Tribune Publishing, owner of the Los Angeles Times and other newspapers, walked away from a heated auction session as the winning bidder of Freedom Communications, the parent company of the Orange County Register and the Riverside Press-Enterprise. Tribune offered $56 million cash for the papers.

However, the win has put Tribune Publishing in the way of a lawsuit filed Thursday in California’s Central District by the Department of Justice to block the sale. Assistant Atty. Gen. William J. Baer of the antitrust division said the sale would create a publishing monopoly that could have an adverse effect on readers and advertisers.

He noted that The Los Angeles Times and the Orange County Register together account for about 98 percent of the circulation of local daily newspapers in Orange County. After the acquisition, Tribune would also own four of the top five daily newspapers in Riverside County, according to the complaint.

“Tribune would monopolize the market,” the lawsuit states. "Tribune’s dominant position in both Orange County and Riverside County would allow it to, among other harmful effects, increase subscription prices and advertising rates to businesses targeting readers in those areas.”

A Tribune spokeswoman said the company is ready for a court battle over its takeover bid.

“We are prepared to defend the legality of the transaction,” said Dana Meyer, a spokesman for Tribune Publishing, in an emailed statement to the Business Journal.

Because Tribune's bid did not include assumption of the Register's pension plan, its liability would be taken over by the Pension Benefit Guaranty Corp., the federal pension guarantor that is a major creditor in Freedom's bankruptcy.

“For this concern to be raised at this stage of the process is not only disappointing, but potentially damaging to the Pension Benefit Guarantee Corporation,” Meyer added.

Tribune beat out an offer from an insider group consisting of Freedom co-owner and Chief Executive Rich Mirman and Orange County developer Mike Harrah, as well as a bid by Los Angeles Daily news parent Digital First Media.

Meyer also explained that as Tribune was the highest cash bidder, a restraining order at this late stage would force the seller to revert to the significantly lower back-up bid, allowing for lesser repayment of claims against the company.

“The antitrust division is living in a time capsule, with a framework that predates the arrival of iPhones, Google, Facebook, and modern media outlets that are killing the traditional newspaper industry,” Meyer wrote. “It wasn’t competition from the Los Angeles Times that forced the Register into bankruptcy. It was the Internet and related technology.”

A bankruptcy court hearing is scheduled for Monday to review the winning bid, which is scheduled to close March 31.

The Register’s Mirman expressed his unhappiness with the outcome of the auction on Freedom Communications’ corporate website.

“Despite our best efforts, our local investor group was not able to overcome a series of insurmountable obstacles in the bidding process,” said Mirman. “At this point, we really have very little detail as to how (Monday’s hearing) is going to play out. However, we anticipate a number of issues will be discussed with the judge at Monday's hearing.”

Media analyst Ken Doctor said Tribune’s purchase raised concerns about the quality of the acquired newspapers moving forward, as well as the welfare of its employees.

“The consolidation brings up the troubling question of how well one news organization can effectively serve 18 to 20 million readers between San Diego and Ventura counties, with shared reporting and a single line of authority,” said Doctor. "(It could result) in a deepening lack of diversity in editorial voices and local newspapers losing their character.”

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