United States v. The McClatchy Company and Knight-Ridder Incorporated; Proposed Final Judgment and Competitive Impact Statement, 41249-41257 [06-6362]

Agencies

• Antitrust Division
• Department of Justice

[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]


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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:-----------------------------------------------------------------

-----------------------------------------------------------------------
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

[[Page 41255]]

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

[[Page 41256]]

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