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“Corrupt the competitive process”

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This is funny in the era of media consolidation:

    THE PARENT COMPANY of the SF Weekly and the owner of New York City’s Village Voice illegally colluded to shut down newspapers in Los Angeles and Cleveland in a scheme to avoid competing against each other, federal and state officials formally charged in a complaint filed Jan. 27.

    The U.S. Department of Justice, the California and Ohio Attorney General’s Offices, and the Los Angeles District Attorney’s Office charged that in October 2002, New Times Media and Village Voice Media cut an illegal deal under which New Times would close its Los Angeles paper if VVM would shutter its weekly in Cleveland. This left New Times with a monopoly in Cleveland and VVM with a monopoly in Los Angeles.

    Readers and advertisers got screwed.

    “Faced with the prospect of a protracted competitive struggle,” the federal government’s complaint says, “the defendants chose instead to corrupt the competitive process. Each agreed to withdraw from a market, guaranteeing the other a monopoly, and in the process depriving consumers in both cities of the continued benefits of the defendants’ competition.”

    The complaint continues: “The defendants immediately capitalized on their market swap by exploiting their new monopolies. In Los Angeles, Village Voice Media began implementing plans to increase significantly advertising rates after eliminating New Times L.A. as a competitive alternative. Similarly, in Cleveland, New Times told advertisers that their rates would increase now that its newsweekly, the Cleveland Scene, was ‘the only game in town.’ ”

    California attorney general Bill Lockyer denounced the New Times-VVM deal in a Jan. 27 press statement. “These two companies entered into an unlawful agreement to swap markets and customers by shutting down two weekly newspapers in the only two cities in which they competed head to head,” he stated. “By eliminating competition between two major alternative weeklies, the anti-competitive agreement harms local readers, and also hurts area businesses by inflating advertising rates.”

    The deal violated the federal Sherman Antitrust Act and the state’s Cartwright Act, prosecutors charge, and the U.S. Justice Department alleged 12 specific violations, including “allocat[ing] territories and customers among themselves for the readership of, and advertising in, alternative newsweeklies” in L.A. and Cleveland. The complaint also alleges that the two chains sought to block future competition in the markets.

We’ve had a lot of writers and editors walking around in a daze of late around here in Cleveland – at least they’ll have something to do again and get out of everyone’s hair.

    New Times and VVM have signed on to the consent decree, which both sides say should end the case. It requires both companies to help create new competitors to their Los Angeles and Cleveland papers by selling assets, including the right to use the names of the two closed papers, the Cleveland Free Times and New Times L.A.

    The two largest chains in the alternative weekly industry also must refrain from enforcing agreements that limited advertisers and employees from doing business with competitors and must let Los Angeles and Cleveland advertisers who were forced to pay higher rates as a result of New Times and VVM’s marketplace collusion out of their contracts. [San Francisco Bay Guardian]

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About Eric Olsen