposition that 

Congress intended that the definition of “ failing newspaper” contain a p erse rule 

requiring that before a newspaper may qualify as such it must have been offered 

for sale and good-faith efforts must have been made to find a purchaser ready, 

willing, and able to operate it as an independent publication.

T h e o d o r e B . O l s o n

Assistant Attorney General

Office cf Legal Counsel

M We note that Intervenors have disputed this finding Intervenors’ Exceptions at 12 ei seq. A nother of the 

A dm inistrative Law Ju d g e’s conclusions (F inding 158) ( “ The Post-Intelligencer could in all probability be sold at 

fair m arket value to a person o r firm who co u ld , and w ould, continue it in operation as an independent metropolitan 

daily.” ) can be read as inconsistent with it. The factual issue will have to be resolved on the basis o f the entire record 

before th e A ttorney G eneral 28 C FR . § 4 8 .14(a).*

♦ N o t e : T he A ttorney G eneral approved th e joint operating arrangem ent on June 15, 1982. In subsequent 

litigation challenging it, the district court held that alternatives to a jo in t operating arrangem ent were relevant to a 

determ ination w hether a new spaper qualifies fo r an antitrust exem ption under the Newspaper Preservation Act, and 

that such alternatives had not been adequately explored by the parties to the agreem ent in this case. 549 F. Supp. 985 

(W D W ash. 1982) T h e court of appeals agreed as to the legal standard, but reversed on the m erits, holding that the 

Tim es C om pany and H earst had sufficiently negated the possibility that any such alternatives were available. 704 

F.2d 467 (9th Cir. 1983) The Supreme Court denied certiorari on O ctober 11, 1983. 464 U S 892 (1983). Ed.

250