Court Opinion

ID: 9478754
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:57:24.74615+00
Date Added: 2024-06-11T17:46:36.380028
License: Public Domain

RUTH BADER GINSBURG, Circuit Judge,
dissenting:
As a condition to the consummation of a joint operating agreement (JOA), and receipt of the attendant antitrust exemption, Congress required the approval of the Attorney General, an approval intended to “act as a brake” upon premature resort to such devices. 116 Cong.Rec. 2006 (1970) (statement of Sen. Hruska). In this important and unprecedented case, the Attorney General approved a JOA and, in so doing,. rejected the contrary conclusions of the administrative law judge (AU) and the Justice Department’s Antitrust Division, as elaborated in the post-hearing brief the Division presented to the AU. At issue is a large and attractive newspaper market, Detroit, one concededly capable of sustaining two profitable newspapers. I have grave doubts whether the Attorney General properly performed in this instance the braking function Congress envisioned for him. I would therefore remand the case for reconsideration and a fuller account of the standard of approval the Attorney General deems applicable.
I.
As the Antitrust Division emphasized before the AU, no prior JOA application “has presented a comparable situation.” Post-Hearing Brief of the Antitrust Division, Docket No. 44-03-24-8 (Sept. 23, 1987) [hereafter, Antitrust Division Brief], at 2. The Detroit Free Press (a morning newspaper)-Detroit News (evening paper) application “involves the largest market and largest newspapers” in the nation “ever to be involved in a JOA.” Id.1 Applicants con*1298cede that the Free Press is unlike any other newspaper thus far declared “failing.” The typical case presents an applicant caught in a “downward spiral” in which the newspaper’s “declining circulation and lessening advertising feed off one another, eventually forcing it to close.” Committee for an Independent P-I v. Hearst, 704 F.2d 467, 471 (9th Cir.), cert. denied, 464 U.S. 892, 104 S.Ct. 236, 78 L.Ed.2d 228 (1983). The only Newspaper Preservation Act-JOA before this one to be examined in court, Hearst, fit that description.
Just as there is no dispute that the Free Press and the News have both incurred significant losses on an operating basis,2 so it is undisputed that neither paper has experienced any “downward spiral” effect. On the contrary, in the relevant time period, 1976 to 1986, the Free Press share of daily circulation was never less than 49%; its competitive position has remained essentially stable; the News, though retaining a “leading” edge, is not “dominant.” Antitrust Division Brief at 7-11. In other words, the two papers, each now maintained by a “deep pocket,” the News by Gannett, the Free Press by Knight-Ridder, have fought to a draw. Neither has achieved supremacy. The competition today “is as close, or closer, than it was a decade ago.” Id. at 2.3
Gannett, it is also conceded, acquired the News only after obtaining expression of Knight-Ridder’s willingness to consider a JOA. Id. at 27-28. The nearly equal profit split for the Free Press under the JOA indicates the “standoff” that existed; it reflects “a recognition on Gannett’s part that the Free Press was not likely to exit the market in the near future.” Id. at 20-22. No “failing” paper in Newspaper Preservation Act history, it appears, has emerged so advantageously under an approved JOA. Id. at 22. In these circumstances, I believe it incumbent on the Attorney General to recall — as our sister court observed — the legislature’s “primary” concern “to prevent newspapers from allowing or encouraging financial difficulties in the hope of reaping long-term financial gains through a JOA.” Hearst, 704 F.2d at 478.4
II.
Three “failing newspaper” standards figured in the design of the Newspaper Preservation Act: the deathbed “failing company” doctrine which Congress rejected; the “not likely to remain or become financially sound” standard Congress adopted for existing JOAs, i.e., those entered into prior to July 24, 1970; and the “probable danger of financial failure” definition Congress set for future JOAs. See 18 U.S.C. §§ 1802(5), 1803(a), (b) (1982); Hearst, 704 F.2d at 473-74. Under the “failing company” doctrine, as stated by the Supreme Court in Citizen Publishing Co. v. United States, 394 U.S. 131, 137-38, 89 S.Ct. 927, 930, 22 L.Ed.2d 148 (1969), newspapers with JOAs could successfully defend against illegal merger or agreement charges only upon showing an enterprise in dire financial straits, on the brink of collapse, reaching for “the last straw.” Congress thought that doctrine too exacting. It settled on a more lenient definition to grandparent existing JOAs and, as the Attorney General acknowl*1299edged in this case, it conceived the “probable danger of financial failure” standard for future JOAs as a "middle ground,” one falling in between the other two. See Attorney General’s Decision and Order, Docket No. 44-03-24-8 (Aug. 8, 1988) [hereafter, Attorney General’s Decision], at 8.
The Newspaper Preservation Act’s legislative history confirms that the “probable danger” standard was meant to have bite, to be “far more stringent” than the “not financially sound” test, 116 Cong.Rec. 23,146 (statement of Rep. Kastenmeier), and thus “limited only to those situations where a joint newspaper operating arrangement is demonstrably essential to prevent a newspaper failure.” Id. at 23,-.148 (statement of Rep. McCulloch). Given the congressional design, approval of a proposed JOA requires an affirmative answer to this question: “Is the [allegedly failing] newspaper suffering losses which more than likely cannot be reversed?” Hearst, 704 F.2d at 478.
The Attorney General’s readiness to say “Yes” to a JOA for Free Press-Detroit News now, despite the view of the Antitrust Division and the AU that such a judgment remains premature,5 seems to me problematic on two counts. First, the Decision affords no assurance that the Attorney General has found a “middle ground” firmer than the pliant “not likely to ... become financially sound” ground Congress thought inadequate for new agreements. The Decision never suggests any separate content for the “probable danger” standard to distinguish it from the more accommodating one. Second, the demonstration that satisfied the Attorney General allows parties situated as Gannett and Knight-Ridder are artificially to generate and maintain the conditions that will yield them a passing JOA. I remain unpersuaded that, with passage of the Newspaper Preservation Act, Congress opened the door to this sort of self-serving, competition-quieting arrangement. Cf Attorney General’s Decision at 12 (maintaining that “Congress opened the door to just this sort of response with passage of the Newspaper Preservation Act”).
It is accepted by the Attorney General that the Free Press and News have arrived at a “competitive stalemate,” Attorney General’s Decision at 5, and that market dominance is “no longer within the grasp of either paper.” Id. at 13. It is also a “given” that “the Detroit market could sustain two profitable newspapers if both circulation and advertising prices were increased.” Id. at 9 n. 3 (emphasis in original). But “the unbroken pattern of annual operating losses” cannot be reversed by Free Press “unilateral actions,” and that, in the Attorney General’s judgment, makes “probable” if not “imminent” the “danger of financial failure.” Id. at 7, 12.
Without the lure of a JOA, however, what reason is there to believe that the losses here “likely cannot be reversed”? Absent the Attorney General’s promise of that large pot of gold, would the parties not have, as the Antitrust Division suggested, an effective “incentive to adopt strategies directed toward achieving profitability in a competitive marketplace”? Antitrust Division Brief at 27, 28.
The Attorney General does not disavow “the well-recognized rule that antitrust exemptions must be narrowly construed.” Hearst, 704 F.2d at 478 (citing Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 231, 99 S.Ct. 1067, 1083, 59 L.Ed.2d 261 (1979)). This accepted rule 6 should be factored into an evaluation already *1300weighted by (1) the concession that both newspapers, by their own projections, “could achieve profitability with price increases and the elimination of discounting,” Attorney General’s Decision at 5, and (2) the burden of proof which JOA applicants bear, 28 C.F.R. § 48.10(a)(4) (1988). A remand would give the Attorney General an opportunity to state more comprehensibly why the JOA-route is ripe for his approbation now, i.e., why that course should not be deferred for consideration “at some future time” when the results of the current competition afford a firmer basis for predicting whether the Free Press, profitably for itself, for readers, and for advertisers, can survive. See Antitrust Division Brief at 29.
Conclusion
Detroit, as the Attorney General said, “is a highly prized $300 million dollar market.” Attorney General’s Decision at 4. That market could sustain two profitable newspapers. Id. at 9 n. 3. Market dominance is now beyond the grasp of the News as well as the Free Press. Id. at 13. The Attorney General has not cogently explained why, on the facts thus far found, the proposed JOA has become “an available option.” Id. Making the JOA an option now, in the situation artificially created and maintained by the Free Press and the News, moves boldly away from the “frame of reference [Congress] essentially embraced” — “the scenario of a strong newspaper poised to drive from the market a weaker competitor,” a newspaper experiencing, “due to external market forces,” a decline in revenues and circulation “that in all probability cannot be reversed.” Id. at 6, 13-14. I therefore dissent from the majority’s disposition approving instanter the giant stride the Attorney General has taken.

. The Assistant Attorney General in charge of the Antitrust Division, in recommending that a hearing be held before an AU, stated: "Clearly, Detroit remains one of the largest and most attractive newspaper markets in the country.” Report of the Assistant Attorney General, Public File No. 44-03-24-8 (July 21, 1986) [hereafter, *1298Assistant Attorney General Report], at 3 (executive summary); see id. at 27 (same observation).

. As the Majority Opinion at 1289 reports, the Free Press lost over $10 million per year from 1981 to 1986, while the News lost over $50 million between 1981 and 1986.

. This portrait of the competitive situation, drawn in the Antitrust Division Brief, contrasts with the majority’s depiction of the Free Press as "poised on the brink of the [downward] spiral.” Maj.Op. at 1292. The majority recognizes that the downward spiral is indicated "[o]nce a paper loses circulation." Id. at 1288. In this light, the Antitrust Division emphasized the precarious position of the News: “The News has been unable to convert its leads into any degree of profitability; instead, its losses in 1986 increased as it sought to protect a daily circulation lead which it appeared to be on the verge of losing.” Antitrust Division Brief at 10.

.Cf. Assistant Attorney General Report at 6-7 (executive summary) ("When a newspaper owner consciously and deliberately decides to sacrifice short-term profits in a quest for greater long-term profits, indeed potential monopoly profits, should a JOA be available as a ‘second-best’ alternative?”); id. at 66 (same query).

. It bears repetition that the AU’s decision reflected the position presented to him as the decided view of the Antitrust Division, the very Department of Justice unit responsible for enforcing the antitrust laws. The bottom lines of the brief filed by the Division after the AU hearing state: "[T]he record does not warrant the conclusion that Detroit cannot support two competitive papers or that the Free Press is in probable danger of failure if the JOA is denied. The Antitrust Division therefore recommends that the application be disapproved." Antitrust Division Brief at 29.

. My colleagues deem the rule one the Attorney General need not “pick” if he finds the statute ambiguous. See Maj.Op. at 1292-93. At the same time, however, my colleagues recognize that the Hearst court’s analysis was “guided by” the rule. Id. at 1292. Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984), modifies Hearst pro tanto, the majority next maintains, and rele*1300gates the “narrow construction of antitrust exemptions” rule to cases in which Congress had a specific intent. See Maj.Op. at 1292. Did Chevron indeed uproot a guide (both to the executive and to the judiciary) of such "fundamental importance” (Hearst, 704 F.2d at 473) to antitrust law administration? Under Chevron, is it the Attorney General’s prerogative to construe an ambiguously-phrased antitrust law exemption expansively? The answer to these questions, I believe, unless and until Higher Authority tells us unambiguously otherwise, must be "No."