Tribune’s Bid for Papers Blocked as Freedom Turns to New Suitor – Bloomberg

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Tribune Publishing Co., owner of the Los Angeles Times, was temporarily blocked by a judge from acquiring bankrupt newspaper publisher Freedom Communications Inc. after the U.S. said the combination would create a monopoly in southern California.

Freedom, owner of two California newspapers, will now turn to its next-highest bidder, Digital First Media Inc., publisher of the Los Angeles Daily News and Oakland Tribune, said William Lobel, Freedom’s lawyer. Freedom does not expect Tribune to resolve the U.S. case ahead of lenders’ March 31 deadline for Freedom to pay back some $21 million, and the company will notify a bankruptcy judge on March 21 of its new plans, Lobel said in an interview.

U.S. District Judge Andre Birotte Jr. in Los Angeles on Friday issued a temporary restraining order after the U.S. government sued to prevent the deal. The Justice Department said this week that Tribune would dominate newspaper sales in two counties, allowing it to increase subscription costs and raise advertising rates.

The U.S. government “has established a likelihood of success” in the case, the judge said while ordering further legal argument before deciding whether to permanently halt the transaction. The U.S. said Tribune’s acquisition of Freedom’s Orange County Register and Riverside Press-Enterprise would more than double its control of English-language daily newspaper circulation to 98 percent in Orange County and provide an almost sevenfold boost to 81 percent in Riverside County.

‘A Threat’

“Such a concentration clearly constitutes a threat to competition and would likely have adverse effects on consumers in the market as a whole,” Birotte wrote in an 11-page order.

Tribune, which won a bankruptcy auction for Freedom with a bid of $56 million, has said it will fight the antitrust case. The U.S. is “living in a time capsule, with a framework that predates the arrival of iPhones, Google, Facebook, and modern media outlets that are killing the traditional newspaper industry,” the company said this week.

Dana Meyer, a Tribune spokeswoman, didn’t immediately return a call and e-mail seeking comment on the ruling after regular business hours. Justice Department spokesman Mark Abueg declined to comment.

Struggling with declining circulation and ad revenue, Tribune is trying to find a successful business model in the digital age. Its flagship newspaper, the Chicago Tribune, is implementing a metered paywall, meaning readers could access as many as 10 articles a month online before being asked to pay for a subscription.

Tribune also operates the San Diego Union-Tribune. Digital First owns more than 30 newspapers throughout California.

Pay Cash

Tribune has agreed to pay cash for Freedom’s assets through subsidiary Orange County Media LLC, according to an earlier statement from the Chicago-based company, which outbid Digital First, which also owns the Denver Post, and a Freedom management group. A hearing in the bankruptcy case is scheduled for March 21. Tribune has said its financing for Freedom runs out on March 31.

Judge Birotte said in his ruling that local newspapers, as opposed to news-aggregation websites like Google News, “continue to serve a unique function in the marketplace: they are the creators of local content.”

The case is U.S. v. Tribune Publishing Co., 16-cv-01822, U.S. District Court, Central District of California (Los Angeles).

Tribune’s Bid for Papers Blocked as Freedom Turns to New Suitor – Bloomberg