Attorney: Freedom Communications to sell to Digital First Media

Freedom Communications, the owner of the Orange County Register and Riverside Press-Enterprise, will accept the $53 million bid of Digital First Media on Monday, the company’s bankruptcy lawyer said Saturday.

The decision comes after a federal judge halted the sale of the papers to Tribune Publishing, the owner of the Los Angeles Times, with a temporary restraining order issued late Friday night. Tribune bid $56 million for the papers in Wednesday’s auction.

“It’s been very topsy-turvy, but my guess is that it’s over, because Tribune, I don’t believe, will be able to get the temporary restraining order removed in a timely maer,” said William Lobel, a lawyer with the Costa Mesa-based firm of Lobel Weiland Golden Friedman. “So we have determined, as the sellers, to take the bid of Digital First Media, and we will appear in court Monday to confirm the sale.”

Freedom declared bankruptcy last fall and Tribune, Digital First Media — which owns nine daily newspapers in Southe Califoia, including this one — and a group including current Freedom leadership, all bid on the company on Wednesday. On Thursday, the U.S. Department of Justice filed to stop the sale of Freedom to Tribune Publishing, citing conces over the monopolies it would create in Orange and Riverside counties.

Tribune officials are mulling their options after Friday night’s restraining order.

“The practical effect of the order will be to force Freedom’s newspapers into the hands of an alteative bidder that will be less able to reduce cost and achieve efficiencies, with the likely effect that the joualism serving the local communities will be diminished,” Tribune spokeswoman Hillary Maing wrote in an emailed statement Saturday afteoon. “In addition, the Antitrust Division action will increase the burden on U.S. taxpayers by increasing the public funding necessary to cover Freedom’s underfunded pension. In light of the court’s order, we are now reviewing our options.”

On Friday night, Judge Andre Birotte approved the Department of Justice’s request for a temporary restraining order on the acquisition, finding that antitrust conces raised by the govement are valid.

“Tribune’s acquisition of the Register will increase its control of local daily newspaper circulation from 41 percent to 98 percent in Orange County, and Tribune’s acquisition of the Press-Enterprise and Register would increase its share of local daily newspapers from 12 percent to over 81 percent in Riverside County,” Birotte wrote in his opinion. “Such a concentration clearly constitutes a threat to competition and would likely have adverse effects on consumers in the market as whole.”

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The Department of Justice on Thursday filed a lawsuit and sought a restraining order, as they had waed they would in a letter sent Monday to Freedom Communications.

“Without such an order, Tribune will take control of The Register and Press-Enterprise newspapers, immediately harming consumers through this lost competition,” the department’s motion for the restraining order reads in part. “Tribune could also begin to integrate its newly acquired assets into those of the Los Angeles Times and take actions at odds with preserving a competitive marketplace, including accessing Freedom’s confidential competitive information, firing employees, and shuttering operations.”

On Friday, Tribune argued that newspaper monopolies are outdated in its own legal filing.

“In this day and age, newspapers caot be reasonably considered to be their own relevant product market, notwithstanding the cases from the 1950s and 1960s cited by the govement,” Tribune’s lawyers wrote.

Tribune argued that the advent of the inteet and social media made it possible for the public to get news and information from sources other than local newspapers.

In other words, Tribune’s brief reads in part, “technology has fundamentally altered the place of newspapers in American society.”

“The Inteet has exploded with new news and information sites. If readers want news on any particular topic, they can look to Google News, Apple News, numerous search engines, or various media. For local news in Orange County, they can tu to numerous on-line local sources,” the brief reads in part. “For leading national or inteational news, they can easily look to a world of sources, from the New York Times to CNN’s web site to the Financial Times or BBC in London to sites in most every major city. For business news, they can easily click on the Wall Street Joual or MarketWatch or CNBC or Forbes or Yahoo Business. For classifieds they can look to Craigslist. For better or worse, the court and the govement need only look at the phone in their pocket to understand that the trend toward digital content is accelerating.”

Birotte was not convinced.

“To the Court’s knowledge neither Google News, Apple News, nor ‘search engines’ themselves generate local content,” the judge wrote. “Rather, news aggregator sites primarily post links to stories on the websites of other content generators – including local newspapers like the Register or the Press-Enterprise. That other websites post links to local sites only demonstrates that local newspapers continue to serve a unique function in the marketplace: they are the creators of local content.”

In their brief, Tribune attoeys also argued that a delay in the sale would force Tribune out and result in Freedom’s assets going to the next-in-line bidder, Digital First Media, as Freedom’s funding runs out at the end of March.

A hearing is scheduled in Santa Ana on Monday to approve the sale of Freedom’s assets.

Birotte set a hearing for March 28 at which attoeys for the govement are expected to argue for an injunction to prohibit the sale to Tribune.

“The public interest and the balance of hardships inquiries are interrelated and both weigh in favor of an injunction,” Birotte wrote. “The Court finds this especially applicable here where the consumer access to local news is at stake. Newspapers — indeed, local ones — are important to a healthy democracy.”

The Associated Press contributed to this story.