Greedy Publishers pay their competition to shut down (L.A. & Cleveland)

Great Debates
1

I don’t know much about anti-trust law, but something about this deal just reeks. Not only are these two large corporations conspiring to reduce competition, but in the process they’re reducing the diversity of viewpoints in two large cities.

Here’s the scenario: In Los Angeles, there are two free “alternative” weeklies (the same type of paper as The Chicago Reader)…The* L.A. Weekly*–owned by Village Voice Media; and New Times Los Angeles–owned by New Times. They are in fierce competition over local advertising dollars.

In Cleveland, there is a similar situation: Village Voice Media owns the Cleveland Free Times; while New Times owns the competing Cleveland Scene.

Now here’s where it gets downright fishy: the corporate honchos at each company got together and decided that this rivalry wasn’t doing each other any good. Their competition was driving down advertising rates, which is really hurting their bottom lines–especially with the economy like it is. So they make a deal: Village Voice Media pays New Times around $1 million dollars, in return New Times agrees to shut down it’s* New Times Los Angeles* paper. In the other part of this deal, Village Voice Media closed down the Cleveland Free Times, in exchange for a smaller cash payment from New Times.

The end result of this is that the Village-Voice-owned L.A. Weekly is now the dominant free weekly in Los Angeles, while New Times has the Cleveland market all to itself for it’s* Cleveland Scene* paper.

This deal reeks of anti-trust to me. The publishers deny that there are any anti-trust issues with this deal, because both Cleveland & L.A. still have many other print & broadcast outlets. But that seems irrelevant to me. According to the Sherman Anti-Trust Act, “Contracts or written agreements that reduce output or raise prices are prohibited”. Sure the papers themselves are free–but advertising rates will undoubtedly rise due to the lack of competition. Not to mention that readers will be deprived of a variety of viewpoints.

Isn’t it totally against the values of capitalism for companies to pay each other not to compete? Driving a competitor out of business through shrewd business practices is one thing, but cutting a check for them to shut down their operations in an entire market just seems slimey to me. Does anyone think that this is a perfectly acceptable business practice?

2

I think it’s perfectly acceptable.

3

Two businesses entering into a consensual mutually-beneficial agreement that causes injury to no one? Sounds perfectly in tune with capitalism to me.

4

Just to add to the mix, the Independent Weekly recently “merged” with the Spectator – the outcome being that the Indy. will continue publishing with a few pages devoted to former material (one column, one syndicated column, and a calendar of events) taken from the Spectator. Interestingly, the Indy., as its name indicates, has always been a locally owned publication, while the Spectator, originally founded by a man who had a great deal to do with the concept of “the Triangle” as a unified entity constituting Raleigh, Durham, Chapel Hill, and their suburbs and adjacent small towns, had been owned and published for about a decade by the Creative Loafing group out of Atlanta.

But I concur with the answers to the OP – the buying out of any publication by its competitors is not a case of monopoly in the sense that the anti-trust laws were out to combat, only a case of the market being unable to sustain two publications in competition. Anyone is free to go into business in competition with the at-present-sole alternative paper in any of these markets, and if adequately financed and with a winning game plan, be a viable competitor and perhaps even drive the established paper out of business.

(Note: in view of the fact that this board is owned and operated by the Chicago Reader, I’d be very interested in seeing what their corporate attitude towards such competition might be. Ed Zotti, any comments on this topic that you’d find suitable to post?)