Federal Judge Susan Illston (pictured) today (July 28) refused a request to issue a temporary restraining order to block McClatchy Co. from selling the Mercury News and other former Knight Ridder newspapers to MediaNews Group. But her ruling doesn’t mean the $1 billion sale will take place. The AP and the Sacramento Bee are reporting that the Department of Justice’s Antitrust Division has again asked for more time to review the transaction.

Judge Illston rejected San Francisco powerbroker Clint Reilly’s request for a TRO, which would have blocked the sale for 10 days while he gathered more data for his lawsuit. “The transaction creates no pressing and imminent danger to (Reilly) or the public that would justify blocking the newspaper sales,” she wrote.

Reilly has said through his lawyer, Joe Alioto (son of the former SF mayor), that he suspects Hearst, which is pouring $263 million into the $1 billion deal, has cooked up a plan with MediaNews to respect each other’s turf and reduce competition.

“If Reilly had proof that such a conspiracy existed, the court’s analysis would obviously be different,” Illston wrote.

“In large part MediaNews’ acquisition of the San Jose Mercury News and the Contra Costa Times will have minimal anti-competitive effects in the Bay Area as a whole,” she wrote.

Even though Illston refused to grant a restraining order, Reilly can continue with his lawsuit and force a trial. If he wins, the judge could conceivably order the transaction reversed, a possibility that McClatchy CEO Gary Pruitt called remote.

Both the AP and Sacramento Bee reported that the Department of Justice is still examining the deal’s antitrust implications. When the agency will issue an approval or denial is unknown. Originally, Pruitt said he expected a “simultaneous closing” on June 27 — meaning that the day McClatchy bought Knight Ridder, McClatchy would sell the Bay Area Knight Ridder papers to MediaNews. MediaNews CEO Dean Singleton said on June 28 that the sale of the papers would be final in four weeks. Four weeks ended today.

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