When Is a Failure?

For the first time, Congress is investigating the U.S. newspaper industry in depth. The impetus is a pending bill that would exempt consolidating newspapers from antitrust laws if one of the papers is "failing" financially. Already under way for two weeks, hearings by Senator Philip Hart's Antitrust and Monopoly Subcommittee promise to be controversial--and prolonged. They may well outlast this session of Congress, as witnesses deliver not only their opinions of the bill but of the industry's troubles in general.

A fairly typical consolidation precipitated the hearings. To save the failing Tucson Daily Citizen in 1940, the Arizona Daily Star combined its advertising and business departments with the other paper. Both remained separate editorially. In 1965, the Star chose to sell. Under the 1940 agreement, the now prosperous Citizen had first option: it bought the Star with the explanation that it would resell the paper as soon as a suitable purchaser could be found. At that point, the Justice Department filed suit not only to break up the merger but to nullify the original joint operating agreement as well.

Back from the Brink. To head off the suit, which is still pending in the courts, Arizona Senator Carl Hayden and 14 other Senators co-sponsored the Failing Newspaper Act. All the sponsors come from states in which there are newspapers with similar joint operating arrangements. The bill would permit such setups as long as one of the consolidating papers "appears unlikely to remain or become a financially sound publication"; the bill also permits outright merger in the same circumstances.

Testifying in favor of the bill, Tucson Citizen Publisher William A. Small Jr. contended that Tucson (pop. 257,000) was simply not a big enough city to support two independent dailies. The Citizen, he said, had been on the "brink of death," and the agreement with the Star had been a "lifesaving device." Jack Howard, president of Scripps-Howard, a chain with a total of seven joint operating agreements, agreed. The effect of the bill, he said, is not to "restrain competition but to preserve it to the fullest extent possible, to preserve two or more healthy papers where there otherwise would be only one."

Bad Psychology. Opponents of the bill were uneasy about giving legal sanction to big dailies to consolidate on grounds as vague as economic "failure." "It is unnecessary and psychologically bad," said New York Times Gen eral Counsel Louis M. Loeb, "for the press to take advantage of its political influence to get special advantages that other businesses do not enjoy." Loeb saw no reason for the Government to interfere with most joint operations, unless the "cooperating papers agree to fix rates below what may be justified for the purpose of obtaining an advantage at the expense of competition."

Why not, suggested Press Critic Ben Bagdikian, offer dying papers for sale at a fair market price to independent buyers? To which Jack Howard replied that he and his co-publishers tried to give away the dying New York World Journal Tribune last spring, but there were no takers. "Nobody would accept it as a gift," said Howard. Whether Congress believes the Failing Newspaper Act is the way to rescue insolvent papers remains to be seen. A decision is still innumerable witnesses away.

This file is automatically generated by a robot program, so reader's discretion is required.