Thursday, November 4, 1999

Star-Bulletin closing after 117 years

Uphold injunction,
U.S. Justice urges

The Feds say the Star-Bulletin's
case is an antitrust issue

By Debra Barayuga


The U.S. Justice Department says the planned closure of the Honolulu Star-Bulletin raises serious antitrust questions.

In a "friend of the court" brief filed yesterday with the 9th U.S. Circuit Court of Appeals, the Justice Department asked the court to uphold the lower court's granting of a preliminary injunction barring the shutdown of the Star-Bulletin.

It also suggested that the court could modify the order to avoid or limit First Amendment concerns raised by Liberty Newspapers Limited Partnership, owner of the Star-Bulletin, and Gannett Pacific Corp., owner of the Honolulu Advertiser. The court could do that by allowing Liberty to stop publishing the Star-Bulletin but not receive the planned termination payment from Gannett, the department said.

The planned closure of the Star-Bulletin raises questions about the extent of antitrust immunity given by the Newspaper Preservation Act and the reach of federal antitrust laws, the department said. Going ahead with the shutdown would prevent these questions from being resolved and affect future antitrust enforcement, it said.

And while it is investigating the agreement between the Star-Bulletin and Advertiser for possible antitrust violations, "we are concerned that a failure to preserve the status quo now will, as a practical matter, make effective relief impossible should there be a violation," the Justice Department said.

Liberty and Gannett announced Sept. 16 that they were ending their joint operating agreement and planned to cease publication of the Star-Bulletin last Saturday. U.S. District Judge Alan Kay stopped the shutdown by granting a preliminary injunction Oct. 13.

The 9th Circuit is expected to rule later this month on an emergency appeal filed by Liberty and Gannett protesting Kay's order.

The newspaper owners contend that Kay's order was improper. They say that it violates Liberty's First Amendment rights by forcing it to continue publishing against its will and that the Newspaper Preservation Act allows joint operating agreements to be amended. They say the agreement to terminate is merely an amendment to the 1993 joint operating agreement, which was to expire in 2012.

Kay said the state is likely to succeed on its arguments that the shutdown violates state and federal antitrust laws.

In his written ruling, Kay said there appeared to be "no lawful justification" for Gannett to buy out Liberty's interest in the joint operating agreement 13 years before it was scheduled to expire. Under the termination agreement, Liberty was to receive a $26.5 million termination payment, or slightly less than it would have received as guaranteed payments under the joint operating agreement.

The Justice Department rejected the newspaper owners' arguments that its amendment to the current joint operating agreement, established in 1962, is immune to antitrust law and that any competition that existed was eliminated when the agreement was forged.

A joint operating agreement allows two or more competing papers to share printing, advertising and production costs but requires they maintain separate editorial and news voices.

The purpose of the termination agreement was not to preserve editorial diversity through a joint operating agreement and not to publish two or more papers, the Justice Department argued. The agreement would end publication of the Star-Bulletin, which is "within neither the letter nor the purpose of the NPA (Newspaper Preservation Act) immunity provision and therefore is subject to antitrust immunity."

The state yesterday filed a 55-page response to the newspaper owners' appeal saying Kay ruled correctly in granting the order.

The state was supported by a "friend of the court" brief filed by a private citizens group, Save Our Star-Bulletin, urging the appeals court to uphold Kay's order.

"The court didn't abuse its discretion in granting the preliminary injunction, and we think his ruling ought to be upheld," Deputy Attorney General Rodney Kimura said yesterday.

The lower court found that a "broader conspiracy" or set of agreements existed to illegally shut down the Star-Bulletin, the state said in its brief.

In its Oct. 6 suit against the newspaper owners which led to the injunction, the state contends that their decision to end the current joint operating agreement and Liberty's plan to stop publishing last Saturday amounts to a conspiracy to monopolize general circulation newspapers on Oahu.

Announcing the pending closure, notifying subscribers and advertisers, and removing street vending racks constitute overt acts that further the conspiracy, the state said.

The newspaper owners' appeal is "about money and nothing more," Ernest Gellhorn, attorney for Save Our Star-Bulletin, said in its brief filed yesterday.

Liberty is concerned it won't get its termination payment, and Gannett is concerned it won't get the newspaper monopoly it sought on Oahu, the brief said. "Neither justifies reversal of the District Court's preliminary injunction."

Gannett and Liberty Newspapers have the option to respond to the state's arguments by Wednesday.

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