LOS ANGELES (CN) - A federal judge signaled his intention Friday to block newspaper publisher Tribune's acquisition of the Orange County Register, granting a temporary restraining order in the government's antitrust case.
Tribune Publishing said Thursday that it had successfully lodged a $56 million bid in a public bankruptcy auction to buy the assets of Freedom Communications, the publisher of the Register and the Press-Enterprise of Riverside County.
The Justice Department immediately responded with an antitrust lawsuit, arguing the acquisition would give the Tribune a monopoly on newspaper sales in the two counties that could lead to increases in subscription and advertising rates.
While Tribune Publishing CEO Justin Dearborn said the acquisition would allow the two struggling papers to "continue providing a distinct local voice in their communities," the government disagrees - estimating the Tribune would control 98 percent of the newspaper market in Orange County with the acquisition.
"If this acquisition is allowed to proceed, newspaper competition will be eliminated and readers and advertisers in Orange and Riverside Counties will suffer," Justice Department official Bill Baer said.
U.S. District Judge Andre Birotte sided with the government in an order he issued late Friday, ruling that the government had established that it would likely succeed on the merits of its claim.
In a court filing, Tribune attorney Peter Huston said the government's arguments were outdated and argued that it is Internet news sources, not the Tribune, that are eroding quality local journalism.
"Now, at the 11th hour, the DOJ seeks to permanently destroy Tribune's ability to acquire these assets, relying on antiquated notions of the relevant market and what competition means in the newspaper industry in today's digital world with its plethora of sources of news content and advertising platforms," Huston wrote in a March 18 opposition.
Birotte was not persuaded.
"The court is not convinced of Tribune's position that the Internet renders geography and distinctions between kinds of news sources obsolete," Birotte wrote, adding that to his knowledge news sites such as Apple News and Google News aggregate rather than generate local news content.
"News aggregator sites primarily post links to stories on the websites of other content generators - including local newspapers like the Register or the Press-Enterprise," Birotte continued. "That other websites post links to local sites only demonstrates that local newspapers continue to serve a unique function in the marketplace: they are the creators of local content."
Huston argued that a temporary restraining order would allow second bidder Digital First Media to step in and acquire the two papers or force them to liquidate assets when Freedom's financing runs out on March 31.
But Birotte was unmoved, writing that "consumer access to local news is at stake" and that local papers are "important to a healthy democracy."
"It may be that Tribune will lose the opportunity to acquire the Register and Press-Enterprise in favor of the second-place bidder," Birotte wrote in the 11-page order. "However, this private harm does not outweigh the public interest in the preservation of competition, especially given the government's likelihood of success on the merits."
The U.S. Bankruptcy Court was scheduled to approve the buyout at a March 21 hearing.
A hearing on the government's request for a preliminary injunction is scheduled in Birotte's courtroom for Monday, March 28 at 10:00 a.m.
Based in Chicago, Tribune Publishing owns 11 major daily newspapers in California, Illinois, Florida, Maryland, Connecticut, Virginia and Pennsylvania.