A day after U.S. District Judge Susan Illston ordered two rival Bay Area newspaper companies — Hearst and MediaNews — to stop collaborating on advertising and distribution, both sides in the case offered their spin on her ruling.

Illston said she was influenced by a previously undisclosed April 26 letter from a Hearst executive to MediaNews that said the two companies would work together on selling national advertising and newspaper distribution. She issued a temporary restraining order to stop the companies from working with each other — saying it might constitute an antitrust violation. The case goes to trial in April.

Attorney Joe Alioto, representing San Francisco developer Clint Reilly who is suing to stop the consolidation of the newspapers, told E&P that the letter “isn’t just a smoking gun — it’s the bullet coming out of the gun.”

MediaNews President Jody Lodovic told E&P that critics are reading way too much into the letter. “If it truly was a quid pro quo for your investment, wouldn’t you want more than a letter saying that you’re willing to talk about (collaborating)?,” he said.

Lodovic said the Antitrust Division of the U.S. Justice Department saw the letter, “and they weren’t troubled by it.” DOJ, which granted MediaNews permission to buy the San Jose Mercury News and Contra Costa Times four months ago, has yet to rule on whether Hearst can give MediaNews $263 million as part of the deal.

Lodovic denied the judge’s ruling would cause Hearst to back out of the deal. But Alioto said he thinks the deal will unravel as a result of the judge’s decision.

SF Press Club News

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