Alternative newsweekly chains NT Media and Village Voice Media have reached a tentative agreement with the Justice Department that would settle charges that they violated antitrust laws when they agreed to close competing newspapers in Los Angeles and Cleveland.
As part of the settlement, the publishers agreed to sell the assets of their shuttered papers within 30 days to new owners, which would revive them. The sales would be monitored by the Justice Department.
In addition, the publishers each would pay $305,000 in civil penalties and $70,000 in legal fees that would be shared by the California attorney general and the Los Angeles County district attorney. Additional penalties would be paid to the Ohio attorney general. Phoenix-based NT Media and Village Voice Media of New York did not admit guilt.
Federal, state and local prosecutors have been probing the two companies since October, when NT Media agreed to shut down the 6-year-old New Times Los Angeles newspaper in exchange for $11 million from Village Voice Media, which owns the rival LA Weekly.
As part of the arrangement, New Times, which publishes the Cleveland Scene, paid $2 million to Village Voice Media in exchange for an agreement to close its Cleveland Free Times. NT came away with $9 million, according to a federal lawsuit filed Monday with the proposed settlement.
"This was a classic application of antitrust economics," said attorney Don T. Hibner Jr., an antitrust specialist in Los Angeles law firm Sheppard, Mullin, Richter & Hampton. "Beyond the social concerns of quieting an editorial voice, this looked like a case of dividing markets: 'I'll get out of your territory if you get out of mine.' If that's what happened, that is simply against the law."
The complaint, filed by the Justice Department in the U.S. District Court for the Northern District of Ohio, charged that the sales violated the Sherman Antitrust Act. By eliminating local competition, the deals forced advertisers in both cities to pay higher ad rates, according to federal court records.
The attorneys general of California and Ohio, who had been working with the federal government, filed similar lawsuits and tentative settlements in their respective state courts Monday.
All the settlements remain pending until approved by the appropriate court.
"Without a question, this was a clear violation of the Sherman Act," said Deborah Majoras, deputy assistant attorney general with the Justice Department's antitrust division. "The evidence showed they paid each other to exit one of the other's markets. There's not a gray area here."
Los Angeles Dist. Atty. Steve Cooley said that "the settlement provides substantial relief to the two metropolitan communities harmed: Los Angeles and Cleveland."
David Schneiderman, chief executive of Village Voice Media, said in a statement Monday that the company believed the deals were legitimate but that settling with the Justice Department was more expedient than fighting in court.
Litigation would have been "extremely costly, time-consuming and a significant distraction," he said.
Executives with NT Media did not return calls for comment Monday.