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Appeals to Meese : Knight-Ridder Takes Detroit Fight to Wire

January 21, 1988|THOMAS B. ROSENSTIEL | Times Staff Writer

With millions in potential profits in the balance, Knight-Ridder, the nation's second-biggest newspaper chain, this week launched a public relations campaign designed to convince Atty. Gen. Edwin Meese III that he should grant its Detroit paper an exemption from federal antitrust laws.

The company's president, James K. Batten, personally phoned some of the nation's most powerful newspaper editors, asking them to send reporters to cover a Knight-Ridder press conference today in Detroit.

Corporate officers also made themselves available for background interviews during the week. And Monday the Wall Street Journal published a lengthy letter from Knight-Ridder Chairman Alvah H. Chapman Jr.

The effort will culminate in today's special board meeting and press conference. There, the company likely will announce that unless Meese approves a joint operating agreement between Knight-Ridder's Detroit Free Press and its rival, Gannett's Detroit News, the Free Press will close.

Under the agreement sought by Knight-Ridder, the Free Press--America's eighth-largest paper--and the News--the seventh-largest--would merge business operations but maintain separate news staffs.

To forge such a newspaper monopoly in Detroit, Knight-Ridder must receive a special exemption from federal antitrust laws. To do that, it must persuade the government that the Free Press is a failing paper that otherwise would fold.

Strong Opposition

Newspapers are allowed such exemptions because preserving independent newspaper voices is considered an overriding social good. More than 20 such joint operations exist.

But the Detroit agreement, proposed in May, 1986, would be the biggest ever--a merger between two of the country's largest dailies, owned by America's two biggest newspaper companies.

From the start, Detroit's mayor, the papers' unions and a citizens' group that included former Free Press Editor and screenwriter Kurt Luedtke have opposed the plan. The papers were close in circulation, with the Free Press dominant in the crucial morning cycle and gaining overall.

Until Gannett, the nation's biggest newspaper chain, bought the rival News in early 1986, most thought the Free Press would win the war.

Knight-Ridder and Gannett first wanted approval of the agreement without public hearings but lost. Then the Justice Department's antitrust division opposed the agreement. Finally, after 18 months of legal pleadings and public hearings, an administrative law judge ruled Dec. 30 against the agreement.

Now, Knight-Ridder finds itself with only a few cards left in its hand.

Atty. Gen. Meese can approve the agreement, despite the law judge's recommendation. If he rejects the plan, Knight-Ridder could pursue it in federal court.

Yet the odds suddenly seem longer than expected, particularly considering that no other agreement to go through public hearings ever has received a negative recommendation from the presiding judge.

So Knight-Ridder, as one key executive put it, is now "scratching to do what we can" to persuade Meese, both through legal channels and through other channels, including its professional relationships with other media organizations.

Following the judge's ruling, said another company executive, it was clear that the company had "a public relations problem." Some of the press coverage, and even the administrative law judge's opinion, the executive complained, had a "fairly cynical if not hostile tone."

Chapman, Knight-Ridder's chairman, seemed particularly bothered by a lengthy Wall Street Journal story that tried to piece together a history of Detroit's newspaper war, one of the last great newspaper competitions.

The story suggested that the Free Press had embarked in 1979 on a high-stakes plan either to drive its rival into submission or lose enough while trying to qualify for a joint operating agreement.

The paper has lost nearly $100 million since 1980, Chapman countered. To think that a public company beholden to shareholders would "deliberately" take that beating, Chapman said, is both wrong and not what the law judge found.

Privately, company officials also expressed dismay at a piece in the Columbia Journalism Review this month by University of California law professor Stephen R. Barnett, an expert in the so-called Newspaper Preservation Act.

Because the Detroit papers are so large and, relative to other joint operating agreements, so evenly matched competitively, Barnett wrote, "approval in Detroit could thus pave the way for JOAs in almost all the 20-plus cities that still have real newspaper competition," a list that includes Los Angeles, Chicago and New York.

Barnett also questioned whether Knight-Ridder really tried to turn a profit in Detroit or whether it instead tried to pursue a strategy of domination by keeping prices low. Retail ad rates in Detroit, he noted, are 22% below other cities on weekdays and 39% below on Sundays.

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