4. Public Policy is Served, Not Offended, by an Injunction in This Case

Hearst’s final defense is that antitrust policy and allocative efficiency are disserved by an injunction forbidding Hearst to buy The Chronicle, end the JOA, and close The Examiner if no one will buy it. This argument calls into question the interface between the antitrust laws and the Newspaper Preservation Act.

The argument, as made by Hearst to the Justice Department, is essentially: (1) all economic competition in the newspaper market in San Francisco ended in 1964 with the JOA; (2) since the JOA supplants competition with price-fixing, antitrust policy favors the JOA’s dissolution; (3) since no viable daily newspaper competition is possible any longer in San Francisco, antitrust policy requires that Hearst be allowed to buy The Chronicle and close The Examiner; and (4) denying The Chronicle to Hearst while it owns The Examiner so as to preserve two newspaper voices in San Francisco is an impermissible use of the antitrust laws to foster a policy unrelated to economic competition.

The flaws in this argument are numerous and profound. First, defendants ignore the "gloss" that the Newspaper Preservation Act places on the antitrust laws, to use this Court’s term. Hearst and CPC for 35 years have enjoyed antitrust immunity and monopoly profits. For this dispensation, however, they have paid a price and made a Faustian bargain. In return for their access to an economic monopoly, they have been required to publish editorially independent newspapers. They are stuck with that bargain. Although the antitrust laws are ordinarily concerned with competition, not competitors, Brown Shoe Co. v. United States, 370 U.S. 294, 344 (1962), the "gloss" placed upon the antitrust laws by the Newspaper Preservation Act is that in the newspaper industry, competitors become as important as competition. Rather than following the traditional price-based model of competition, the Act says that in the newspaper industry, the antitrust laws shall be modified so as to preserve the number of competitors, i.e., independent editorial voices, as a paramount objective. This means that when actions are taken to reduce the number of competitors, an antitrust violation may result. Thus, forbidding Hearst’s ownership of The Chronicle while it owns The Examiner does promote antitrust policy, as modified by the Newspaper Preservation Act.

Second, to say that all economic competition is eliminated by the JOA is incorrect. Here, the JOA specifically reserves to CPC and Hearst the right to set their own newsstand and other prices; and they have done so. The JOA also is of finite duration. In 2005, it will end, and whatever competition has been suspended by its operation will resume. Certainly, here, the past three years have been marked by continual jockeying for position by Hearst and CPC to gain whatever advantages can accrue towards the day when the JOA ends, and full competition can resume. Antitrust policy requires a prohibition against conduct that threatens the resumption of such suspended competition as has occurred here with Hearst’s would-be purchase of The Chronicle. The antitrust laws are as much concerned with the elimination of potential competition as they are with actual competition. United States v. Aluminum Company of America, 148 F.2d 416, 431 (2d Cir. 1945, L. Hand, J.); American Tobacco Co. v. United States, 328 U.S. 781, 797 (1946); United States v. Griffith, 334 U.S. 100, 107 (1948) ("The antitrust laws are as much violated by the prevention of competition as by its destruction.") Hearst’s acquisition of The Chronicle therefore has serious and substantial anticompetitive effects falling within the cognizance of the antitrust laws: first, the elimination of actual price competition between The Chronicle and The Examiner; and, second, the elimination of their future competition at the end of the JOA.

Third, defendants’ argument founders on the evidence, in that The Examiner is not a failing enterprise with no prospect of ever competing against The Chronicle. Therefore, Hearst is not being required to continue a business that the market cannot sustain.

Finally, the law does not require defendants to continue in any event with the JOA and engage in per se antitrust violations against their will (although defendants’ protestations that they can no longer endure committing antitrust felonies, e.g., dividing markets, ring somewhat hollow after their 35 years of profitable law-breaking). Defendants are free to end their per se antitrust violations and dissolve the JOA. What they cannot do is combine to form a single-newspaper monopoly, under either the antitrust laws or the Newspaper Preservation Act. That is all plaintiff seeks to prevent in this lawsuit, a result fully consistent with the antitrust laws, the Newspaper Preservation Act, and public policy.