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A major run-in with the Department of Justice three years ago virtually assures that New Times Media and Village Voice Media Inc. will get a hard look from antitrust regulators who must approve the companies’ merger. Although the two publishers of alternative weeklies no longer operate competing papers in any of their 17 markets, they once battled directly in Los Angeles and Cleveland. In 2002, they ran afoul of the Justice Department by agreeing to divide the two markets between them. New Times shut down its Los Angeles paper in return for a $9 million payment and the closure of the VVM’s Cleveland paper. After shuttering the papers, both companies were ordered to sell the assets to other buyers. “It was one of the most blatant antitrust violations I’ve ever seen,” said John M. Taladay partner in the practice at Howrey. “Given their previous experience, I doubt they would pull anything like that this time.” A key issue in this go-around of DOJ scrutiny will be the current state of competition in the market for alternative weeklies — the category of papers specializing in investigative reporting and coverage of local city arts. Both companies contested DOJ’s decision in 2002 to define their market so narrowly, arguing that they compete in the much larger general media market with big metro dailies and other local advertisers. “We thought DOJ staff was misguided” in declaring a specific market for alternative weeklies, said Melanie Sabo, a partner in the Washington office of Preston Gates & Ellis and the lawyer who defended Village Voice in the case. “Because the matter was settled, we never got the chance to prove the market should be measured beyond alternative weeklies,” she said. “All you have to do is look at who’s advertising — they are the same as those in the daily papers.” With local papers increasingly losing classified advertising to Web sites such as Craigslist.com, DOJ will have an even tougher time defining the market so narrowly, added Joseph Kattan, attorney for Gibson, Dunn & Crutcher, who represented New Times in that case. Even if the DOJ manages to establish alternative weeklies as a defined market, the current New Times deal wouldn’t get a second look from the DOJ if not for the previous dispute, Sabo says. “There really is no market where they currently overlap, so there is no likelihood of lessening competition.” One area likely to receive new attention from DOJ is New Times’ national sales agency, Ruxton Media Group. Ruxton represents 24 alternative papers in addition to New Times’ own 11 papers for selling national space. After the merger, VVM is expected to move national account sales of its flagship, New York’s Village Voice, and the five other papers it owns to Ruxton. Currently, the VVM papers help anchor Ruxton’s main rival, the Alternative Weekly Network, a co-op that competes with Ruxton. Again, Kattan said DOJ faces a difficult challenge in establishing that their national buying should be viewed within the narrow context of alternative papers. “Ruxton sells ads for things like Volkswagon Jettas. It’s hard to argue that the relevant market is alternative newspapers.” Nevertheless, activists fighting media consolidation have been ramping up political pressure against the deal since rumors of the merger surfaced in May. In an August editorial, the San Francisco Bay Guardian — which directly competes with New Times’ SF Weekly — lamented that a progressive icon such as the Village Voice would be linking up with the Phoenix-based chain known for its devotion to the bottom line. “A famous progressive bastion of alternative journalism in the media capital of the world would suddenly be thrust under the ownership thumb of the New Times chain,” the Guardian lamented in its editorial, which has been posted on the Web site of reclaimthemedia.org. The Guardian called for the Justice Department to reject the merger. Copyright �2005 TDD, LLC. All rights reserved.

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