United States v. The McClatchy Company and Knight-Ridder Incorporated; Proposed Final Judgment and Competitive Impact Statement, 41249-41257 [06-6362]
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Federal Register / Vol. 71, No. 139 / Thursday, July 20, 2006 / Notices
whether the settlement is ‘‘within the reaches
of the public interest.’’ More elaborate
requirements might undermine the
effectiveness of antitrust enforcement by
consent decree.
Bechtel, 648 F.2d at 666 (emphasis added)
(citations omitted).5
The proposed Final Judgment, therefore,
should not be reviewed under a standard of
whether it is certain to eliminate every
anticompetitive effect of a particular practice
or whether it mandates certainty of free
competition in the future. Court approval of
a final judgment requires a standard more
flexible and less strict than the standard
required for a finding of liability. ‘‘[A]
proposed decree must be approved even if it
falls short of the remedy the court would
impose on its own, as long as it falls within
the range of acceptability or is ‘within the
reaches of public interest.’’’ United States v.
AT&T, 552 F. Supp. 131, 151 (D.D.C. 1982)
(citations omitted) (quoting Gillette, 406 F.
Supp. at 716), aff’d sub nom. Maryland v.
United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605
F. Supp. 619, 622 (W.D. Ky. 1985) (approving
the consent decree even though the court
would have imposed a greater remedy).
Moreover, the Court’s role under the APPA
is limited to reviewing the remedy in
relationship to the violations that the United
States has alleged in its Complaint, and does
not authorize the Court to ‘‘construct [its]
own hypothetical case and then evaluate the
decree against that case.’’ Microsoft, 56 F.3d
at 1459. Because the ‘‘court’s authority to
review the decree depends entirely on the
government’s exercising its prosecutorial
discretion by bringing a case in the first
place,’’ it follows that ‘‘the court is only
authorized to review the decree itself,’’ and
not to ‘‘effectively redraft the complaint’’ to
inquire into other matters that the United
States did not pursue. Id. at 1459–60.
IX. Determinative Documents
There are no determinative materials or
documents within the meaning of the APPA
that were considered by the United States in
formulating the proposed Final Judgment.
Dated: June 23, 2006.
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Respectfully submitted,
Karen Phillips-Savoy,
Dando Cellini,
Jillian Charles,
James Foster,
Christine Hill,
Tara Shinnick,
Robert Wilder,
5 Cf. BNS, 858 F.2d at 463 (holding that the
court’s ‘‘ultimate authority under the [APPA] is
limited to approving or disapproving the consent
decree’’); Gillette, 406 F. Supp. at 716 (noting that,
in this way, the court is constrained to ‘‘look at the
overall picture not hypercritically, nor with a
microscope, but with an artist’s reducing glass’’).
See generally Microsoft, 56 F.3d at 1461 (discussing
whether ‘‘the remedies [obtained in the decree are]
so inconsonant with the allegations charged as to
fall outside of the ‘‘reaches of the public interest’’).
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U.S. Department of Justice, Antitrust
Division, Litigation II Section, Washington,
DC 20530.
[FR Doc. 06–6361 Filed 7–19–06; 8:45 am]
41249
Washington, DC 20530 (telephone: 202–
307–0468).
J. Robert Kramer II,
Director of Operations, Antitrust Division.
BILLING CODE 4410–11–M
In the United States District Court for the
District of Columbia
DEPARTMENT OF JUSTICE
United States of America, Department of
Justice, Antitrust Division, 325 7th Street,
NW.; Suite 300, Washington, DC 20530,
Plaintiff, v. The McClatchy Company, 2100 Q
Street, Sacramento, CA 95816, and KnightRidder, Incorporated, 50 West San Fernando
Street, San Jose, CA 95113, Defendants
Case Number 1:06CV01175, Judge: Richard
W. Roberts, Deck Type: Antitrust, Date
Stamp: 06/27/2006.
Antitrust Division
United States v. The McClatchy
Company and Knight-Ridder
Incorporated; Proposed Final
Judgment and Competitive Impact
Statement
Notice is hereby given pursuant to the
Antitrust Procedures and Penalties Act,
15 U.S.C. 16(b) through (h), that a
proposed Final Judgment, Stipulation
and Competitive Impact Statement have
been filed with the United States
District Court for the District of
Columbia in United States of America v.
The Clatchy Company and KnightRidder, Incorporated, Case No.
1:06CV01175. On June 27, 2006, the
United States filed a Complaint alleging
that the proposed merger of The
McClatchy Company and KnightRidder, Incorporated would violate
Section 7 of the Clayton Act, 15 U.S.C.
18. The proposed Final Judgment, filed
the same time as the Complaint,
requires defendant The McClatchy
Company to divest the Pioneer Press, a
daily newspaper distributed in the
Minneapolis/St. Paul metropolitan area,
along with certain tangible and
intangible assets. Copies of the
Complaint, proposed Final Judgment
and Competitive Impact Statement are
available for inspection at the
Department of Justice in Washington,
DC in Room 215, 325 Seventh Street,
NW., and at the Office of the Clerk of
the United States District Court for the
District of Columbia, Washington, DC.
Public comment is invited within 60
days of the date of this notice. Such
comments, and responses thereto, will
be published in the Federal Register
and filed with the Court. Comments
should be directed to John R. Read,
Chief, Litigation III Section, Antitrust
Division, United States Department of
Jusstice, 325 7th Street, NW., Suite 300,
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Complaint
The United States of America, acting under
the direction of the Attorney General of the
United States, brings this civil antitrust
action to prevent the proposed merger of The
McClatchy Company and Knight-Ridder,
Incorporated. These two newspaper
publishing companies are each other’s
primary competitor in the sale of local daily
newspapers to readers in the Minneapolis/St.
Paul metropolitan area in the state of
Minnesota, and in the sale of advertising in
such newspapers. The merger would
substantially lessen competition and tend to
create a monopoly in the publishing and
distribution of newspapers in violation of
Section 7 of the Clayton Act, 15 U.S.C. 18.
I. Jurisdiction and Venue
1. This action is filed by the United States
pursuant to Section 15 of the Clayton Act, as
amended, 15 U.S.C. 25, to obtain equitable
relief to prevent a violation of Section 7 of
the Clayton Act, as amended, 15 U.S.C. 18.
2. Both defendants sell newspapers and
sell advertising in such newspapers, a
commercial activity that substantially affects
and is in the flow of interstate commerce.
The Court has jurisdiction over the subject
matter of this action and jurisdiction over the
parties pursuant to 15 U.S.C. 22, 25, and 26,
and 28 U.S.C. 1331 and 1337.
3. Both defendants conduct business in the
District of Columbia and have consented to
the plaintiff’s assertion that venue in this
District is proper under 15 U.S.C. 22 and 28
U.S.C. 1391(c).
II. Defendants and the Proposed Merger
4. Defendant The McClatchy Company
(‘‘McClatchy’’) is a Delaware corporation
with its headquarters in Sacramento,
California. McClatchy publishes twelve (12)
daily newspapers throughout the United
States. In the Minneapolis/St. Paul
metropolitan area, McClatchy owns and
operates the Star Tribune.
5. Defendant Knight-Ridder, Incorporated
(‘‘Knight-Ridder’’) is a Florida corporation
With its headquarters in San Jose, California.
Knight-Ridder publishes thirty-two (32) daily
newspapers throughout the United States. In
the Minneapolis/St. Paul metropolitan area,
Knight-Ridder owns and operates the St. Paul
Pioneer Press.
6. On March 12, 2006, McClatchy and
Knight-Ridder entered into an ‘‘Agreement
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and Plan of Merger between The McClatchy
Company and Knight-Ridder, Inc.’’ (‘‘Merger
Agreement’’). Pursuant to that agreement, (1)
Knight-Ridder would merge with and into
McClatchy; (2) Knight-Ridder would cease to
exist as a separate corporate entity; and (3)
McClatchy would continue to operate as the
sole surviving company. As consideration for
the merger, each share of Knight-Ridder
common stock would be exchanged for cash
and stock, for an aggregate transaction value
in excess of $4 billion.
7. The merger would combine under
common ownership and control the only two
local daily newspapers serving the
Minneapolis/St. Paul metropolitan area with
any significant circulation, the Star Tribune
and the St. Paul Pioneer Press.
8. The combination of these two daily
newspapers would substantially reduce or
eliminate competition for the sale of local
daily newspapers in the Minneapolis/St. Paul
metropolitan area and would likely result in
higher prices and lower levels of quality and
service.
9. In addition, the combination of these
two daily newspapers would substantially
reduce or eliminate competition for the sale
of advertising in local daily newspapers in
the Minneapolis/St. Paul metropolitan area
and advertisers would likely pay higher
prices and receive lower levels of quality and
service for their advertisements.
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III. Relevant Market
A. Product Market
10. Local daily newspapers, such as the
Star Tribune and the St. Paul Pioneer Press,
provide a unique package of services to their
readers. They provide national, state, and
local news in a timely manner. The news
stories featured in the Star Tribune and the
St. Paul Pioneer Press are detailed, as
compared to the news as reported by radio
or television, and cover a wide range of
stories of interest to local readers in the
Minneapolis/St. Paul metropolitan area, not
just major news highlights. Newspapers, such
as the Star Tribune and the St. Paul Pioneer
Press, are portable and allow the reader to
read the news, advertisements, and other
information at his or her own convenience.
Readers also value other features of the Star
Tribune and the St. Paul Pioneer Press, such
as calendars of local events and meetings,
movie and TV listings, classified
advertisements, commercial advertisements,
legal notices, comics, syndicated columns,
and obituaries. Readers of the Star Tribune
and the St. Paul Pioneer Press do not
consider weekly newspapers, radio news,
television news, or Internet news to be
adequate substitutes for local daily
newspapers serving the Minneapolis/St. Paul
metropolitan area. If the merged firm were to
impose a small but significant and
nontransitory increase in the price of local
daily newspapers, it would lose too few sales
to make the price increase unprofitable.
11. A newspaper’s ability to attract readers
and build its circulation is not only critical
to competition for readers; it also directly
affects its ability to compete for advertisers.
A newspaper that has more readers is more
attractive and more valuable to advertisers.
Thus, one important reason that the Star
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Tribune and the St. Paul Pioneer Press
compete for readers is so that they can better
compete for advertisers.
12. Advertising in the Star Tribune and the
St. Paul Pioneer Press allows advertisers to
reach a broad cross-section of consumers in
the Minneapolis/St. Paul metropolitan area
with a detailed message in a timely manner.
A substantial portion of the defendants’
advertisers do not consider other types of
advertising, such as advertising in weekly
newspapers, on radio, on television, or on the
Internet as adequate substitutes for
advertising in a local daily newspaper. In the
Minneapolis/St. Paul metropolitan area, the
Star Tribune and the St. Paul Pioneer Press
provide advertisers the best vehicle to
advertise the price of their goods or services
in a timely manner. If the merged firm were
to impose a small but significant and
nontransitory increase in the price of
advertising in local daily newspapers, it
would lose too few sales to make the price
increase unprofitable.
13. Accordingly, the sale of local daily
newspapers to readers and the sale of access
to those readers to advertisers in those
newspapers each constitutes a line of
commerce, or a relevant product market,
within the meaning of Section 7 of the
Clayton Act.
B. Geographic Market
14. The Star Tribune and the St. Paul
Pioneer Press are both produced, published,
and distributed in the Minneapolis/St. Paul
metropolitan area.
15. The Star Tribune and the St. Paul
Pioneer Press target readers in the
Minneapolis/St. Paul metropolitan area. Both
papers provide news relating to the
Minneapolis/St. Paul metropolitan area in
addition to state and national news.
Together, the Star Tribune and the St. Paul
Pioneer Press generate approximately 80
percent of their total circulation from the
Minneapolis/St. Paul metropolitan area.
16. Local daily newspapers that serve areas
outside of the Minneapolis/St. Paul
metropolitan area do not provide local news
specific to the Minneapolis/St. Paul
metropolitan area. From a reader’s
standpoint, local daily newspapers serving
areas outside of the Minneapolis/St. Paul
metropolitan area are not acceptable
substitutes for the Star Tribune and the St.
Paul Pioneer Press. If the merged firm were
to impose a small but significant and
nontransitory increase in the price of local
daily newspapers serving the Minneapolis/
St. Paul metropolitan area, it would lose too
few sales to make the price increase
unprofitable.
17. The Star Tribune and the St. Paul
Pioneer Press allow advertisers to target
readers in the Minneapolis/St. Paul
metropolitan area. From the standpoint of an
advertiser selling goods or services in the
Minneapolis/St. Paul metropolitan area,
advertising in local daily newspapers serving
areas outside of the Minneapolis/St. Paul
metropolitan area is not an acceptable
substitute for advertising in the Star Tribune
and the St. Paul Pioneer Press. If the merged
firm were to impose a small but significant
and nontransitory increase in the price of
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advertisements in local daily newspapers
service the Minneapolis/St. Paul
metropolitan area, it would lose too few sales
to make the price increase unprofitable.
18. Accordingly, the Minneapolis/St. Paul
metropolitan area in the state of Minnesota
is a section of the country, or a relevant
geographic market, within the meaning of
Section 7 of the Clayton Act.
IV. Competitive Effects
A. Harm to Readers
19. The Star Tribune and the St. Paul
Pioneer Press are each other’s primary
competitor in the sale of local daily
newspaper in the Minneapolis/St. Paul
metropolitan area, competing aggressively for
readers. Their head-to-head competition has
given readers in the Minneapolis/St. Paul
metropolitan area higher quality news
coverage, better service, and lower prices. A
combination of these two newspapers under
common ownership and control would
substantially reduce or eliminate that
competition and would decrease incentives
of the merged firm to maintain high levels of
quality and service.
20. The proposed merger would give the
newly merged entity almost 100 percent of
local daily newspaper circulation in the
Minneapolis/St. Paul metropolitan area.
Based on audited figures for daily circulation
ending March 2004, the Star Tribune had a
daily circulation of 296,069 or approximately
64 percent of readers, and the St. Paul
Pioneer Press had a daily circulation of
159,223, or approximately 34 percent of
readers, in the Minneapolis/St. Paul
metropolitan area. Based on audited figures
for Sunday circulation ending March 2004,
the Star Tribune had a Sunday circulation of
517,685, or approximately 72 percent of
readers, and the St. Paul Pioneer Press had
a daily circulation of 203,471, or
approximately 28 percent of readers, in the
Minneapolis/St. Paul metropolitan area.
21. The only other local daily newspaper
competitor of the merged firm in the
Minneapolis/St. Paul metropolitan area is the
Stillwater Gazette with a daily circulation
(excluding Sunday) of 3,255 in the year
ending in March 2004, which represents less
than one percent of readers.
22. Using a measure of market
concentration called the HerfindahlHirschman Index (‘‘HHI’’), explained in
Appendix A, the combination of the Star
Tribune and the St. Paul Pioneer Press under
common ownership and control would create
a monopoly and yield a post-merger HHI of
approximately 9,900, representing an
increase of roughly 4,488 points for daily
circulation. For Sunday circulation, the
combination of the Star Tribune and the St.
Paul Pioneer Press would yield an HHI of
approximately 10,000, an increase of roughly
4,050 points.
B. Harm to Advertisers
23. The Star Tribune and the St. Paul
Pioneer Press are each other’s primary
competitor in the sale of advertising in local
daily newspapers in the Minneapolis/St. Paul
metropolitan area, competing aggressively for
the business of advertisers in that area. Their
head-to-head competition has been
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instrumental in giving advertisers in the
Minneapolis/St. Paul metropolitan area
higher quality advertising, better service, and
lower prices. A combination of these two
newspapers under common ownership and
control would substantially reduce or
eliminate that competition.
24. If the two papers combine under
common ownership and control, the
combined entity would control virtually 100
percent of the sales of advertisements in local
daily newspapers serving the Minneapolis/
St. Paul metropolitan area. In 2005, the Star
Tribune generated $308 million, or
approximately 68 percent, in total daily
newspaper advertising revenues. The St. Paul
Pioneer Press generated $140 million, or
approximately 32 percent, in total daily
newspaper advertising revenues. The vast
majority of these advertising revenues come
from advertisers seeking to reach readers in
the Minneapolis/St. Paul metropolitan area.
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V. Entry
25. Entry by local daily newspapers in the
Minneapolis/St. Paul metropolitan area is
time-consuming and difficult, and is not
likely to eliminate the anticompetitive effects
of the merger by constraining the market
power of the combined entity in the nearterm, or in the foreseeable future. Local daily
newspapers incur significant fixed costs,
many of which are sunk. Examples of these
sunk costs include hiring reporters and
editors, news gathering, and marketing the
very existence of the new paper, all of which
take substantial time. In the event that the
entrant fails or exits the newspaper industry,
it cannot recover these sunk costs, making
entry risky and likely unprofitable. As a
result, entry will not be timely, likely, or
sufficient to eliminate the competitive harm
that would likely result from the proposed
merger.
VI. Violation Alleged
26. On March 12, 2006, McClatchy, and
Knight-Ridder entered into the Merger
Agreement. Pursuant to that agreement,
Knight-Ridder would merge with and into
McClatchy. As a result of this transaction, the
Star Tribune and the St. Paul Pioneer Press
would be under common ownership and
control.
27. This transaction will have the
following effects, among others, in violation
of Section 7 of the Clayton Act, 15 U.S.C. 18:
(a) Competition in the sale of local daily
newspapers to readers in the Minneapolis/St.
Paul metropolitan area will be substantially
lessened or eliminated;
(b) Prices for local daily newspapers in the
Minneapolis/St. Paul metropolitan area
would likely increase to levels above those
that would prevail absent the merger;
(c) Competition in the sale of advertising
in local daily newspapers in the
Minneapolis/St. Paul metropolitan area will
be substantially lessened or eliminated; and
(d) Prices for advertising in local daily
newspapers in the Minneapolis/St. Paul
metropolitan area would likely increase to
levels above those that would prevail absent
the merger.
VII. Requested Relief
28. Plaintiff requests:
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(a) Adjudication that the proposed merger
of McClatchy and Knight-Ridder violates
Section 7 of the Clayton Act;
(b) Permanent injunctive relief to prevent
the consummation of the proposed merger
and to prevent the defendants from entering
into or carrying out any agreement,
understanding or plan, the effect of which
would be to combine the businesses or assets
of defendants;
(c) An award to plaintiff of its costs in this
action; and
(d) Such other relief as is proper.
Dated: June 27, 2006.
For Plaintiff United States of America.
Thomas O. Barnett,
Assistant Attorney General, Antitrust
Division.
David L. Meyer,
Deputy Assistant Attorney General, Antitrust
Division.
J. Robert Kramer II,
Director of Operations.
John R. Read,
Chief, Litigation III.
Gregg I. Malawer (D.C. Bar #481685),
Joan Hogan,
Attorneys for the United States, United States
Department of Justice, Antitrust Division,
Litigation III, 325 7th Street, NW., Suite
300, Washington, DC 20530, (202) 514–
2000.
Exhibit A—Definition of HHI and
Calculations for Market
‘‘HHI’’ means the Herfindahl-Hirschman
Index, a commonly accepted measure of
market concentration. It is calculated by
squaring the market share of each firm
competing in the market and then summing
the resulting numbers. For example, for a
market consisting of four firms with shares of
thirty, thirty, twenty and twenty percent, the
HHI is 2600 (302 + 302 + 202 + 202 = 2600).
The HHI takes into account the relative size
and distribution of the firms in a market and
approaches zero when a market consists of a
large number of finns of relatively equal size.
The HHI increases both as the number of
firms in the market decreases and as the
disparity in size between those firms
increases.
Markets in which the HHI is between 1000
and 1800 points are considered to be
moderately concentrated, and those in which
the HHI is in excess of 1800 points are
considered to be concentrated. Transactions
that increase the HHI by more than 100
points in concentrated markets
presumptively raise antitrust concerns under
the Merger Guidelines. See Merger
Guidelines § 1.51.
Proposed Final Judgment
Whereas, Plaintiff, United States of
America, and defendants, The McClatchy
Company (‘‘McClatchy’’), and Knight Ridder,
Incorporated (‘‘Knight Ridder’’), by their
respective attorneys, have consented to the
entry of this Final Judgment without trial or
adjudication of any issue of fact or law, and
without this Final Judgment constituting any
evidence against or admission by any party
regarding any issue of fact or law;
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And whereas, Defendants agree to be
bound by the provisions of this Final
Judgment pending its approval by the Court;
And whereas, the essence of this Final
Judgment is the prompt and certain
divestiture of certain rights or assets by the
Defendant McClatchy to assure that
competition is not substantially lessened;
And whereas, Plaintiff requires Defendant
McClatchy to make certain divestitures for
the purpose of remedying the loss of
competition alleged in the Complaint;
And whereas, Defendant McClatchy has
represented to the United States that the
divestitures required below can and will be
made and that Defendant McClatchy will
later raise no claim of hardship or difficulty
as grounds for asking the Court to modify any
of the divestiture provisions contained
below;
Now, therefore, before any testimony is
taken, without trial or adjudication of any
issue of fact or law, and upon consent of the
patties, it is ordered, adjudged, and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject
matter of and each of the parties to this
action. The Complaint states a claim upon
which relief may be granted against
defendant under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ‘‘McClatchy’’ means Defendant The
McClatchy Company, a Delaware corporation
with its headquarters in Sacramento,
California, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their
directors, officers, managers, agents, and
employees.
B. ‘‘Knight Ridder’’ means Defendant
Knight Ridder, Inc., a Florida corporation
with its headquarters in San Jose, California,
its successors and assigns, and its
subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their
directors, officers, managers, agents, and
employees.
C. ‘‘Pioneer Press’’ or ‘‘St. Paul Pioneer
Press’’ means the local daily newspaper
referred to as either the Pioneer Press or the
St. Paul Pioneer Press, distributed in the
Minneapolis/St. Paul metropolitan area, and
owned and operated by defendant
McClatchy.
D. ‘‘Star Tribune’’ means the local daily
newspaper, distributed in the Minneapolis/
St. Paul metropolitan area, and owned and
operated by defendant McClatchy.
E. ‘‘Minneapolis/St. Paul metropolitan
area’’ means the area encompassing and
surrounding the cities of Minneapolis and St.
Paul in the state of Minnesota.
F. ‘‘Divestiture Assets’’ means all of the
assets, tangible or intangible, used in the
operations of the Pioneer Press, including,
but not limited to:
1. All tangible assets that comprise the
printing, publication, distribution, sale, and
operation of the Pioneer Press, including all
equipment, fixed assets and fixtures,
personal property, inventory, office furniture,
materials, supplies, and other tangible
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property and all assets used in connection
with the Pioneer Press; all licenses, permits
and authorizations issued by any
governmental organization relating to the
Pioneer Press; all contracts, agreements,
leases, commitments, certifications, and
understandings relating to the Pioneer Press,
including supply agreements; all customer
lists, contracts, accounts, and credit records;
all repair and performance records and all
other records relating to the Pioneer Press;
2. All intangible assets used in the
printing, publication, distribution,
production, servicing, sale and operation of
the Divestiture Assets, including, but not
limited to all licenses and sublicenses,
intellectual property, technical information,
computer software (except defendant’s
proprietary software) and related
documentation, know-how, drawings,
blueprints, designs, specifications for
materials, specifications for parts and
devices, quality assurance and control
procedures, all technical manuals and
information defendant provide to their own
employees, customers, suppliers, agents or
licensees, and all research data relating to the
Pioneer Press.
G. ‘‘Acquirer’’ or ‘‘Acquirers’’ mean the
entity or entities to whom Defendant
McClatchy divest the Divestiture Assets.
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III. Applicability
A. This Final Judgment applies to
McClatchy and Knight Ridder, as defined
above, and all other persons in active concert
or participation with any of them who
receive actual notice of this Final Judgment
by personal service or otherwise.
B. Defendant McClatchy shall require, as a
condition of the sale or other disposition of
all or substantially all of their assets or of
lesser business units that include the
Divestiture Assets, that the purchaser(s)
agree(s) to be bound by the provisions of this
Final Judgment.
IV. Divestitures
A. Defendant McClatchy is ordered and
directed to divest the Divestiture Assets in a
manner consistent with this Final Judgment
to an Acquirer or Acquirers acceptable to the
United States in its sole discretion, before the
later of (1) sixty (60) calendar days after the
filing of the Complaint in this matter or (2)
five (5) days after notice of the entry of this
Final Judgment by the Court. The United
States, in its sole discretion, may agree to one
or more extensions of this time, not to exceed
sixty (60) calendar days in total, and shall
notify the Court in such circumstances.
Defendant McClatchy agrees to use its best
effort to divest the Divestiture Assets, and to
obtain all regulatory approvals necessary for
such divestitures, as expeditiously as
possible.
B. In accomplishing the divestiture ordered
by this Final Judgment, Defendant McClatchy
promptly shall make known, by usual and
customary means, the availability of the
Divestiture Assets. Defendant McClatchy
shall inform any person making inquiry
regarding a possible purchase of the
Divestiture Assets that they are being
divested pursuant to this Final Judgment and
provide that person with a copy of this Final
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Judgment. Defendant McClatchy shall offer to
furnish to all prospective Acquirers, subject
to customary confidentiality assurances, all
information and documents relating to the
Divestiture Assets customarily provided in a
due diligence process, except such
information or documents subject to the
attorney-client or work product privileges.
Defendant McClatchy shall make available
such information to the United States at the
same time that such information is made
available to any other person.
C. Defendant McClatchy shall provide to
the Acquirer(s) and the United States
information relating to the personnel
involved in the operation of the Divestiture
Assets to enable the Acquirer(s) to make
offers of employment. Defendant McClatchy
will not interfere with any negotiations by
the Acquirer(s) to employ an employee of
Defendant McClatchy whose primary
responsibility relates to the operation of the
Divestiture Assets.
D. Defendant McClatchy shall permit
prospective Acquirers of the Divestiture
Assets to have reasonable access to personnel
and to make inspections of the physical
facilities of any and all facilities relating the
operation of the Pioneer Press; access to any
and all environmental, zoning, and other
permit documents and information; and
access to any and all financial, operational or
other documents and information
customarily provided as part of a due
diligence process.
E. Defendant McClatchy shall warrant to
the Acquirer(s) of the Divestiture Assets that
the assets will be operational on the date of
sale.
F. Defendant McClatchy shall not take any
action that will impede in any way the
permitting, operation, or divestiture of the
Divestiture Assets.
G. Defendant McClatchy shall warrant to
the Acquirer(s) of the Divestiture Assets that
there are no material defects in the
environmental, zoning or other permits
pertaining to the operation of the Assets, and
that following the sale of the Divestiture
Assets, Defendant McClatchy will not
undertake, directly or indirectly, any
challenges to the environmental, zoning or
other permits relating to the operation of the
Divestiture Assets.
H. Unless the United States otherwise
consents in writing, the divestiture pursuant
to Section IV, or by trustee appointed
pursuant to Section V, of this Final
Judgment, shall include the entire Divestiture
Assets, and shall be accomplished in such a
way as to satisfy the United States, in its sole
discretion, that the Divestiture Assets can
and will be used by the Acquirer(s) as part
of a viable, ongoing newspaper publishing
business. Divestiture of the Divestiture Assets
may be made to one or more Acquirers,
provided that in each instance it is
demonstrated to the sole satisfaction of the
United States that the Divestiture Assets will
remain viable and the divestiture of such
assets will remedy the competitive harm
alleged in the Complaint. The divestiture,
whether pursuant to Section IV or V of this
Final Judgment:
1. Shall be made to an Acquirer or
Acquirers that, in the United State’s sole
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judgment, has the intent and capability
(including the necessary managerial,
operational, and financial capability) of
competing effectively in the sale of local
daily newspapers to readers and in the sale
of advertising in such newspapers in the
Minneapolis/St. Paul metropolitan areas; and
2. Shall be accomplished so as to satisfy
the United States, in its sole discretion, that
none of the terms of any agreement(s)
between an Acquirer or Acquirers and
defendant McClatchy give Defendant
McClatchy the ability unreasonably to raise
the Acquirer’s costs, to lower to Acquirer’s
efficiency, or otherwise to interfere in the
ability of the Acquirer to compete effectively.
V. Appointment of Trustee
A. If Defendant McClatchy has not divested
the Divestiture Assets within the time period
specified in Section IV(A), Defendant
McClatchy shall notify the United States of
that fact in writing. Upon application of the
United States, the Court shall appoint a
trustee selected by the United States and
approved by the Court to effect the
divestiture of the Divestiture Assets.
B. After the appointment of a trustee
becomes effective, only the trustee shall have
the right to sell the Divestiture Assets. The
trustees shall have the power and authority
to accomplish the divestiture to an
Acquirer(s) acceptable to the United States at
such price and on such terms as are then
obtainable upon reasonable effort by the
trustee, subject to the provisions of Sections
IV, V and VI of this Final Judgment, and shall
have such other powers as this Court deems
appropriate. Subjects to Section V(D) of this
Final Judgment, the trustee may hire at the
cost and expense of Defendant McClatchy
any investment bankers, attorneys, or other
agents, who shall be solely accountable to the
trustee, reasonably in the trustee’s judgement
to assist in the divestiture.
C. Defendant McClatchy shall not object to
a sale by the trustee on any ground other than
the trustee’s malfeasance. Any such
objections by Defendant McClatchy must be
conveyed in writing to the United States and
the trustee within ten (10) calendar days after
the trustee has provided the notice required
under Section VI.
D. The trustee shall serve at the cost and
expense of defendant McClatchy, on such
terms and conditions as the United States
approves, and shall account for all monies
derived from the sale of the assets sold by the
trustee and all costs and expenses so
incurred. After approval by the Court of the
trustee’s accounting, including fees for its
services and those of any professionals and
agents retained by the trustee, all remaining
money shall be paid to Defendant McClatchy
and the trust shall then be terminated. The
compensation of the trustee and any
professionals and agents retained by the
trustee shall be reasonable in light of the
value of the Divestiture Assets and based on
a fee arrangement providing the trustee with
an incentive based on the price and terms of
the divestiture and the speed with which it
is accomplished, but timeliness is
paramount.
E. Defendant McClatchy shall use its best
efforts to assist the trustee in accomplishing
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the required divestiture. The trustee and any
consultants, accountants, attorneys, and
other persons retained by the trustee shall
have full and complete access to the
personnel, books, records, and facilities
related to the operation of the Pioneer Press
and Defendant McClatchy shall develop
financial and other information relevant to
the operation of the Pioneer Press as the
trustee may reasonably request, subject to
reasonable protection for trade secret or other
confidential research, development, or
commercial information. Defendant
McClatchy shall take no action to interfere
with or to impede the trustee’s
accomplishment of the divestiture.
F. After its appointment becomes effective,
the trustee shall file monthly reports with the
United States and the Court, setting forth the
trustee’s efforts to accomplish the divestiture
ordered under this Final Judgment. To the
extent such reports contain information that
the trustee deems confidential, such reports
shall not be filed in the public docket of the
Court. Such reports shall include the name,
address, and telephone number of each
person who, during the preceding month,
made an offer to acquire, expressed an
interest in acquiring, entered into
negotiations to acquire, or was contacted or
make an inquiry about acquiring, any interest
in the Divestiture Assets, and shall describe
in detail each contact with any such person.
The trustee shall maintain full records of all
efforts made to divest the Divestiture Assets.
G. If the trustee has not accomplish such
divestiture within four (4) months after its
appointment, the trustee shall promptly file
with the Court a report setting forth: (1) The
trustee’s efforts to accomplish the required
divestiture, (2) the reasons, in the trustee’s
judgment, why the required divestiture has
not been accomplished, and (3) the trustee’s
recommendations. To the extent such reports
contain information that the trustee deems
confidential, such report shall not be filed in
the public docket of the Court. The trustee at
the same time shall furnish such report to the
United States, who shall have the right to
make additional recommendations consistent
with the purpose of the trust. The Court
thereafter shall enter such orders as it shall
deem appropriate to carry out the purpose of
this Final Judgment, which may, if necessary,
include extending the trust and the term of
the trustee’s appointment by a period
requested by the United States.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following
execution of a definitive divestiture
agreement, Defendant McClatchy or the
trustee, whichever is then responsible for
effecting the divestiture required herein,
shall notify the United States of any
proposed divestiture required by Section IV
or V of this Final Judgment. If the trustee is
responsible, it shall similarly notify
Defendant McClatchy. The notice shall set
forth the details of the proposed divestiture
and list the name, address, and telephone
number of each person not previously
identified who offered or expressed an
interest in or desire to acquire any ownership
interest in the Divestiture Assets, together
with full details of the same.
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B. Within fifteen (15) calendar days of
receipt by the United States of such notice,
the United States may request from
Defendant McClatchy, the proposed
Acquirer(s), any other third party, or the
trustee if applicable additional information
concerning the proposed divestiture, the
proposed Acquirer(s) and any other potential
Acquirer(s). Defendant McClatchy and the
trustee shall furnish any additional
information requested within fifteen (15)
calendar days of the receipt of the request,
unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after
receipt of the notice or within twenty (20)
calendar days after the United States has
been provided the additional information
requested from Defendant McClatchy, the
proposed Acquirer(s), any third party and the
trustee, whichever is later, the United States
shall provide written notice to Defendant
McClatchy and the trustee, if there is one,
stating whether or not it objects to the
proposed divestiture. If the United States
provides written notices that it does not
object, the divestiture may be consummated,
subject only to Defendant McClatchy’s
limited right to object to the sale under
Section V(C) of this Final Judgment. Absent
written notice that the United States does not
object to the proposed Acquirer(s) or upon
objection by the United States, a divestiture
proposed under Section IV or V shall not be
consummated. Upon objection by Defendant
McClatchy under Section V(C), a divestiture
proposed under Section V shall not be
consummated unless approved by the Court.
VII. Financing
Defendant McClatchy shall not finance all
or any part of any purchase made pursuant
to this Final Judgment.
VIII. Hold Separate Order
Until the divestitures required by the Final
Judgment have been accomplished,
Defendant McClatchy shall take all steps
necessary to comply with the Hold Separate
Stipulation and Order entered by this Court
and to preserve in all material respects the
Divestiture Assets. Defendant McClatchy
shall take no action that would jeopardize the
divestiture of the Divestiture Assets.
IX. Affidavits
A. Within twenty (20) calendar days of the
filing of the Complaint and every thirty (30)
calendar days thereafter until the divestiture
has been completed, whether pursuant to
Section IV or V of this Final Judgment,
Defendant McClatchy shall deliver to the
United States an affidavit as to the fact and
manner of their compliance with Section IV
or V of this Final Judgment. Each such
affidavit shall include the name, address, and
telephone number of each person who,
during the preceding thirty (30) days, made
an offer to acquire, expressed an interest in
acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry
about acquiring, any interest in the
Divestiture Assets and shall describe in detail
each contact with any such person during
that period. Each such affidavit shall also
include a description of the efforts that
defendant McClatchy has taken to solicit
buyers for the Divestiture Assets and to
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41253
provide required information to prospective
purchasers, including the limitations, if any,
on such information. Assuming the
information set forth in the affidavit is true
and complete, any objection by the United
States to information provided by Defendant
McClatchy, including limitations on
information, shall be made within fourteen
(14) days of receipt of such affidavit.
B. Within twenty (20) calendar days of the
filing of the Complaint in this matter,
Defendant McClatchy shall deliver to the
United States an affidavit that describes in
reasonable detail all actions Defendant
McClatchy has taken and all steps Defendant
McClatchy has implemented on an ongoing
basis to comply with Section IV of this Final
Judgment. Defendant McClatchy shall deliver
to the United States an affidavit describing
any changes to the efforts and actions
outlined in Defendant McClatchy’s earlier
affidavits filed pursuant to this section
within fifteen (15) calendar days after the
change is implemented.
C. Defendant McClatchy shall keep all
records of all efforts made to preserve and
divest the Divestiture Assets until one year
after such divestiture has been completed.
X. Compliance Inspection
A. For the purposes of determining or
securing compliance with this Final
Judgment, or of determining whether the
Final Judgment should be modified or
vacated, and subject to any legally recognized
privilege, from time to time duly authorized
representatives of the United States
Department of Justice, including consultants
and other persons retained by the United
States, shall, upon the written request of a
duly authorized representative of the
Assistant Attorney General in charge of the
Antitrust Divsion, and on reasonable notice
to Defendant McClatchy, be permitted:
1. Access during defendant McClatchy’s
office hours to inspect and copy or, at
plaintiff’s option, to require defendant
McClatchy to provide copies of, all books,
ledgers, accounts, records and documents in
the possession, custody, or control of the
defendant McClatchy, relating to any matters
contained in this Final Judgment; and
2. To interview, either informally or on the
record, defendant McClatchy’s officers,
employees, or agents, who may have their
individual counsel present, regarding such
matters. The interviews shall be subject to
the interviewee’s reasonable convenience
and without restraint or interference by
Defendant McClatchy.
B. Upon the written request of a duly
authorized representative of the Assistant
Attorney General in charge of the Antitrust
Division, Defendant McClatchy shall submit
such written reports or responses to written
interrogatories, under oath if requested,
relating to any of the matters contained in
this Final Judgment as may be requested.
C. No information or documents obtained
by the means provided in this section shall
be divulged by the United States to any
person other than an authorized
representative of the Executive Branch of the
United States, except in the course of legal
proceedings to which the United States is a
party (including grand jury proceedings), or
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for the purpose of securing compliance with
this Final Judgment, or as otherwise required
by law.
D. If, at the time Defendant McClatchy
furnishes information or documents to the
United States, Defendant McClatchy
represents and identifies in writing the
material in any such information or
documents to which a claim of protection
may be asserted under Rule 26(c)(7) of the
Federal Rules of Civil Procedure, and
Defendant McClatchy marks each pertinent
page of such material, ‘‘Subject to claim of
protection under Rule 26(c)(7) of the Federal
Rules of Civil Procedure,’’ then the United
States shall give defendant McClatchy ten
(10) calendar days’ notice prior to divulging
such material in any legal proceeding (other
than a grand jury proceeding).
Minneapolis/St. Paul metropolitan area in
the state of Minnesota and in the sale of
advertising in such newspapers. The merger
would combine under common ownership
and control the only two local daily
newspapers serving the Minneapolis/St. Paul
metropolitan area in the state of Minnesota
and in the sale of advertising in such
newspapers. The merger would combine
under common ownership and control the
only two local daily newspapers serving the
Minneapolis/St. Paul metropolitan area, the
Star Tribune and the St. Paul Pioneer Press.
The newly merged firm would have
essentially a 100 percent market share (by
circulation and revenue). As a result, the
combination of these two daily newspapers
would substantially reduce or eliminate
competition for readers of local daily
newspapers and newspaper readers in the
XI. No Reacquisition
Minneapolis/St. Paul metropolitan area
During the term of this Final Judgment,
would be likely to pay higher prices and to
Defendant McClatchy may not reacquire any
receive lower levels of quality and service. In
part of the Divestiture Assets.
addition, the combination of these two daily
newspapers in the Minneapolis/St. Paul
XII. Retention of Jurisdiction
metropolitan area and advertisers would be
This Court retains jurisdiction to enable
likely to pay higher prices and to receive
any party to this Final Judgment to apply to
lower levels of quality and service for their
this Court at any time for further orders and
advertisements.
directions as may be necessary or appropriate
The prayer for relief seeks: (a) An
to carry out or construe this Final Judgment,
adjudication that the proposed merger
to modify any of its provisions, to enforce
described in the Complaint would violate
compliance, and to punish violations of its
Section 7 of the Clayton Act; (b) permanent
provisions.
injunctive relief preventing the
consummation of the transaction; (c) an
XIII. Expiration of Final Judgment
award to the plaintiff of the costs of this
Unless this Court grants an extension, this
action; and (d) such other relief as is proper.
Final Judgment shall expire (10) ten years
Shortly before this suit was filed, a
from the date of its entry.
proposed settlement was reached that
permits McClatchy to complete its merger
XIV. Public Interest Determination
with Knight-Ridder, yet preserves
For the reasons set forth in the Competitive
competition in the markets in which the
Impact Statement filed in this case, and made
transaction would raise significant
available for public comment, entry of this
competitive concerns. A Stipulation and
Final Judgment is in the public interest and
proposed Final Judgment embodying the
the parties have complied with the
settlement were filed at the same time the
procedures of the Antitrust Procedures and
Complaint was filed.
Penalties Act, 15 U.S.C. 16.
The proposed Final Judgment, which is
Court Approval Subject to Procedures of
explained more fully below, requires
Antitrust Procedures and Penalties Act, 15
McClatchy and Knight-Ridder to divest the
U.S.C. 16.
St. Paul Pioneer Press to acquirer(s)
Dated: lllllllllllllllll acceptable to the United States. Unless the
lllllllllllllllllllll United States grants a time extension, the
divestiture must be completed within sixty
United States District Judge
(60) calendar days after the filing of the
Competitive Impact Statemnt
Complaint in this matter or five (5) calender
days after notice of the entry of this Final
Plaintiff, the United States of America
Judgment by the Court, whichever is later.
(‘‘United States’’ or ‘‘Plaintiff’’ or
If the divestitures are not completed within
‘‘government’’), pursuant to Section 2(b) of
the divestiture period, the Court, upon
the Antitrust Procedures and Penalties Act
application of the United States, is to appoint
(‘‘APPA’’), 15 U.S.C. 16(b)–(h), files this
trustee selected by the United States to sell
Competitive Impact Statement relating to the
proposed Final Judgment submitted for entry the assets. The proposed Final Judgment also
requires that, until the divestitures mandated
in this civil antitrust proceeding.
by the Final Judgment have been
I. Nature and Purpose of the Proceeding
accomplished, the defendants must maintain
Plaintiff the United States filed a civil
and operate the St. Paul Pioneer Press as an
antitrust Complaint on June 26, 2006,
active competitor, maintain the management,
alleging that a proposed merger of The
staffing, sales, and marketing of St. Pioneer
McClatchy Company (‘‘McClatchy’’) and
Pioneer Press and fully maintain the St. Paul
Knight-Ridder, Incorporated (‘‘KnightPioneer Press in operable condition.
Ridder’’) would violate Section 7 of the
The plaintiff and the defendants have
Clayton Act, 15 U.S.C. 18. The Complaint
stipulated that the proposed Final Judgment
alleges that McClatchy and Knight-Ridder are may be entered after compliance with the
each other’s primary competitor in the sale
APPA. Entry of the proposed Final Judgment
of local daily newspapers to readers in the
would terminate this action, except that the
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Court would retain jurisdiction to construe,
modify, or enforce the provisions of the
proposed Final Judgment and to punish
violations thereof.
II. The Alleged Violation
A. The Defendants
McClatchy is a Delaware corporation with
its headquarters in Sacramento, California.
McClatchy publishes twelve (12) daily
newspapers throughout the United States. In
the Minneapolis/St. Paul metropolitan area,
McClatchy owns and operates the Star
Tribune. McClatchy had revenues of
approximately $1.2 billion during 2005.
Knight-Ridder is a Florida corporation with
its headquarters in San Jose, California.
Knight-Ridder publishes thirty-two (32) daily
newspapers throughout the United States. In
the Minneapolis/St. Paul metropolitan area,
Knight-Ridder owns and operates the St. Paul
Pioneer Press. Knight-Ridder had revenues of
approximately $3 billion during 2005.
B. Description of the Events Giving Rise to
the Alleged Violation
On March 12, 2006, McClatchy and KnightRidder entered into an ‘‘Agreement and Plan
of Merger between The McClatchy Company
and Knight-Ridder, Inc.’’ (‘‘Merger
Agreement’’). Pursuant to that agreement, (1)
Knight-Ridder would merge with and into
McClatchy; (2) Knight-Ridder would cease to
exist as a separate corporate entity; and (3)
McClatchy would continue to operate as the
sole surviving company. As consideration for
the merger, each share of Knight-Ridder
common stock would be exchanged for cash
and stock, for an aggregate transaction value
in excess of $4 billion.
The Star Tribune and the St. Paul Pioneer
Press compete head-to-head in the sale of
local daily newspapers in the Minneapolis/
St. Paul metropolitan area and compete headto-head in the sale of advertising in these
local daily newspapers. They compete for
readers so that they can better compete for
advertisers. The proposed merger, and the
threatened loss of competition that would be
caused by it, precipitated the government’s
suit.
C. Anticompetitive Consequences of the
Proposed Transaction
1. Relevant Market
A. Product Market. The Complaint alleges
that the sale of local daily newspapers to
readers and the sale of access to those readers
to advertisers in such newspapers each
constitutes a line of commerce within the
meaning of Section 7 of the Clayton Act.
From a reader’s standpoint, the news stories
in local daily newspapers, such as the Star
Tribune and the St. Paul Pioneer Press, differ
significantly from other sources of news. The
news stories are detailed, as compared to the
news as reported by radio or television, and
the Star Tribune and the St. Paul Pioneer
Press cover a wide range of stories of interest
to local readers, not just major news
highlights. Newspapers, such as the Star
Tribune and the St. Paul Pioneer Press, are
portable and allow the reader to read the
news, advertisements, and other information
at his or her own convenience. Readers also
value other features of the Star Tribune and
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the St. Paul Pioneer Press, such as calendars
of local events and meetings, movie and TV
listings, classified advertisements,
commercial advertisements, legal notices,
comics, syndicated columns, and obituaries.
Reader of the Star Tribune and the St. Paul
Pioneer Press do not consider weekly
newspapers, radio news, television news, or
Internet news to be adequate substitutes for
local daily newspapers. If the merged firm
were to impose a small but significant and
nontransitory increase in the price of
advertisements in local daily newspapers, it
would lose too few sales to make the price
increase unprofitable.
From an advertiser’s standpoint, there is no
alternative to purchasing advertisements
from local daily papers. Advertising in the
Star Tribune and the St. Paul Pioneer Press
allows advertisers to reach a broad crosssection of consumers in the Minneapolis/St.
Paul metropolitan area with a detailed
message in a timely manner. A substantial
portion of defendants’ advertisers do not
consider other types of advertising, such as
advertising in weekly newspapers, on radio,
on television, or on the Internet as adequate
substitutes for advertising in a local daily
newspaper. In the Minneapolis/St. Paul
metropolitan area, the Star Tribune and the
St. Paul Pioneer Press provide advertisers the
best vehicle to advertise the price of their
goods or services in a timely manner. If the
merged firm were to impose a small but
significant and nontransitory increase in the
price of advertising in local daily
newspapers, it would lose too few sales to
make the price increase unprofitable.
B. Geographic Market. The Complaint
alleges that the Minneapolis/St. Paul
metropolitan area in the state of Minnesota
is a section of the country, or a relevant
geographic market, within the meaning of
Section 7 of the Clayton Act. The Star
Tribune and the St. Paul Pioneer Press are
both produced, published, and distributed in
the Minneapolis/St. Paul metropolitan area.
The Star Tribune and the St. Paul Pioneer
Press target readers in the Minneapolis/St.
Paul metropolitan area. Both papers provide
news relating to the Minneapolis/St. Paul
metropolitan area in addition to state and
national news. Together, the Star Tribune
and the St. Paul Pioneer Press generate
approximately 80 percent of their total
circulation from the Minneapolis/St. Paul
metropolitan area.
Local daily newspapers that serve areas
outside of the Minneapolis/St. Paul
metropolitan area do not provide local news
specific to the Minneapolis/St. Paul
metropolitan area. From a readers’s
standpoint, local daily newspapers serving
areas outside of the Minneapolis/St. Paul
metropolitan area are not acceptable
substitutes for the Star Tribune and the St.
Paul Pioneer Press. If the merged firm were
to impose a small but significant and
nontransitory increase in the price of local
daily newspapers serving the Minneapolis/
St. Paul metropolitan area, it would lose too
few sales to make the price increase
unprofitable.
From the standpoint of an advertiser
selling goods or services in the Minneapolis/
St. Paul metropolitan area, advertising in
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local daily newspapers serving areas outside
of the Minneapolis/St. Paul metropolitan area
are not acceptable substitutes for the Star
Tribune and the St. Paul Pioneer Press. If the
merged firm were to impose a small but
significant and nontransitory increase in the
price of local daily newspapers serving the
Minneapolis/St. Paul metropolitan area, it
would lose too few sales to make the price
increase unprofitable.
2. Competitive Effects
A. Harm to Readers. The Complaint alleges
that, in the Minneapolis/St. Paul
metropolitan area, the merger of McClatchy
and Knight-Ridder would lessen competition
substantially and tend to create a monopoly
in market for local daily newspapers. The
Star Tribune and the St. Paul Pioneer Press
are each other’s primary competitor in the
sale of local daily newspapers in the
Minneapolis/St. Paul metropolitan area,
competing aggressively for readers. Their
head-to-head competition has given readers
in the Minneapolis/St. Paul metropolitan
area higher quality news coverage, better
service, and lower prices. A combination of
these two newspapers under common
ownership and control would substantially
reduce or eliminate that competition and
would decrease incentives of the merged firm
to maintain high levels of quality and service.
The proposed transaction would create
further market concentration in an already
concentrated market for local daily
newspapers. The merged firm would control
the only two daily local newspapers in the
Minneapolis/St. Paul metropolitan area, the
Star Tribune and the St. Paul Pioneer Press,
with a market share position of almost 100
percent, as measured by local daily
newspaper circulation. Prior to the merger,
the Star Tribune had the highest market share
in the Minneapolis/St. Paul metropolitan
area, with approximately 72 percent of
readers. The only other local daily
newspaper competitor of the merged firm in
the Minneapolis/St. Paul metropolitan area,
the Stillwater Gazette, had a market share of
less than one percent of readers. According
to the Herfindahl-Hirschman Index (‘‘HHI’’),
a widely-used measure of market
concentration defined and explained in
Exhibit A, the combination of the Star
Tribune and the St. Paul Pioneer Press under
common ownership and control would create
a monopoly and yield a post-merger HHI of
approximately 9,900, representing an
increase of roughly 4,488 points for daily
circulation. For Sunday circulation, at the
combination of the Star Tribune and the St.
Paul Pioneer Press would yield an HHI of
approximately 10,000, an increase of roughly
4,050 points.
B. Harm to Advertisers. The Complaint also
alleges that, in the Minneapolis/St. Paul
metropolitan area, the merger of McClatchy
and Knight would lessen competition
substantially and tend to create a monopoly
in the market for advertising in local daily
newspapers. The Star Tribune and the St.
Paul Pioneer Press are each other’s primary
competitor in the sale of advertising in local
daily newspapers in the Minneapolis/St. Paul
metropolitan area, the create a monopoly in
the market for advertising local daily
newspapers in the Minneapolis/St. Paul
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41255
metropolitan area, competing aggressively for
the business of advertisers in that area. Their
head-to-head competition has been
instrumental in giving advertisers in the
Minneapolis/St. Paul metropolitan area
higher quality advertising better service, and
lower prices. A combination of these two
newspapers under common ownership and
control would substantially reduce or
eliminate that competition.
The proposed transaction would create
further market concentration in an already
concentrated market for advertising in local
daily newspapers. If the two papers combine
under common ownership and control, the
combined city would control virtually 100
percent of the sales of advertisements in local
daily newspapers serving the Minneapolis/
St. Paul metropolitan area. Prior to the
merger, the Star Tribune generated $308
million, or approximately 68 percent, in total
local daily newspaper advertising revenues.
The St. Paul Pioneer Press generated $140
million, or approximately 32 percent, in tota1
local daily newspaper advertising revenues.
The vast majority of these advertising
revenues come from advertisers seeking to
reach readers in the Minneapolis/St. Paul
metropolitan area.
The proposed Final Judgment would leave
the merged firm in control of the Star
Tribune, but not the St. Paul Pioneer Press.
As a result readers will not be harmed as the
separate owners of the Star Tribune and the
St. Paul Pioneer Press will still have an
economic incentive to compete against each
other and capture the other company readers
by offering lower prices and a better product.
In addition, advertisers will not be harmed as
the separate owners of the Star Tribune and
the St. Paul Pioneer Press will still have an
economic incentive to compete against each
other for additional advertising dollars by
offering lower rates, discounts off the rate
cards, and better service. The proposed Final
Judgment will preserve the premerger
competitive situation in which readers and
advertisers have two local daily newspapers
in the Minneapolis/St. Paul metropolitan
area from which to choose.
3. Entry
Entry by local daily newspapers in the
Minneapolis/St. Paul metropolitan area is
time-consuming and difficult, and is not
likely to eliminate the anticompetitive effects
of the merger by constraining the market
power of the combined entity in the nearterm, or in the foreseeable future. Local daily
newspapers incur significant fixed costs,
many of which are sunk. Examples of these
sunk costs include hiring reporters and
editors, news gathering, and marketing the
very existence of the new paper, all of which
take substantial time. In the event that the
entrant fails or exists the newspaper
industry, it cannot recover these sunk costs,
making entry risky and likely unprofitable.
As a result, entry will not be timely, likely,
or sufficient to eliminate the competitive
harm that would likely result from the
proposed merger.
4. Violation Alleged
For all of these reasons, Plaintiff has
concluded that the proposed transaction
would lessen competition substantially in the
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sale of local daily newspapers to readers and
in the sale of advertising in such newspapers
serving the Minneapolis/St. Paul
metropolitan area, and likely result in
increased prices and lower service and
quality for readers and advertisers. The
proposed merger therefore violates of Section
7 of the Clayton Act.
divestitures, (2) the reasons, in the trustee’s
judgment, why the required divestitures have
not been accomplished and (3) the trustee’s
recommendations. At the same time the
trustee will furnish such report to the
plaintiff and defendants, who will each have
the right to be heard and to make additional
recommendations.
3. Explanation of the Proposed Final
Judgment
The proposed Final Judgment would
preserve existing competition in the sale of
local daily newspapers to readers and in the
sale of advertising in such newspapers
serving the Minneapolis/St. Paul
metropolitan area. It requires the divestiture
of the St. Paul Pioneer Press. The divestiture
will preserve choices for read less likely that
in the relevant market (1) prices will increase
for readers, (2) prices will increase for
advertisers, (3) the quality of the local daily
newspapers will decline or (4) service levels
will decline as a result of the transaction.
Unless the United States grants an
extension of time, the divestiture must be
completed within sixty (60) calendar days
after the filing of the Complaint in this matter
or five (5) calender days after notice of the
entry of this Final Judgment by the Court,
whichever is later. Until the divestiture takes
place, McClatchy must maintain and operate
the St. Paul Pioneer Press as an active
competitor to the Star Tribune, maintain the
management, staffing, sales, and marketing of
the St. Paul Pioneer Press, and fully maintain
St. Paul Pioneer Press in operable condition.
The divestiture must be to a purchaser or
purchasers acceptable to the United States in
its sole discretion. Unless the United States
otherwise consents in writing, the divestiture
shall include all the assets of the St. Paul
Pioneer Press, and shall be accomplished in
such a way as to satisfy the United States that
such assets can and will be used as a viable
local daily newspaper.
If Defendant McClatchy fails to divest the
St. Paul Pioneer Press within the time
periods specified in the Final Judgment, the
Court, upon, application of the United States,
is to appoint a trustee nominated by the
United States to effect the divestitures. If a
trustee is appointed, the proposed Final
Judgment provides that McClatchy will pay
all costs and expenses of the trustee and any
professionals and agents retained by the
trustee. Under Section V(d) of the propose
Final Judgment, the compensation paid to the
trustee and any persons retained by the
trustee shall be both reasonable in light of the
value of the St. Paul Pioneer Press, and based
on a fee arrangement providing the trustee
with an incentive based on the price and
terms of the divestitures and the speed with
which they are accomplished. Timeliness is
paramount. After appointment, the trustee
will file monthly reports with the parties and
the Court, setting forth the trustee’s efforts to
accomplish the divestitures ordered under
the proposed Final Judgment. Section V(g) of
the proposed Final Judgment provides that if
the trustee has not accomplished the
divestitures within four (4) months after its
appointment, the trustee shall promptly file
with the Court a report setting forth (1) the
trustee’s efforts to accomplish the required
4. Remedies Available to Potential Private
Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15,
provides that any person who has been
injured as a result of conduct prohibited by
the antitrust laws may bring suit in federal
court to recover three times the damages the
person has suffered, as well as costs and
reasonable attorneys’ fees. Entry of the
proposed Final Judgment will neither impair
nor assist the bringing of any private antitrust
damage action. Under the provisions of
Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no
prima facie effect in any subsequent private
lawsuit that may be brought against
defendants.
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5. Procedures Available for Modification of
the Proposed Final Judgment
Plaintiff and defendants have stipulated
that the proposed Final Judgment may be
entered by the Court after compliance with
the provisions of the APPA, provided that
plaintiff has not withdrawn its consent. The
APPA conditions entry upon the Court’s
determination that the proposed Final
Judgment is in the public interest.
The APPA provides a period of at least
sixty (60) days preceding the effective date of
the proposed Final Judgment within which
any person may submit to plaintiff written
comments regarding the proposed Final
Judgment. Any person who wishes to
comment should do so within sixty (60) days
of the date of publication of this Competitive
Impact Statement in the Federal Register. All
comments received during this period will be
considered by the Department of Justice,
which remains free to withdraw its consent
to the proposed Final Judgment at any time
prior to the Court’s entry of judgment. The
comments and the response of plaintiff will
be filed with the Court and published in the
Federal Register.
Written comments should be submitted to:
John R. Read, Chief, Litigation III, Antitrust
Division, United States Department of
JustIce, 325 7th Street, NW., Suite 300,
Washington, DC 20530.
The proposed Final Judgment provides that
the Court retains jurisdiction over this action,
and the parties may apply to the Court for
any order necessary or appropriate for the
modification, interpretation, or enforcement
of the Final Judgment.
6. Alternatives to the Proposed Final
Judgment
Plaintiff considered, as an alternative to the
proposed Final Judgment, a full trial on the
merits against Defendants. Plaintiff could
have continued the litigation and sought
preliminary and permanent injunctions
against McClatchy’s acquisition of KnightRidder. Plaintiff is satisfied, however, that
the divestiture of assets and other relief
described in the proposed Final Judgment
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Fmt 4703
Sfmt 4703
will preserve competition in the sale of local
daily newspapers to readers and in the sale
of advertising in such newspapers serving the
Minneapolis/St. Paul metropolitan area as
identified in the Complaint.
7. Standard of Review Under the APPA for
Proposed Final Judgment
The APPA requires that proposed consent
judgments in antitrust cases by the United
States be subject to a sixty (60) day comment
period, after which the Court shall determine
whether entry of the proposed Final
Judgment ‘‘is in the public interest.’’ In
making that determination, the Court shall
consider:
(A) The competitive impact of such
judgment, including termination of alleged
violations, provisions for enforcement and
modification, duration or relief sought,
anticipated effects of alternative remedies
actually considered and any other
considerations bearing upon the adequacy of
such judgment;
(B) The impact of entry of such judgment
upon the public generally and individuals
alleging specific injury from the violations
set forth in the complaint including
consideration of the public bene t, if any, to
be derived from a determination of the issues
at trial.
15 U.S.C. 16(e)(l)(A) & (B). As the United
states Court of Appeals for the D.C. Circuit
held, this statute permits a court to consider,
among other things, the relationship between
the remedy secured and the specific
allegations set forth in the government’s
complaint, whether the decree is sufficiently
clear, whether enforcement mechanisms are
sufficient and whether the decree may
positively harm third parties. See United
States v. Microsoft, S6 F.3d 1448, 1461–62
(D.C. Cir. 1995).
‘‘Nothing in this section shall be construed
to require the court to conduct an evidentiary
hearing or to require the court to permit
anyone to intervene.’’ 15 U.S.C. 16(e)(2).
Thus, in conducting this inquiry, ‘‘[t]he Court
is nowhere compelled to go to trial or to
engage in extended proceedings which might
have the effect of vitiating the benefits of
prompt and less costly settlement through
the consent decree process.’’ 1 Rather,
[a]bsent a showing of corrupt failure of the
government to discharge its duty, the Court,
in making its public interest finding, should
* * * carefully consider the explanations of
the government in the competitive impact
statement and its responses to comments in
order to determine whether those
explanations are reasonable under the
circumstances.
1 119 Congo Rec. 24598 (1973) (statement of
Senator Tunney). See United States v. Gillette Co.,
406 F. Supp. 713, 715 (D. Mass. 1975). A ‘‘public
interest’’ determination can be made properly on
the basis of the Competitive Impact Statement and
Response to Comments filed pursuant to the APPA.
Although the APPA authorizes the use of additional
procedures, 15 U.S.C. § 16(f), those procedures are
discretionary. A court need not invoke any of them
unless it believes that the comments have raised
significant issues and that further proceedings
would aid the court in resolving those issues. See
H.R. Rep. 93–1463, 93rd Cong. 2d Sess. 8–9 (1974),
reprinted in U.S.C.C.A.N. 6535, 6538.
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United States v. Mid-America Dairymen. Inc.,
977–1 Trade Cas. ¶ 61,508, at 71,980 (W.D.
Mo. 1977).
Accordingly, with respect to the adequacy
of the relief secured by the decree, a court
may not ‘‘engage in an unrestricted
evaluation of what relief would best serve the
public.’’ United States v. BNS. Inc., 858 F.2d
456, 462 (9th Cir. 1988), citing United States
v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir.),
cert. denied, 454 U.S. 11083 (1981); see also
Microsoft, 56 F.3d at 1460–62. Precedent
requires that:
The balancing of competing social and
political interests affected by a proposed
antitrust consent decree must be left, in the
first instance, to the discretion of the
Attorney General. The court’s role in
protecting the public interest is one of
insuring that the government has not
breached its duty to the public in consenting
to the decree. The court is required to
determine not whether a particular decree is
the one that will best serve society, but
whether the settlement is ‘‘within the reach
of the public interest.’’ More elaborate
requirements might undermine the
effectiveness of antitrust enforcement by
consent decree.2
Bechtel, 648 F .2d at 666 (citations omitted)
(emphasis added).
Court approval of a final judgment requires
a standard more flexible and less strict than
the standard required for a finding of
liability. ‘‘[A] proposed decree must be
approved even if it falls short of the remedy
the court would impose on its own, as long
as it falls within the range of acceptability or
is ‘within the reaches of public interest.’ ’’
United States v. American Tel. and Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982), aff’d.
sub nom. Maryland v. United States, 460 U.S.
1001 (1983), quoting Gillette Co., 406 F.
Supp. at 716 (citations omitted); United
States v. Alcan Aluminum, Ltd., 605 F. Supp.
619, 622 (W.D. Ky. 1985). Moreover, the
Court’s role under the APPA is limited to
reviewing the remedy in relationship to the
violations that the United States has alleged
in its Complaint, and does not authorize the
Court to ‘‘construct [its] own hypothetical
case and then evaluate the decree against that
case.’’ Microsoft, 56 F.3d at 1459. Because
the ‘‘court’s authority to review the decree
depends entirely on the government’s
exercising its prosecutorial discretion by
bringing a case in the first place,’’ it follows
that ‘‘the court is only authorized to review
the decree itself,’’ and not to ‘‘effectively
redraft the complaint’’ to inquire into other
matters that the United States did not pursue.
Id. at 1459–60.
2 Cf. BNS. 858 F.2d at 464; 858 F.2d at 64 (bolding
that the court’s ‘‘ultimate authority under the [APP
A] is limited to approving or disapproving the
consent decree’’); Gillette, 406 F. Supp. at 716
(noting that, in this way, the court s constrained to
‘‘look at the overall picture not hypercritically, nor
with a microscope, but with artist’s reducing
glass’’); see generally Microsoft, 56 F.3d at 1461
(discussing whether ’the remedies [obtained in the
decree are) so inconsonant with the allegations
charged as to fall outside of the ‘reaches of the
public interest’ ’’).
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VIII. Determinative Document
There are no determinative materials or
documents within the meaning of the APPA
that were considered by the plaintiff in
formulating the proposed Final Judgment.
Dated: June 27, 2006.
Respectfully submitted,
Gregg I. Malawer (D.C. Bar #481685), U.S.
Department of Justice Antitrust Division, 325
7th Street, NW., Suite 300, Washington, DC
20530, (202) 514–0230, Attorney for Plaintiff
the United States.
Exhibit A—Definition of HHI and
Calculations for Market
‘‘HHI’’ means the Herfindahl-Hirschm
Index, a commonly accepted measure of
market concentration. It is calculated by
squaring the market share of each firm
competing in the market and then summing
the resulting numbers. For example, for a
market consisting of four firms with shares of
thirty, thirty, twenty and twenty percent, the
HHI is 2600 (302 + 302 + 202 + 202 = 2600).
The HHI takes into account the relative size
and distribution of the firms in a market and
approaches zero when a market consists of a
large number of firms of relatively equal size.
The HHI increases both as the number of
firms in the market decreases and as the
disparity in size between those firms
increases.
Markets in which the HHI is between 1000
and 1800 points are considered to be
moderately concentrated, and those in which
the HHI is in excess of 1800 points are
considered to be concentrated. Transactions
that increase the HHI by more than 100
points in concentrated markets
presumptively raise antitrust concerns under
the Merger Guidelines. See Merger
Guidelines § 1.51.
[FR Doc. 06–6362 Filed 7–19–06; 8:45 am]
BILLING CODE 4410–11–M
41257
Hong Kong KONKA Ltd., Hong Kong,
Hong Kong-China; Kawai Musical
Instruments Mfg. Co., Ltd., Shizuoka,
Japan; Shenzhen Mizuda AV Co., Ltd.,
Shenzhen, People’s Republic of China;
Teltron S.A.,Buenos Aires, Argentina;
and Toyo Recording Co., Ltd., Tokyo,
Japan have been added as parties to this
venture.
Also, CIS Technology, Inc., Taipei
Hsien, Taiwan; and Encentrus Systems
Inc., Pointe-Claire, Quebec, Canada have
withdrawn as parties to this venture. In
addition, Favor Digital Technology Co.,
Ltd. has changed its name to Major
Digital Technology Co., Ltd., Jiang Xi,
People’s Republic of China.
No other changes have been made to
either the membership or planned
activity of the group research project.
Membership in this group research
project remains open, and DVD CCA
intends to file additional written
notification disclosing all changes in
membership.
On April 11, 2001, DVD CCA filed its
original notification pursuant to Section
6(a) of the Act. The Department of
Justice published a notice in the Federal
Register pursuant to Section 6(b) of the
Act on August 3, 2001 (66 FR 40727).
The last notification was filed with
the Department on March 16, 2006. A
notice was published in the Federal
Register pursuant to Section 6(b) of the
Act on April 12, 2006 (71 FR 18769).
Dorothy B. Fountain,
Deputy Director of Operations, Antitrust
Division.
[FR Doc. 06–6359 Filed 7–19–06; 8:45 am]
BILLING CODE 4410–11–M
DEPARTMENT OF JUSTICE
DEPARTMENT OF JUSTICE
Antitrust Division
Notice Pursuant to the National
Cooperative Research and Production
Act of 1993—DVD Copy Control
Association
Notice is hereby given that, on June
22, 2006, pursuant to Section 6(a) of the
National Cooperative Research and
Production Act of 1993, 15 U.S.C. 4301
et seq. (‘‘the Act’’), DVD Copy Control
Association (‘‘DVD CCA’’) has filed
written notifications simultaneously
with the Attorney General and the
Federal Trade Commission disclosing
changes in its membership. The
notifications were filed for the purpose
of extending the Act’s provisions
limiting the recovery of antitrust
plaintiffs to actual damages under
specified circumstances. Specifically,
BeyondWiz Co., Ltd., Seongnam,
Republic of Korea; CD Video
Manufacturing, Inc., Santa Ana, CA;
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Antitrust Division
Notice Pursuant to the National
Cooperative Research and Production
Act of 1993—Network Centric
Operations Industry Consortium, Inc.
Notice is hereby given that, on June
20, 2006, pursuant to Section 6(a) of the
National Cooperative Research and
Production Act of 1993, 15 U.S.C. 4301
et seq. (‘‘Act’’), Network Centric
Operations Industry Consortium, Inc.
has filed written notifications
simultaneously with the Attorney
General and the Federal Trade
Commission disclosing changes in its
membership. The notifications were
filed for the purpose of extending the
Act’s provisions limiting the recovery of
antitrust plaintiffs to actual damages
under specified circumstances.
Specifically, American Red Cross,
Washington, DC; Open Geospatial
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]]>Agencies
[Federal Register Volume 71, Number 139 (Thursday, July 20, 2006)]
[Notices]
[Pages 41249-41257]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-6362]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. The McClatchy Company and Knight-Ridder
Incorporated; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b) through (h), that a proposed Final
Judgment, Stipulation and Competitive Impact Statement have been filed
with the United States District Court for the District of Columbia in
United States of America v. The Clatchy Company and Knight-Ridder,
Incorporated, Case No. 1:06CV01175. On June 27, 2006, the United States
filed a Complaint alleging that the proposed merger of The McClatchy
Company and Knight-Ridder, Incorporated would violate Section 7 of the
Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed the same
time as the Complaint, requires defendant The McClatchy Company to
divest the Pioneer Press, a daily newspaper distributed in the
Minneapolis/St. Paul metropolitan area, along with certain tangible and
intangible assets. Copies of the Complaint, proposed Final Judgment and
Competitive Impact Statement are available for inspection at the
Department of Justice in Washington, DC in Room 215, 325 Seventh
Street, NW., and at the Office of the Clerk of the United States
District Court for the District of Columbia, Washington, DC.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to John R. Read, Chief, Litigation III Section, Antitrust Division,
United States Department of Jusstice, 325 7th Street, NW., Suite 300,
Washington, DC 20530 (telephone: 202-307-0468).
J. Robert Kramer II,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
United States of America, Department of Justice, Antitrust
Division, 325 7th Street, NW.; Suite 300, Washington, DC 20530,
Plaintiff, v. The McClatchy Company, 2100 Q Street, Sacramento, CA
95816, and Knight-Ridder, Incorporated, 50 West San Fernando
Street, San Jose, CA 95113, Defendants
Case Number 1:06CV01175, Judge: Richard W. Roberts, Deck Type:
Antitrust, Date Stamp: 06/27/2006.
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action to prevent the proposed merger of The McClatchy Company and
Knight-Ridder, Incorporated. These two newspaper publishing
companies are each other's primary competitor in the sale of local
daily newspapers to readers in the Minneapolis/St. Paul metropolitan
area in the state of Minnesota, and in the sale of advertising in
such newspapers. The merger would substantially lessen competition
and tend to create a monopoly in the publishing and distribution of
newspapers in violation of Section 7 of the Clayton Act, 15 U.S.C.
18.
I. Jurisdiction and Venue
1. This action is filed by the United States pursuant to Section
15 of the Clayton Act, as amended, 15 U.S.C. 25, to obtain equitable
relief to prevent a violation of Section 7 of the Clayton Act, as
amended, 15 U.S.C. 18.
2. Both defendants sell newspapers and sell advertising in such
newspapers, a commercial activity that substantially affects and is
in the flow of interstate commerce. The Court has jurisdiction over
the subject matter of this action and jurisdiction over the parties
pursuant to 15 U.S.C. 22, 25, and 26, and 28 U.S.C. 1331 and 1337.
3. Both defendants conduct business in the District of Columbia
and have consented to the plaintiff's assertion that venue in this
District is proper under 15 U.S.C. 22 and 28 U.S.C. 1391(c).
II. Defendants and the Proposed Merger
4. Defendant The McClatchy Company (``McClatchy'') is a Delaware
corporation with its headquarters in Sacramento, California.
McClatchy publishes twelve (12) daily newspapers throughout the
United States. In the Minneapolis/St. Paul metropolitan area,
McClatchy owns and operates the Star Tribune.
5. Defendant Knight-Ridder, Incorporated (``Knight-Ridder'') is
a Florida corporation With its headquarters in San Jose, California.
Knight-Ridder publishes thirty-two (32) daily newspapers throughout
the United States. In the Minneapolis/St. Paul metropolitan area,
Knight-Ridder owns and operates the St. Paul Pioneer Press.
6. On March 12, 2006, McClatchy and Knight-Ridder entered into
an ``Agreement
[[Page 41250]]
and Plan of Merger between The McClatchy Company and Knight-Ridder,
Inc.'' (``Merger Agreement''). Pursuant to that agreement, (1)
Knight-Ridder would merge with and into McClatchy; (2) Knight-Ridder
would cease to exist as a separate corporate entity; and (3)
McClatchy would continue to operate as the sole surviving company.
As consideration for the merger, each share of Knight-Ridder common
stock would be exchanged for cash and stock, for an aggregate
transaction value in excess of $4 billion.
7. The merger would combine under common ownership and control
the only two local daily newspapers serving the Minneapolis/St. Paul
metropolitan area with any significant circulation, the Star Tribune
and the St. Paul Pioneer Press.
8. The combination of these two daily newspapers would
substantially reduce or eliminate competition for the sale of local
daily newspapers in the Minneapolis/St. Paul metropolitan area and
would likely result in higher prices and lower levels of quality and
service.
9. In addition, the combination of these two daily newspapers
would substantially reduce or eliminate competition for the sale of
advertising in local daily newspapers in the Minneapolis/St. Paul
metropolitan area and advertisers would likely pay higher prices and
receive lower levels of quality and service for their
advertisements.
III. Relevant Market
A. Product Market
10. Local daily newspapers, such as the Star Tribune and the St.
Paul Pioneer Press, provide a unique package of services to their
readers. They provide national, state, and local news in a timely
manner. The news stories featured in the Star Tribune and the St.
Paul Pioneer Press are detailed, as compared to the news as reported
by radio or television, and cover a wide range of stories of
interest to local readers in the Minneapolis/St. Paul metropolitan
area, not just major news highlights. Newspapers, such as the Star
Tribune and the St. Paul Pioneer Press, are portable and allow the
reader to read the news, advertisements, and other information at
his or her own convenience. Readers also value other features of the
Star Tribune and the St. Paul Pioneer Press, such as calendars of
local events and meetings, movie and TV listings, classified
advertisements, commercial advertisements, legal notices, comics,
syndicated columns, and obituaries. Readers of the Star Tribune and
the St. Paul Pioneer Press do not consider weekly newspapers, radio
news, television news, or Internet news to be adequate substitutes
for local daily newspapers serving the Minneapolis/St. Paul
metropolitan area. If the merged firm were to impose a small but
significant and nontransitory increase in the price of local daily
newspapers, it would lose too few sales to make the price increase
unprofitable.
11. A newspaper's ability to attract readers and build its
circulation is not only critical to competition for readers; it also
directly affects its ability to compete for advertisers. A newspaper
that has more readers is more attractive and more valuable to
advertisers. Thus, one important reason that the Star Tribune and
the St. Paul Pioneer Press compete for readers is so that they can
better compete for advertisers.
12. Advertising in the Star Tribune and the St. Paul Pioneer
Press allows advertisers to reach a broad cross-section of consumers
in the Minneapolis/St. Paul metropolitan area with a detailed
message in a timely manner. A substantial portion of the defendants'
advertisers do not consider other types of advertising, such as
advertising in weekly newspapers, on radio, on television, or on the
Internet as adequate substitutes for advertising in a local daily
newspaper. In the Minneapolis/St. Paul metropolitan area, the Star
Tribune and the St. Paul Pioneer Press provide advertisers the best
vehicle to advertise the price of their goods or services in a
timely manner. If the merged firm were to impose a small but
significant and nontransitory increase in the price of advertising
in local daily newspapers, it would lose too few sales to make the
price increase unprofitable.
13. Accordingly, the sale of local daily newspapers to readers
and the sale of access to those readers to advertisers in those
newspapers each constitutes a line of commerce, or a relevant
product market, within the meaning of Section 7 of the Clayton Act.
B. Geographic Market
14. The Star Tribune and the St. Paul Pioneer Press are both
produced, published, and distributed in the Minneapolis/St. Paul
metropolitan area.
15. The Star Tribune and the St. Paul Pioneer Press target
readers in the Minneapolis/St. Paul metropolitan area. Both papers
provide news relating to the Minneapolis/St. Paul metropolitan area
in addition to state and national news. Together, the Star Tribune
and the St. Paul Pioneer Press generate approximately 80 percent of
their total circulation from the Minneapolis/St. Paul metropolitan
area.
16. Local daily newspapers that serve areas outside of the
Minneapolis/St. Paul metropolitan area do not provide local news
specific to the Minneapolis/St. Paul metropolitan area. From a
reader's standpoint, local daily newspapers serving areas outside of
the Minneapolis/St. Paul metropolitan area are not acceptable
substitutes for the Star Tribune and the St. Paul Pioneer Press. If
the merged firm were to impose a small but significant and
nontransitory increase in the price of local daily newspapers
serving the Minneapolis/St. Paul metropolitan area, it would lose
too few sales to make the price increase unprofitable.
17. The Star Tribune and the St. Paul Pioneer Press allow
advertisers to target readers in the Minneapolis/St. Paul
metropolitan area. From the standpoint of an advertiser selling
goods or services in the Minneapolis/St. Paul metropolitan area,
advertising in local daily newspapers serving areas outside of the
Minneapolis/St. Paul metropolitan area is not an acceptable
substitute for advertising in the Star Tribune and the St. Paul
Pioneer Press. If the merged firm were to impose a small but
significant and nontransitory increase in the price of
advertisements in local daily newspapers service the Minneapolis/St.
Paul metropolitan area, it would lose too few sales to make the
price increase unprofitable.
18. Accordingly, the Minneapolis/St. Paul metropolitan area in
the state of Minnesota is a section of the country, or a relevant
geographic market, within the meaning of Section 7 of the Clayton
Act.
IV. Competitive Effects
A. Harm to Readers
19. The Star Tribune and the St. Paul Pioneer Press are each
other's primary competitor in the sale of local daily newspaper in
the Minneapolis/St. Paul metropolitan area, competing aggressively
for readers. Their head-to-head competition has given readers in the
Minneapolis/St. Paul metropolitan area higher quality news coverage,
better service, and lower prices. A combination of these two
newspapers under common ownership and control would substantially
reduce or eliminate that competition and would decrease incentives
of the merged firm to maintain high levels of quality and service.
20. The proposed merger would give the newly merged entity
almost 100 percent of local daily newspaper circulation in the
Minneapolis/St. Paul metropolitan area. Based on audited figures for
daily circulation ending March 2004, the Star Tribune had a daily
circulation of 296,069 or approximately 64 percent of readers, and
the St. Paul Pioneer Press had a daily circulation of 159,223, or
approximately 34 percent of readers, in the Minneapolis/St. Paul
metropolitan area. Based on audited figures for Sunday circulation
ending March 2004, the Star Tribune had a Sunday circulation of
517,685, or approximately 72 percent of readers, and the St. Paul
Pioneer Press had a daily circulation of 203,471, or approximately
28 percent of readers, in the Minneapolis/St. Paul metropolitan
area.
21. The only other local daily newspaper competitor of the
merged firm in the Minneapolis/St. Paul metropolitan area is the
Stillwater Gazette with a daily circulation (excluding Sunday) of
3,255 in the year ending in March 2004, which represents less than
one percent of readers.
22. Using a measure of market concentration called the
Herfindahl-Hirschman Index (``HHI''), explained in Appendix A, the
combination of the Star Tribune and the St. Paul Pioneer Press under
common ownership and control would create a monopoly and yield a
post-merger HHI of approximately 9,900, representing an increase of
roughly 4,488 points for daily circulation. For Sunday circulation,
the combination of the Star Tribune and the St. Paul Pioneer Press
would yield an HHI of approximately 10,000, an increase of roughly
4,050 points.
B. Harm to Advertisers
23. The Star Tribune and the St. Paul Pioneer Press are each
other's primary competitor in the sale of advertising in local daily
newspapers in the Minneapolis/St. Paul metropolitan area, competing
aggressively for the business of advertisers in that area. Their
head-to-head competition has been
[[Page 41251]]
instrumental in giving advertisers in the Minneapolis/St. Paul
metropolitan area higher quality advertising, better service, and
lower prices. A combination of these two newspapers under common
ownership and control would substantially reduce or eliminate that
competition.
24. If the two papers combine under common ownership and
control, the combined entity would control virtually 100 percent of
the sales of advertisements in local daily newspapers serving the
Minneapolis/St. Paul metropolitan area. In 2005, the Star Tribune
generated $308 million, or approximately 68 percent, in total daily
newspaper advertising revenues. The St. Paul Pioneer Press generated
$140 million, or approximately 32 percent, in total daily newspaper
advertising revenues. The vast majority of these advertising
revenues come from advertisers seeking to reach readers in the
Minneapolis/St. Paul metropolitan area.
V. Entry
25. Entry by local daily newspapers in the Minneapolis/St. Paul
metropolitan area is time-consuming and difficult, and is not likely
to eliminate the anticompetitive effects of the merger by
constraining the market power of the combined entity in the near-
term, or in the foreseeable future. Local daily newspapers incur
significant fixed costs, many of which are sunk. Examples of these
sunk costs include hiring reporters and editors, news gathering, and
marketing the very existence of the new paper, all of which take
substantial time. In the event that the entrant fails or exits the
newspaper industry, it cannot recover these sunk costs, making entry
risky and likely unprofitable. As a result, entry will not be
timely, likely, or sufficient to eliminate the competitive harm that
would likely result from the proposed merger.
VI. Violation Alleged
26. On March 12, 2006, McClatchy, and Knight-Ridder entered into
the Merger Agreement. Pursuant to that agreement, Knight-Ridder
would merge with and into McClatchy. As a result of this
transaction, the Star Tribune and the St. Paul Pioneer Press would
be under common ownership and control.
27. This transaction will have the following effects, among
others, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18:
(a) Competition in the sale of local daily newspapers to readers
in the Minneapolis/St. Paul metropolitan area will be substantially
lessened or eliminated;
(b) Prices for local daily newspapers in the Minneapolis/St.
Paul metropolitan area would likely increase to levels above those
that would prevail absent the merger;
(c) Competition in the sale of advertising in local daily
newspapers in the Minneapolis/St. Paul metropolitan area will be
substantially lessened or eliminated; and
(d) Prices for advertising in local daily newspapers in the
Minneapolis/St. Paul metropolitan area would likely increase to
levels above those that would prevail absent the merger.
VII. Requested Relief
28. Plaintiff requests:
(a) Adjudication that the proposed merger of McClatchy and
Knight-Ridder violates Section 7 of the Clayton Act;
(b) Permanent injunctive relief to prevent the consummation of
the proposed merger and to prevent the defendants from entering into
or carrying out any agreement, understanding or plan, the effect of
which would be to combine the businesses or assets of defendants;
(c) An award to plaintiff of its costs in this action; and
(d) Such other relief as is proper.
Dated: June 27, 2006.
For Plaintiff United States of America.
Thomas O. Barnett,
Assistant Attorney General, Antitrust Division.
David L. Meyer,
Deputy Assistant Attorney General, Antitrust Division.
J. Robert Kramer II,
Director of Operations.
John R. Read,
Chief, Litigation III.
Gregg I. Malawer (D.C. Bar 481685),
Joan Hogan,
Attorneys for the United States, United States Department of
Justice, Antitrust Division, Litigation III, 325 7th Street, NW.,
Suite 300, Washington, DC 20530, (202) 514-2000.
Exhibit A--Definition of HHI and Calculations for Market
``HHI'' means the Herfindahl-Hirschman Index, a commonly
accepted measure of market concentration. It is calculated by
squaring the market share of each firm competing in the market and
then summing the resulting numbers. For example, for a market
consisting of four firms with shares of thirty, thirty, twenty and
twenty percent, the HHI is 2600 (302 + 302 +
202 + 202 = 2600). The HHI takes into account
the relative size and distribution of the firms in a market and
approaches zero when a market consists of a large number of finns of
relatively equal size. The HHI increases both as the number of firms
in the market decreases and as the disparity in size between those
firms increases.
Markets in which the HHI is between 1000 and 1800 points are
considered to be moderately concentrated, and those in which the HHI
is in excess of 1800 points are considered to be concentrated.
Transactions that increase the HHI by more than 100 points in
concentrated markets presumptively raise antitrust concerns under
the Merger Guidelines. See Merger Guidelines Sec. 1.51.
Proposed Final Judgment
Whereas, Plaintiff, United States of America, and defendants,
The McClatchy Company (``McClatchy''), and Knight Ridder,
Incorporated (``Knight Ridder''), by their respective attorneys,
have consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law, and without this Final
Judgment constituting any evidence against or admission by any party
regarding any issue of fact or law;
And whereas, Defendants agree to be bound by the provisions of
this Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is the prompt
and certain divestiture of certain rights or assets by the Defendant
McClatchy to assure that competition is not substantially lessened;
And whereas, Plaintiff requires Defendant McClatchy to make
certain divestitures for the purpose of remedying the loss of
competition alleged in the Complaint;
And whereas, Defendant McClatchy has represented to the United
States that the divestitures required below can and will be made and
that Defendant McClatchy will later raise no claim of hardship or
difficulty as grounds for asking the Court to modify any of the
divestiture provisions contained below;
Now, therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
patties, it is ordered, adjudged, and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each
of the parties to this action. The Complaint states a claim upon
which relief may be granted against defendant under Section 7 of the
Clayton Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``McClatchy'' means Defendant The McClatchy Company, a
Delaware corporation with its headquarters in Sacramento,
California, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships and joint ventures, and
their directors, officers, managers, agents, and employees.
B. ``Knight Ridder'' means Defendant Knight Ridder, Inc., a
Florida corporation with its headquarters in San Jose, California,
its successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees.
C. ``Pioneer Press'' or ``St. Paul Pioneer Press'' means the
local daily newspaper referred to as either the Pioneer Press or the
St. Paul Pioneer Press, distributed in the Minneapolis/St. Paul
metropolitan area, and owned and operated by defendant McClatchy.
D. ``Star Tribune'' means the local daily newspaper, distributed
in the Minneapolis/St. Paul metropolitan area, and owned and
operated by defendant McClatchy.
E. ``Minneapolis/St. Paul metropolitan area'' means the area
encompassing and surrounding the cities of Minneapolis and St. Paul
in the state of Minnesota.
F. ``Divestiture Assets'' means all of the assets, tangible or
intangible, used in the operations of the Pioneer Press, including,
but not limited to:
1. All tangible assets that comprise the printing, publication,
distribution, sale, and operation of the Pioneer Press, including
all equipment, fixed assets and fixtures, personal property,
inventory, office furniture, materials, supplies, and other tangible
[[Page 41252]]
property and all assets used in connection with the Pioneer Press;
all licenses, permits and authorizations issued by any governmental
organization relating to the Pioneer Press; all contracts,
agreements, leases, commitments, certifications, and understandings
relating to the Pioneer Press, including supply agreements; all
customer lists, contracts, accounts, and credit records; all repair
and performance records and all other records relating to the
Pioneer Press;
2. All intangible assets used in the printing, publication,
distribution, production, servicing, sale and operation of the
Divestiture Assets, including, but not limited to all licenses and
sublicenses, intellectual property, technical information, computer
software (except defendant's proprietary software) and related
documentation, know-how, drawings, blueprints, designs,
specifications for materials, specifications for parts and devices,
quality assurance and control procedures, all technical manuals and
information defendant provide to their own employees, customers,
suppliers, agents or licensees, and all research data relating to
the Pioneer Press.
G. ``Acquirer'' or ``Acquirers'' mean the entity or entities to
whom Defendant McClatchy divest the Divestiture Assets.
III. Applicability
A. This Final Judgment applies to McClatchy and Knight Ridder,
as defined above, and all other persons in active concert or
participation with any of them who receive actual notice of this
Final Judgment by personal service or otherwise.
B. Defendant McClatchy shall require, as a condition of the sale
or other disposition of all or substantially all of their assets or
of lesser business units that include the Divestiture Assets, that
the purchaser(s) agree(s) to be bound by the provisions of this
Final Judgment.
IV. Divestitures
A. Defendant McClatchy is ordered and directed to divest the
Divestiture Assets in a manner consistent with this Final Judgment
to an Acquirer or Acquirers acceptable to the United States in its
sole discretion, before the later of (1) sixty (60) calendar days
after the filing of the Complaint in this matter or (2) five (5)
days after notice of the entry of this Final Judgment by the Court.
The United States, in its sole discretion, may agree to one or more
extensions of this time, not to exceed sixty (60) calendar days in
total, and shall notify the Court in such circumstances. Defendant
McClatchy agrees to use its best effort to divest the Divestiture
Assets, and to obtain all regulatory approvals necessary for such
divestitures, as expeditiously as possible.
B. In accomplishing the divestiture ordered by this Final
Judgment, Defendant McClatchy promptly shall make known, by usual
and customary means, the availability of the Divestiture Assets.
Defendant McClatchy shall inform any person making inquiry regarding
a possible purchase of the Divestiture Assets that they are being
divested pursuant to this Final Judgment and provide that person
with a copy of this Final Judgment. Defendant McClatchy shall offer
to furnish to all prospective Acquirers, subject to customary
confidentiality assurances, all information and documents relating
to the Divestiture Assets customarily provided in a due diligence
process, except such information or documents subject to the
attorney-client or work product privileges. Defendant McClatchy
shall make available such information to the United States at the
same time that such information is made available to any other
person.
C. Defendant McClatchy shall provide to the Acquirer(s) and the
United States information relating to the personnel involved in the
operation of the Divestiture Assets to enable the Acquirer(s) to
make offers of employment. Defendant McClatchy will not interfere
with any negotiations by the Acquirer(s) to employ an employee of
Defendant McClatchy whose primary responsibility relates to the
operation of the Divestiture Assets.
D. Defendant McClatchy shall permit prospective Acquirers of the
Divestiture Assets to have reasonable access to personnel and to
make inspections of the physical facilities of any and all
facilities relating the operation of the Pioneer Press; access to
any and all environmental, zoning, and other permit documents and
information; and access to any and all financial, operational or
other documents and information customarily provided as part of a
due diligence process.
E. Defendant McClatchy shall warrant to the Acquirer(s) of the
Divestiture Assets that the assets will be operational on the date
of sale.
F. Defendant McClatchy shall not take any action that will
impede in any way the permitting, operation, or divestiture of the
Divestiture Assets.
G. Defendant McClatchy shall warrant to the Acquirer(s) of the
Divestiture Assets that there are no material defects in the
environmental, zoning or other permits pertaining to the operation
of the Assets, and that following the sale of the Divestiture
Assets, Defendant McClatchy will not undertake, directly or
indirectly, any challenges to the environmental, zoning or other
permits relating to the operation of the Divestiture Assets.
H. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by trustee appointed pursuant
to Section V, of this Final Judgment, shall include the entire
Divestiture Assets, and shall be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the
Divestiture Assets can and will be used by the Acquirer(s) as part
of a viable, ongoing newspaper publishing business. Divestiture of
the Divestiture Assets may be made to one or more Acquirers,
provided that in each instance it is demonstrated to the sole
satisfaction of the United States that the Divestiture Assets will
remain viable and the divestiture of such assets will remedy the
competitive harm alleged in the Complaint. The divestiture, whether
pursuant to Section IV or V of this Final Judgment:
1. Shall be made to an Acquirer or Acquirers that, in the United
State's sole judgment, has the intent and capability (including the
necessary managerial, operational, and financial capability) of
competing effectively in the sale of local daily newspapers to
readers and in the sale of advertising in such newspapers in the
Minneapolis/St. Paul metropolitan areas; and
2. Shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement(s)
between an Acquirer or Acquirers and defendant McClatchy give
Defendant McClatchy the ability unreasonably to raise the Acquirer's
costs, to lower to Acquirer's efficiency, or otherwise to interfere
in the ability of the Acquirer to compete effectively.
V. Appointment of Trustee
A. If Defendant McClatchy has not divested the Divestiture
Assets within the time period specified in Section IV(A), Defendant
McClatchy shall notify the United States of that fact in writing.
Upon application of the United States, the Court shall appoint a
trustee selected by the United States and approved by the Court to
effect the divestiture of the Divestiture Assets.
B. After the appointment of a trustee becomes effective, only
the trustee shall have the right to sell the Divestiture Assets. The
trustees shall have the power and authority to accomplish the
divestiture to an Acquirer(s) acceptable to the United States at
such price and on such terms as are then obtainable upon reasonable
effort by the trustee, subject to the provisions of Sections IV, V
and VI of this Final Judgment, and shall have such other powers as
this Court deems appropriate. Subjects to Section V(D) of this Final
Judgment, the trustee may hire at the cost and expense of Defendant
McClatchy any investment bankers, attorneys, or other agents, who
shall be solely accountable to the trustee, reasonably in the
trustee's judgement to assist in the divestiture.
C. Defendant McClatchy shall not object to a sale by the trustee
on any ground other than the trustee's malfeasance. Any such
objections by Defendant McClatchy must be conveyed in writing to the
United States and the trustee within ten (10) calendar days after
the trustee has provided the notice required under Section VI.
D. The trustee shall serve at the cost and expense of defendant
McClatchy, on such terms and conditions as the United States
approves, and shall account for all monies derived from the sale of
the assets sold by the trustee and all costs and expenses so
incurred. After approval by the Court of the trustee's accounting,
including fees for its services and those of any professionals and
agents retained by the trustee, all remaining money shall be paid to
Defendant McClatchy and the trust shall then be terminated. The
compensation of the trustee and any professionals and agents
retained by the trustee shall be reasonable in light of the value of
the Divestiture Assets and based on a fee arrangement providing the
trustee with an incentive based on the price and terms of the
divestiture and the speed with which it is accomplished, but
timeliness is paramount.
E. Defendant McClatchy shall use its best efforts to assist the
trustee in accomplishing
[[Page 41253]]
the required divestiture. The trustee and any consultants,
accountants, attorneys, and other persons retained by the trustee
shall have full and complete access to the personnel, books,
records, and facilities related to the operation of the Pioneer
Press and Defendant McClatchy shall develop financial and other
information relevant to the operation of the Pioneer Press as the
trustee may reasonably request, subject to reasonable protection for
trade secret or other confidential research, development, or
commercial information. Defendant McClatchy shall take no action to
interfere with or to impede the trustee's accomplishment of the
divestiture.
F. After its appointment becomes effective, the trustee shall
file monthly reports with the United States and the Court, setting
forth the trustee's efforts to accomplish the divestiture ordered
under this Final Judgment. To the extent such reports contain
information that the trustee deems confidential, such reports shall
not be filed in the public docket of the Court. Such reports shall
include the name, address, and telephone number of each person who,
during the preceding month, made an offer to acquire, expressed an
interest in acquiring, entered into negotiations to acquire, or was
contacted or make an inquiry about acquiring, any interest in the
Divestiture Assets, and shall describe in detail each contact with
any such person. The trustee shall maintain full records of all
efforts made to divest the Divestiture Assets.
G. If the trustee has not accomplish such divestiture within
four (4) months after its appointment, the trustee shall promptly
file with the Court a report setting forth: (1) The trustee's
efforts to accomplish the required divestiture, (2) the reasons, in
the trustee's judgment, why the required divestiture has not been
accomplished, and (3) the trustee's recommendations. To the extent
such reports contain information that the trustee deems
confidential, such report shall not be filed in the public docket of
the Court. The trustee at the same time shall furnish such report to
the United States, who shall have the right to make additional
recommendations consistent with the purpose of the trust. The Court
thereafter shall enter such orders as it shall deem appropriate to
carry out the purpose of this Final Judgment, which may, if
necessary, include extending the trust and the term of the trustee's
appointment by a period requested by the United States.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a
definitive divestiture agreement, Defendant McClatchy or the
trustee, whichever is then responsible for effecting the divestiture
required herein, shall notify the United States of any proposed
divestiture required by Section IV or V of this Final Judgment. If
the trustee is responsible, it shall similarly notify Defendant
McClatchy. The notice shall set forth the details of the proposed
divestiture and list the name, address, and telephone number of each
person not previously identified who offered or expressed an
interest in or desire to acquire any ownership interest in the
Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from Defendant
McClatchy, the proposed Acquirer(s), any other third party, or the
trustee if applicable additional information concerning the proposed
divestiture, the proposed Acquirer(s) and any other potential
Acquirer(s). Defendant McClatchy and the trustee shall furnish any
additional information requested within fifteen (15) calendar days
of the receipt of the request, unless the parties shall otherwise
agree.
C. Within thirty (30) calendar days after receipt of the notice
or within twenty (20) calendar days after the United States has been
provided the additional information requested from Defendant
McClatchy, the proposed Acquirer(s), any third party and the
trustee, whichever is later, the United States shall provide written
notice to Defendant McClatchy and the trustee, if there is one,
stating whether or not it objects to the proposed divestiture. If
the United States provides written notices that it does not object,
the divestiture may be consummated, subject only to Defendant
McClatchy's limited right to object to the sale under Section V(C)
of this Final Judgment. Absent written notice that the United States
does not object to the proposed Acquirer(s) or upon objection by the
United States, a divestiture proposed under Section IV or V shall
not be consummated. Upon objection by Defendant McClatchy under
Section V(C), a divestiture proposed under Section V shall not be
consummated unless approved by the Court.
VII. Financing
Defendant McClatchy shall not finance all or any part of any
purchase made pursuant to this Final Judgment.
VIII. Hold Separate Order
Until the divestitures required by the Final Judgment have been
accomplished, Defendant McClatchy shall take all steps necessary to
comply with the Hold Separate Stipulation and Order entered by this
Court and to preserve in all material respects the Divestiture
Assets. Defendant McClatchy shall take no action that would
jeopardize the divestiture of the Divestiture Assets.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the
Complaint and every thirty (30) calendar days thereafter until the
divestiture has been completed, whether pursuant to Section IV or V
of this Final Judgment, Defendant McClatchy shall deliver to the
United States an affidavit as to the fact and manner of their
compliance with Section IV or V of this Final Judgment. Each such
affidavit shall include the name, address, and telephone number of
each person who, during the preceding thirty (30) days, made an
offer to acquire, expressed an interest in acquiring, entered into
negotiations to acquire, or was contacted or made an inquiry about
acquiring, any interest in the Divestiture Assets and shall describe
in detail each contact with any such person during that period. Each
such affidavit shall also include a description of the efforts that
defendant McClatchy has taken to solicit buyers for the Divestiture
Assets and to provide required information to prospective
purchasers, including the limitations, if any, on such information.
Assuming the information set forth in the affidavit is true and
complete, any objection by the United States to information provided
by Defendant McClatchy, including limitations on information, shall
be made within fourteen (14) days of receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the
Complaint in this matter, Defendant McClatchy shall deliver to the
United States an affidavit that describes in reasonable detail all
actions Defendant McClatchy has taken and all steps Defendant
McClatchy has implemented on an ongoing basis to comply with Section
IV of this Final Judgment. Defendant McClatchy shall deliver to the
United States an affidavit describing any changes to the efforts and
actions outlined in Defendant McClatchy's earlier affidavits filed
pursuant to this section within fifteen (15) calendar days after the
change is implemented.
C. Defendant McClatchy shall keep all records of all efforts
made to preserve and divest the Divestiture Assets until one year
after such divestiture has been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with
this Final Judgment, or of determining whether the Final Judgment
should be modified or vacated, and subject to any legally recognized
privilege, from time to time duly authorized representatives of the
United States Department of Justice, including consultants and other
persons retained by the United States, shall, upon the written
request of a duly authorized representative of the Assistant
Attorney General in charge of the Antitrust Divsion, and on
reasonable notice to Defendant McClatchy, be permitted:
1. Access during defendant McClatchy's office hours to inspect
and copy or, at plaintiff's option, to require defendant McClatchy
to provide copies of, all books, ledgers, accounts, records and
documents in the possession, custody, or control of the defendant
McClatchy, relating to any matters contained in this Final Judgment;
and
2. To interview, either informally or on the record, defendant
McClatchy's officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
shall be subject to the interviewee's reasonable convenience and
without restraint or interference by Defendant McClatchy.
B. Upon the written request of a duly authorized representative
of the Assistant Attorney General in charge of the Antitrust
Division, Defendant McClatchy shall submit such written reports or
responses to written interrogatories, under oath if requested,
relating to any of the matters contained in this Final Judgment as
may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person
other than an authorized representative of the Executive Branch of
the United States, except in the course of legal proceedings to
which the United States is a party (including grand jury
proceedings), or
[[Page 41254]]
for the purpose of securing compliance with this Final Judgment, or
as otherwise required by law.
D. If, at the time Defendant McClatchy furnishes information or
documents to the United States, Defendant McClatchy represents and
identifies in writing the material in any such information or
documents to which a claim of protection may be asserted under Rule
26(c)(7) of the Federal Rules of Civil Procedure, and Defendant
McClatchy marks each pertinent page of such material, ``Subject to
claim of protection under Rule 26(c)(7) of the Federal Rules of
Civil Procedure,'' then the United States shall give defendant
McClatchy ten (10) calendar days' notice prior to divulging such
material in any legal proceeding (other than a grand jury
proceeding).
XI. No Reacquisition
During the term of this Final Judgment, Defendant McClatchy may
not reacquire any part of the Divestiture Assets.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this
Final Judgment to apply to this Court at any time for further orders
and directions as may be necessary or appropriate to carry out or
construe this Final Judgment, to modify any of its provisions, to
enforce compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire (10) ten years from the date of its entry.
XIV. Public Interest Determination
For the reasons set forth in the Competitive Impact Statement
filed in this case, and made available for public comment, entry of
this Final Judgment is in the public interest and the parties have
complied with the procedures of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
Court Approval Subject to Procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
Dated:-----------------------------------------------------------------
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United States District Judge
Competitive Impact Statemnt
Plaintiff, the United States of America (``United States'' or
``Plaintiff'' or ``government''), pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-
(h), files this Competitive Impact Statement relating to the
proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. Nature and Purpose of the Proceeding
Plaintiff the United States filed a civil antitrust Complaint on
June 26, 2006, alleging that a proposed merger of The McClatchy
Company (``McClatchy'') and Knight-Ridder, Incorporated (``Knight-
Ridder'') would violate Section 7 of the Clayton Act, 15 U.S.C. 18.
The Complaint alleges that McClatchy and Knight-Ridder are each
other's primary competitor in the sale of local daily newspapers to
readers in the Minneapolis/St. Paul metropolitan area in the state
of Minnesota and in the sale of advertising in such newspapers. The
merger would combine under common ownership and control the only two
local daily newspapers serving the Minneapolis/St. Paul metropolitan
area in the state of Minnesota and in the sale of advertising in
such newspapers. The merger would combine under common ownership and
control the only two local daily newspapers serving the Minneapolis/
St. Paul metropolitan area, the Star Tribune and the St. Paul
Pioneer Press. The newly merged firm would have essentially a 100
percent market share (by circulation and revenue). As a result, the
combination of these two daily newspapers would substantially reduce
or eliminate competition for readers of local daily newspapers and
newspaper readers in the Minneapolis/St. Paul metropolitan area
would be likely to pay higher prices and to receive lower levels of
quality and service. In addition, the combination of these two daily
newspapers in the Minneapolis/St. Paul metropolitan area and
advertisers would be likely to pay higher prices and to receive
lower levels of quality and service for their advertisements.
The prayer for relief seeks: (a) An adjudication that the
proposed merger described in the Complaint would violate Section 7
of the Clayton Act; (b) permanent injunctive relief preventing the
consummation of the transaction; (c) an award to the plaintiff of
the costs of this action; and (d) such other relief as is proper.
Shortly before this suit was filed, a proposed settlement was
reached that permits McClatchy to complete its merger with Knight-
Ridder, yet preserves competition in the markets in which the
transaction would raise significant competitive concerns. A
Stipulation and proposed Final Judgment embodying the settlement
were filed at the same time the Complaint was filed.
The proposed Final Judgment, which is explained more fully
below, requires McClatchy and Knight-Ridder to divest the St. Paul
Pioneer Press to acquirer(s) acceptable to the United States. Unless
the United States grants a time extension, the divestiture must be
completed within sixty (60) calendar days after the filing of the
Complaint in this matter or five (5) calender days after notice of
the entry of this Final Judgment by the Court, whichever is later.
If the divestitures are not completed within the divestiture
period, the Court, upon application of the United States, is to
appoint trustee selected by the United States to sell the assets.
The proposed Final Judgment also requires that, until the
divestitures mandated by the Final Judgment have been accomplished,
the defendants must maintain and operate the St. Paul Pioneer Press
as an active competitor, maintain the management, staffing, sales,
and marketing of St. Pioneer Pioneer Press and fully maintain the
St. Paul Pioneer Press in operable condition.
The plaintiff and the defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the
APPA. Entry of the proposed Final Judgment would terminate this
action, except that the Court would retain jurisdiction to construe,
modify, or enforce the provisions of the proposed Final Judgment and
to punish violations thereof.
II. The Alleged Violation
A. The Defendants
McClatchy is a Delaware corporation with its headquarters in
Sacramento, California.
McClatchy publishes twelve (12) daily newspapers throughout the
United States. In the Minneapolis/St. Paul metropolitan area,
McClatchy owns and operates the Star Tribune. McClatchy had revenues
of approximately $1.2 billion during 2005.
Knight-Ridder is a Florida corporation with its headquarters in
San Jose, California. Knight-Ridder publishes thirty-two (32) daily
newspapers throughout the United States. In the Minneapolis/St. Paul
metropolitan area, Knight-Ridder owns and operates the St. Paul
Pioneer Press. Knight-Ridder had revenues of approximately $3
billion during 2005.
B. Description of the Events Giving Rise to the Alleged Violation
On March 12, 2006, McClatchy and Knight-Ridder entered into an
``Agreement and Plan of Merger between The McClatchy Company and
Knight-Ridder, Inc.'' (``Merger Agreement''). Pursuant to that
agreement, (1) Knight-Ridder would merge with and into McClatchy;
(2) Knight-Ridder would cease to exist as a separate corporate
entity; and (3) McClatchy would continue to operate as the sole
surviving company. As consideration for the merger, each share of
Knight-Ridder common stock would be exchanged for cash and stock,
for an aggregate transaction value in excess of $4 billion.
The Star Tribune and the St. Paul Pioneer Press compete head-to-
head in the sale of local daily newspapers in the Minneapolis/St.
Paul metropolitan area and compete head-to-head in the sale of
advertising in these local daily newspapers. They compete for
readers so that they can better compete for advertisers. The
proposed merger, and the threatened loss of competition that would
be caused by it, precipitated the government's suit.
C. Anticompetitive Consequences of the Proposed Transaction
1. Relevant Market
A. Product Market. The Complaint alleges that the sale of local
daily newspapers to readers and the sale of access to those readers
to advertisers in such newspapers each constitutes a line of
commerce within the meaning of Section 7 of the Clayton Act. From a
reader's standpoint, the news stories in local daily newspapers,
such as the Star Tribune and the St. Paul Pioneer Press, differ
significantly from other sources of news. The news stories are
detailed, as compared to the news as reported by radio or
television, and the Star Tribune and the St. Paul Pioneer Press
cover a wide range of stories of interest to local readers, not just
major news highlights. Newspapers, such as the Star Tribune and the
St. Paul Pioneer Press, are portable and allow the reader to read
the news, advertisements, and other information at his or her own
convenience. Readers also value other features of the Star Tribune
and
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the St. Paul Pioneer Press, such as calendars of local events and
meetings, movie and TV listings, classified advertisements,
commercial advertisements, legal notices, comics, syndicated
columns, and obituaries. Reader of the Star Tribune and the St. Paul
Pioneer Press do not consider weekly newspapers, radio news,
television news, or Internet news to be adequate substitutes for
local daily newspapers. If the merged firm were to impose a small
but significant and nontransitory increase in the price of
advertisements in local daily newspapers, it would lose too few
sales to make the price increase unprofitable.
From an advertiser's standpoint, there is no alternative to
purchasing advertisements from local daily papers. Advertising in
the Star Tribune and the St. Paul Pioneer Press allows advertisers
to reach a broad cross-section of consumers in the Minneapolis/St.
Paul metropolitan area with a detailed message in a timely manner. A
substantial portion of defendants' advertisers do not consider other
types of advertising, such as advertising in weekly newspapers, on
radio, on television, or on the Internet as adequate substitutes for
advertising in a local daily newspaper. In the Minneapolis/St. Paul
metropolitan area, the Star Tribune and the St. Paul Pioneer Press
provide advertisers the best vehicle to advertise the price of their
goods or services in a timely manner. If the merged firm were to
impose a small but significant and nontransitory increase in the
price of advertising in local daily newspapers, it would lose too
few sales to make the price increase unprofitable.
B. Geographic Market. The Complaint alleges that the
Minneapolis/St. Paul metropolitan area in the state of Minnesota is
a section of the country, or a relevant geographic market, within
the meaning of Section 7 of the Clayton Act. The Star Tribune and
the St. Paul Pioneer Press are both produced, published, and
distributed in the Minneapolis/St. Paul metropolitan area. The Star
Tribune and the St. Paul Pioneer Press target readers in the
Minneapolis/St. Paul metropolitan area. Both papers provide news
relating to the Minneapolis/St. Paul metropolitan area in addition
to state and national news. Together, the Star Tribune and the St.
Paul Pioneer Press generate approximately 80 percent of their total
circulation from the Minneapolis/St. Paul metropolitan area.
Local daily newspapers that serve areas outside of the
Minneapolis/St. Paul metropolitan area do not provide local news
specific to the Minneapolis/St. Paul metropolitan area. From a
readers's standpoint, local daily newspapers serving areas outside
of the Minneapolis/St. Paul metropolitan area are not acceptable
substitutes for the Star Tribune and the St. Paul Pioneer Press. If
the merged firm were to impose a small but significant and
nontransitory increase in the price of local daily newspapers
serving the Minneapolis/St. Paul metropolitan area, it would lose
too few sales to make the price increase unprofitable.
From the standpoint of an advertiser selling goods or services
in the Minneapolis/St. Paul metropolitan area, advertising in local
daily newspapers serving areas outside of the Minneapolis/St. Paul
metropolitan area are not acceptable substitutes for the Star
Tribune and the St. Paul Pioneer Press. If the merged firm were to
impose a small but significant and nontransitory increase in the
price of local daily newspapers serving the Minneapolis/St. Paul
metropolitan area, it would lose too few sales to make the price
increase unprofitable.
2. Competitive Effects
A. Harm to Readers. The Complaint alleges that, in the
Minneapolis/St. Paul metropolitan area, the merger of McClatchy and
Knight-Ridder would lessen competition substantially and tend to
create a monopoly in market for local daily newspapers. The Star
Tribune and the St. Paul Pioneer Press are each other's primary
competitor in the sale of local daily newspapers in the Minneapolis/
St. Paul metropolitan area, competing aggressively for readers.
Their head-to-head competition has given readers in the Minneapolis/
St. Paul metropolitan area higher quality news coverage, better
service, and lower prices. A combination of these two newspapers
under common ownership and control would substantially reduce or
eliminate that competition and would decrease incentives of the
merged firm to maintain high levels of quality and service.
The proposed transaction would create further market
concentration in an already concentrated market for local daily
newspapers. The merged firm would control the only two daily local
newspapers in the Minneapolis/St. Paul metropolitan area, the Star
Tribune and the St. Paul Pioneer Press, with a market share position
of almost 100 percent, as measured by local daily newspaper
circulation. Prior to the merger, the Star Tribune had the highest
market share in the Minneapolis/St. Paul metropolitan area, with
approximately 72 percent of readers. The only other local daily
newspaper competitor of the merged firm in the Minneapolis/St. Paul
metropolitan area, the Stillwater Gazette, had a market share of
less than one percent of readers. According to the Herfindahl-
Hirschman Index (``HHI''), a widely-used measure of market
concentration defined and explained in Exhibit A, the combination of
the Star Tribune and the St. Paul Pioneer Press under common
ownership and control would create a monopoly and yield a post-
merger HHI of approximately 9,900, representing an increase of
roughly 4,488 points for daily circulation. For Sunday circulation,
at the combination of the Star Tribune and the St. Paul Pioneer
Press would yield an HHI of approximately 10,000, an increase of
roughly 4,050 points.
B. Harm to Advertisers. The Complaint also alleges that, in the
Minneapolis/St. Paul metropolitan area, the merger of McClatchy and
Knight would lessen competition substantially and tend to create a
monopoly in the market for advertising in local daily newspapers.
The Star Tribune and the St. Paul Pioneer Press are each other's
primary competitor in the sale of advertising in local daily
newspapers in the Minneapolis/St. Paul metropolitan area, the create
a monopoly in the market for advertising local daily newspapers in
the Minneapolis/St. Paul metropolitan area, competing aggressively
for the business of advertisers in that area. Their head-to-head
competition has been instrumental in giving advertisers in the
Minneapolis/St. Paul metropolitan area higher quality advertising
better service, and lower prices. A combination of these two
newspapers under common ownership and control would substantially
reduce or eliminate that competition.
The proposed transaction would create further market
concentration in an already concentrated market for advertising in
local daily newspapers. If the two papers combine under common
ownership and control, the combined city would control virtually 100
percent of the sales of advertisements in local daily newspapers
serving the Minneapolis/St. Paul metropolitan area. Prior to the
merger, the Star Tribune generated $308 million, or approximately 68
percent, in total local daily newspaper advertising revenues. The
St. Paul Pioneer Press generated $140 million, or approximately 32
percent, in tota1 local daily newspaper advertising revenues. The
vast majority of these advertising revenues come from advertisers
seeking to reach readers in the Minneapolis/St. Paul metropolitan
area.
The proposed Final Judgment would leave the merged firm in
control of the Star Tribune, but not the St. Paul Pioneer Press. As
a result readers will not be harmed as the separate owners of the
Star Tribune and the St. Paul Pioneer Press will still have an
economic incentive to compete against each other and capture the
other company readers by offering lower prices and a better product.
In addition, advertisers will not be harmed as the separate owners
of the Star Tribune and the St. Paul Pioneer Press will still have
an economic incentive to compete against each other for additional
advertising dollars by offering lower rates, discounts off the rate
cards, and better service. The proposed Final Judgment will preserve
the premerger competitive situation in which readers and advertisers
have two local daily newspapers in the Minneapolis/St. Paul
metropolitan area from which to choose.
3. Entry
Entry by local daily newspapers in the Minneapolis/St. Paul
metropolitan area is time-consuming and difficult, and is not likely
to eliminate the anticompetitive effects of the merger by
constraining the market power of the combined entity in the near-
term, or in the foreseeable future. Local daily newspapers incur
significant fixed costs, many of which are sunk. Examples of these
sunk costs include hiring reporters and editors, news gathering, and
marketing the very existence of the new paper, all of which take
substantial time. In the event that the entrant fails or exists the
newspaper industry, it cannot recover these sunk costs, making entry
risky and likely unprofitable. As a result, entry will not be
timely, likely, or sufficient to eliminate the competitive harm that
would likely result from the proposed merger.
4. Violation Alleged
For all of these reasons, Plaintiff has concluded that the
proposed transaction would lessen competition substantially in the
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sale of local daily newspapers to readers and in the sale of
advertising in such newspapers serving the Minneapolis/St. Paul
metropolitan area, and likely result in increased prices and lower
service and quality for readers and advertisers. The proposed merger
therefore violates of Section 7 of the Clayton Act.
3. Explanation of the Proposed Final Judgment
The proposed Final Judgment would preserve existing competition
in the sale of local daily newspapers to readers and in the sale of
advertising in such newspapers serving the Minneapolis/St. Paul
metropolitan area. It requires the divestiture of the St. Paul
Pioneer Press. The divestiture will preserve choices for read less
likely that in the relevant market (1) prices will increase for
readers, (2) prices will increase for advertisers, (3) the quality
of the local daily newspapers will decline or (4) service levels
will decline as a result of the transaction.
Unless the United States grants an extension of time, the
divestiture must be completed within sixty (60) calendar days after
the filing of the Complaint in this matter or five (5) calender days
after notice of the entry of this Final Judgment by the Court,
whichever is later. Until the divestiture takes place, McClatchy
must maintain and operate the St. Paul Pioneer Press as an active
competitor to the Star Tribune, maintain the management, staffing,
sales, and marketing of the St. Paul Pioneer Press, and fully
maintain St. Paul Pioneer Press in operable condition.
The divestiture must be to a purchaser or purchasers acceptable
to the United States in its sole discretion. Unless the United
States otherwise consents in writing, the divestiture shall include
all the assets of the St. Paul Pioneer Press, and shall be
accomplished in such a way as to satisfy the United States that such
assets can and will be used as a viable local daily newspaper.
If Defendant McClatchy fails to divest the St. Paul Pioneer
Press within the time periods specified in the Final Judgment, the
Court, upon, application of the United States, is to appoint a
trustee nominated by the United States to effect the divestitures.
If a trustee is appointed, the proposed Final Judgment provides that
McClatchy will pay all costs and expenses of the trustee and any
professionals and agents retained by the trustee. Under Section V(d)
of the propose Final Judgment, the compensation paid to the trustee
and any persons retained by the trustee shall be both reasonable in
light of the value of the St. Paul Pioneer Press, and based on a fee
arrangement providing the trustee with an incentive based on the
price and terms of the divestitures and the speed with which they
are accomplished. Timeliness is paramount. After appointment, the
trustee will file monthly reports with the parties and the Court,
setting forth the trustee's efforts to accomplish the divestitures
ordered under the proposed Final Judgment. Section V(g) of the
proposed Final Judgment provides that if the trustee has not
accomplished the divestitures within four (4) months after its
appointment, the trustee shall promptly file with the Court a report
setting forth (1) the trustee's efforts to accomplish the required
divestitures, (2) the reasons, in the trustee's judgment, why the
required divestitures have not been accomplished and (3) the
trustee's recommendations. At the same time the trustee will furnish
such report to the plaintiff and defendants, who will each have the
right to be heard and to make additional recommendations.
4. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three
times the damages the person has suffered, as well as costs and
reasonable attorneys' fees. Entry of the proposed Final Judgment
will neither impair nor assist the bringing of any private antitrust
damage action. Under the provisions of Section 5(a) of the Clayton
Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima facie
effect in any subsequent private lawsuit that may be brought against
defendants.
5. Procedures Available for Modification of the Proposed Final Judgment
Plaintiff and defendants have stipulated that the proposed Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that plaintiff has not withdrawn
its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to plaintiff written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do
so within sixty (60) days of the date of publication of this
Competitive Impact Statement in the Federal Register. All comments
received during this period will be considered by the Department of
Justice, which remains free
