THE HYPERLAW REPORT
April 9, 1996
WILL DOJ ONCE AGAIN CHALLENGE A THOMSON TRANSACTION.
COMMUNITY PUBLISHERS v. DR PARTNERS & THOMSON NEWSPAPERS, INC.
DOJ'S 1995 CHALLENGE OF SMALL ARKANSAS NEWSPAPER MERGER.
WHY A SMALL NEWSPAPER IN ARKANSAS?
Browsing through the Department of Justice's Gopher Site (justice2.usdoj.gov)
serendipity hits. Amongst the cases described in speeches by Deputy Attorney
General Bingaman as examples of antitrust enforcement against anticompetitive
mergers was a 1995 case called Community Publishers v. DR Partners.
Apparently, the case went to trial and is now on appeal to the Eighth Circuit.
Further browsing around the gopher site brought up the December 1, 1995 brief
filed by DOJ in the Eighth Circuit (look under Antitrust Cases).
In light of the attempt by Thomson Publishing Company to acquire the
politically connected West Publishing Company, it is fascinating to ruminate on
the Community Publisher's case.
Here are some interesting facts:
Thomson Publishing company was the seller of the Northwest Arkansas Times to a
family that owned the Morning Times of Northwest Arkansas, and "eliminated
competition" in the Fayetteville, Arkansas metropolitan area.
A private party (in Fayetteville) challenged the transaction in the Arkansas
United States District Court on February 5, 1995 and thereafter the Department
of Justice intervened.
The size of the transaction is dwarfed by the size of the Thomson/West merger.
The purchasing family group was the Stephens family which already owned the
other newspaper in the market.
Thomson "demanded a $2 million premium over its previously indicated asking
price" according to the DOJ brief. [According to an New York Times story
concerning the West sale, some bidders competing to purchase West complained
that Thomson paid a similar type premium.]
The DOJ participated in an EIGHT DAY trial and DOJ economist Kenneth Baseman
testified at length as an expert witness and the district court ordered the
transaction to be rescinded. See 892 F.Supp. 1146.
An appeal to the Eighth Circuit followed (No. 95-2976 filed August 4, 1996).
The lead attorney on the length DOJ brief is Craig W. Conrath, who also happens
to be the DOJ's Chief of the Merger Task Force that is reviewing the
Thomson/West merger.
The purchaser of the Times was a Stephens company known as NAT, LC.
Representing the Stephens interests is a firm in Arkansas known as the Rose Law
Firm and a New York firm known as Skadden Arps.
The Eighth Circuit oral argument is set in St. Louis for this coming Thursday.
Some excerpts from the DOJ brief:
"NAT obtained the Times from Thomson Newspapers, Inc. ("Thomson") in early
1995. As a consequence of a strategic reorganization, Thomson decided to sell
twenty-five of its over one-hundred papers (T. 2275, GA 195). Although Thomson
offered the other twenty-four papers as a package deal, it determined that the
Times would be extremely valuable to a local purchaser, and therefore decided
to sell it separately (T. 2307, GA 200). Several potential buyers expressed
interest in the Times; however, Thomson short-circuited the bidding process,
concluding an agreement on January 27, 1995, to sell the paper to NAT. Thomson
demanded, as a condition of sale to the Stephens family, a $2 million premium
over its previously indicated asking price (T. 2281-82, GA 196-97)."
***
"The record shows that from 1990 until NAT acquired the Times, the two papers
engaged in a "newspaper war" that left each with significant readership in the
other's primary town of circulation. Participants in this competitive struggle
viewed the other paper, and not other media, as threatening to wrest away
significant readership and advertising dollars, and actual marketplace behavior
confirmed these perceptions. Based on this evidence, as well as other data,
the government's expert testified that the relevant market encompassed the
Times and the Morning News but excluded other media, and the district court
properly credited this testimony."
*****
"However, this circuit has made clear that "testimony of market participants is
relevant to a determination of [the] market." Freeman, 1995 WL 638354 at *9.
When such evidence has been rejected as deficient, it is not because market
participant testimony never can suffice to delineate the relevant market, but
because, in context, the particular evidence was not sufficiently probative of
the crucial question before the court. For instance, in H.J., the
plaintiffs' internal documents consisted of "casual" and "conclusory
statements" that "alternatively discount[ed] and recognize[ed]" another product
as competition. 867 F.2d at 1540. Such contradictory statements did not
constitute "hard evidence" that permitted the conclusion that two products did
not compete. Id."
****
"Finally, Overstreet's assertion that the papers, under common ownership, would
offer lower rates to advertisers (T. 2054-55, 2228, A 267-68, 330) did not
demonstrate, by clear and convincing evidence, see United States v. Rockford
Mem. Corp., 717 F. Supp. 1251, 1288-89 (N.D. Ill. 1989), aff'd, 898 F.2d 1278
(7th Cir.), cert. denied, 498 U.S. 920 (1990), that the merger would result in
significant efficiencies that could not be achieved but for the acquisition.
Presumably, the papers could offer some joint advertising even if independently
owned. And, in light of the Stephens family's professed intentions not
actually to merge the operations of the two papers (T. 1102, A 137), Appellants
did not show that the acquisition would result in significant cost savings (T.
869, GA 103), as Overstreet claimed (T. 2092-93, A 305-06). In any event, even
if Appellants established these efficiencies, there is no basis for concluding
that they would outweigh, as they must, see Rockford, 717 F. Supp. at 1289; FTC
v. University Health, Inc., 938 F.2d 1206, 1222 (11th Cir. 1991), the
acquisition's demonstrable anticompetitive effects."
****
"The Stephens family's investment philosophy, as Warren Stephens testified, has
always "focused on the long run"; the family "think[s] in terms of generations.
1342, GA 149-50). Consistent with this objective, his subordinate position in
SGI, the general structure of the family's investments, and his position as
principal beneficiary of Jack Stephens' estate (T. 1016-18,PA 171-72), Warren
Stephens never has competed directly against his father in a business venture
(T. 1014, 1278, PA 169, 240)."
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