Regulators check antitrust implications of McClatchy getting stake in The Times

The U.S. Justice Department is looking into antitrust implications of The McClatchy Co.'s proposed acquisition of a 49.5 percent stake in The Seattle Times Co.

The inquiries are part of the agency's broader antitrust review of McClatchy's pending takeover of another newspaper chain, Knight Ridder, which has owned the minority interest in The Times since 1928. McClatchy already publishes The News Tribune in Tacoma, 30 miles south of Seattle.

Peter Horvitz, publisher of the King County Journal in Kent, said Friday that a federal antitrust lawyer interviewed him by phone a couple of weeks ago. But Horvitz, who originally expressed concern that McClatchy ownership of nearly half of The Times could raise antitrust concerns, said he has concluded it's not a problem, and told the lawyer so.

Jack Kirkwood, a Seattle University law professor who specializes in antitrust matters, said he, too, was contacted by the Justice Department about a week ago. The agency's review appears to be routine, he said: "Justice has not in recent years challenged newspaper acquisitions."

A Justice Department spokeswoman confirmed the agency is looking into the overall McClatchy-Knight Ridder deal as required by law but declined further comment. In a conference call with Wall Street analysts Thursday, McClatchy CEO Gary Pruitt said the company doesn't expect significant problems will emerge.

A Seattle Times spokeswoman declined to comment.

Sacramento-based McClatchy announced a month ago that it had agreed to acquire troubled Knight Ridder for $6.5 billion in cash, stock and assumed debt, and that it also would immediately sell 12 of Knight Ridder's 32 daily newspapers.

Among the 20 it plans to keep are two in Washington, The Olympian and The Bellingham Herald, bringing the number of McClatchy newspapers in the state to four. In addition to The News Tribune, the company also already publishes the Tri-City Herald.

And, with Knight Ridder's 49.5 percent interest in The Seattle Times Co., McClatchy would gain a minority stake in three more. In addition to its flagship paper, The Times Co. also publishes the Yakima Herald Republic and Walla Walla Union-Bulletin.

But that minority interest has meant little to Knight Ridder in recent years. The Seattle-based Blethen family, which owns the remaining 50.5 percent, controls a majority of board seats and has made all the big decisions, sometimes over Knight Ridder's objections.

When the McClatchy-Knight Ridder takeover was first announced, the King County Journal's Horvitz said it might create "an outrageously anti-competitive situation." He said his suburban paper already had a hard time competing against The Times and Seattle Post-Intelligencer, which are run under a joint operating agreement (JOA), and that potentially adding the Tacoma paper to the mix might make the situation even worse.

But Horvitz said Friday that, when the Justice Department lawyer called, "I expressed my view that McClatchy's ownership in The Seattle Times did not pose an antitrust problem from my perspective."

Horvitz said he assumes McClatchy, like Knight Ridder, will not be active in Times management and said he thinks the Seattle and Tacoma papers will not collaborate. "They make all the decisions," he said of the Blethens. "It's not as if it's the same company running both newspapers."

Kirkwood said the Justice Department contacted him because it thought he had independent knowledge of the level of competition between The News Tribune and The Times, which he doesn't. He said the Justice Department probably is trying to find out whether advertisers view The Times and The News-Tribune as competitors for their advertising dollars.

Audited circulation reports indicate the two newspapers' markets don't overlap much. Both sell a significant number of weekday papers in Federal Way, Auburn and Enumclaw, but north and south of there the circulation landscape quickly gets one-sided.

Aside from Kirkwood and Horvitz, who both have been quoted in the press on McClatchy-Times antitrust matters, it's unclear who in Washington the Justice Department may have contacted.

Tina Kondo, antitrust division chief in the state Attorney General's Office, said she is aware her federal counterparts are interviewing people in the state. But she would not identify those people and declined further comment.

The Justice Department also has asked antitrust-related questions in the San Francisco Bay area about the McClatchy-Knight Ridder deal. McClatchy plans to sell two Knight Ridder papers there, The San Jose Mercury News and Contra Costa Times; Media News of Denver, which already publishes several dailies in the area, is considered a likely bidder.

McClatchy already has said it plans to sell Knight Ridder's Pioneer-Press in St. Paul, Minn., to avoid antitrust problems. That paper's market overlaps significantly with that of The Star-Tribune of Minneapolis, which McClatchy already owns.

Pruitt said Thursday he expects the Knight Ridder takeover will close July 1.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com