July 18, 2006 > Businessman Sues To Block Sale Of 3 Bay Area Newspapers

by Marcus Wohlsen

SAN FRANCISCO (AP), Jul 14 _ A millionaire real estate investor filed an antitrust lawsuit Friday in federal court to block McClatchy Co.'s plan to sell three Bay Area newspapers to MediaNews Group Inc.

Clinton Reilly claimed the $737 million deal to cast off the San Jose Mercury News, Contra Costa Times and Monterey Herald as part of McClatchy's acquisition of Knight Ridder Inc. would eliminate newspaper competition in the San Francisco Bay area, attorney Joseph A. Alioto said.

``The hope is to convince these very powerful people and influential people that competition is much better than monopoly,'' Alioto said.

Reilly's challenge comes six years after he turned the sale of the San Francisco Chronicle into a legal marathon.

The lawsuit names as defendants MediaNews Group, publisher of The Oakland Tribune and other newspapers; the Hearst Corp., which publishes the Chronicle; Gannett Corp. and Stephens Media Group, a privately held a company.

Sacramento-based McClatchy reached an agreement in April to sell the three San Francisco Bay area papers to MediaNews with backing from Hearst and the other publishers.

Reilly, a one-time San Francisco mayoral candidate, tried to block Hearst from acquiring the Chronicle in 2000, but a judge rejected his claims that the sale created a monopoly for Hearst, which already owned the rival San Francisco Examiner. The litigation delayed and complicated the deal.

The McClatchy deal, which is under review by the U.S. Justice Department and California's attorney general, would create a ``straight monopoly'' that would drive up newspaper prices, harm the quality of news coverage and reduce jobs in the industry, Alioto said.

MediaNews owns 22 newspapers in Northern California, including the Tribune, the Marin Independent Journal and The Vacaville Reporter.

Reilly plans to seek an injunction against the completion of the sale if the Justice Department approves the deal and is willing to take the case to trial, Alioto said.

MediaNews and Hearst representatives could not be reached for comment Friday.

Contacted Thursday regarding the pending suit, MediaNews president Jody Lodovic said the sale would create ``virtually no overlap'' in terms of circulation with the papers the company already owns.

``The efficiencies created from this should more than offset any of those competitive issues,'' Lodovic said.

In the complaint filed in U.S. District Court, Reilly claims the planned sale would hurt him as a subscriber to, purchaser of and advertiser in local newspapers.

Reilly spent $2.5 million pursuing his case against the Chronicle, according to Alioto.

The case is Reilly v. MediaNews Group, 06-04332.