U.S. District Judge Raner Collins hosted an upside-down debate Monday, with a newspaper company arguing it was right to close a paper, the Tucson Citizen, while the state argued the court should resuscitate it.
Collins said he would decide today whether Gannett Co. Inc. should be forced to continue publishing the Citizen, as requested by the Arizona Attorney General's Office. The paper published its final edition Saturday, but late Friday the attorney general filed suit asking a judge to issue a temporary restraining order compelling Gannett to keep publishing the Citizen.
Attorney Nancy Bonnell, the state's antitrust unit chief, argued that Gannett and Lee Enterprises, the owner of the Arizona Daily Star, illegally conspired to stop publishing the Citizen so they could equally split profits from the Star when it became the only daily newspaper in Tucson.
The agreement, Bonnell argued, is "essentially the same thing as paying Gannett to kill off the Citizen."
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Lee and Gannett equally own TNI Partners, better known as Tucson Newspapers. The company handled production, distribution and advertising for both the Citizen and the Star through a "joint operating agreement," or JOA. In the arrangement, the two newspapers shared non-news operations while maintaining independent editorial content.
The JOA between the publishers ended Saturday, but both companies are continuing to split profits from TNI.
Attorneys for the newspapers said the Star had been subsidizing a money-losing Citizen and shouldn't be forced to continue.
Publishers aren't in the business to shut down newspapers, but they have to make difficult choices during trying economic times, said Donald A. Kaplan, the attorney representing Lee.
"If you can't shut down a newspaper that's losing $10,000 a day — that's millions of dollars a year — to save a healthy one, this industry is in trouble," Kaplan said.
According to documents filed by the defendants, Gannett lawyers first informed the Justice Department, which regulates JOAs, on Oct. 31 of its intention to stop publishing the Citizen. The Justice Department concluded a 6 1/2-month investigation into Gannett, its actions with the Citizen and the JOA on Thursday, taking no enforcement action, the documents say.
That's a day before Gannett announced it was publishing the Citizen's last edition.
During Monday's hearing, Judge Collins interjected questions and comments repeatedly, asking the state's Bonnell, for example, "Isn't the reason they'll make more money because they'll lose less money (than they would) to keep the Citizen operating?"
"It's not entirely clear the Citizen is a losing proposition," Bonnell responded.
Gannett attorney Gordon Lang said the Citizen is continuing to have a "robust" presence on the Internet and with a weekly column in the Star, an argument that had present and former Citizen staffers in the audience exchanging incredulous smiles. The Citizen is keeping a few staffers after laying off more than 60 on Friday.
Lang presented a copy of Monday's Star to Collins and pointed out a Citizen contribution on the editorial page.
The judge raised his eyebrows and smiled as he pointed at the column: "The one that says, 'Once you've read the news, discuss it on new Citizen site?' "
"That's it," Lang said.
The newspapers' attorneys also argued that no economic competition existed between the Star and the Citizen. Both papers, they noted, are functionally arms of the same business, Tucson Newspapers.
Bonnell, on the other hand, said shutting down the Citizen causes irreparable harm by silencing an editorial voice that has value for the community. She urged Collins to issue the restraining order because the Citizen loses value every day it's not published.
The companies benefited from antitrust protection under the JOA and are now using that arrangement to profit when a monopoly is established, Bonnell said.
She said Gannett also dismissed reasonable offers from potential buyers who would have provided editorial, news- gathering and advertising competition with the Star.
In court papers filed Monday, the newspaper companies argued that there were no adequate offers to buy the Citizen.
An appraisal contracted by Gannett placed the value of the Citizen's assets (not including the JOA, which was not offered for sale) at $760,000, said Daniel Ehrman Jr., a Gannett official, in sworn testimony.
The offers Gannett received included one from Santa Monica Media Co. for $250,000 in cash, or $400,000 over five years, Ehrman said. The company refused to provide evidence of its ability to pay, he said.
The other offer, from Unisystems LLC, was $300,000, "well below the liquidated value of the assets," Ehrman said.
The newspaper companies' response to the lawsuit cites several large advertisers saying that they have plentiful advertising options and that they have shifted advertising away from newspapers without losing business.
In a sworn declaration, auto dealer Jim Click said he only returned to advertising in the local newspapers last week after stopping four or five months ago.
"During that time, I shifted my advertising to television, radio and the Internet. We saw no difference in our customer traffic during that time," he said.
Anna Martinez Ross, the owner of Martinez-Ross marketing, said in a sworn statement that the closure of the Citizen wouldn't create a monopoly because of continued competition from magazines, TV and radio.
"If the Citizen were to close, my clients would not think there was a monopoly because the Star is the only one remaining," she said. "There is simply too much competition for the advertising dollars in town."