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Judge: Tucson Citizen Closing OK

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TUCSON, Ariz. — The Tucson Citizen won't be forced to resume publication.

A federal judge ruled Tuesday that the Arizona attorney general's office failed to show that the Citizen's owner, Gannett Co., violated antitrust laws by ending the 138-year-old newspaper with last Saturday's issue.

"While regrettable that the Citizen's illustrious legacy must come to end, it can not be said at this time, the decision to close the Citizen involves an anti-trust violation," U.S. District Judge Raner Collins wrote.

The state had said the move eliminated competition and fostered a monopoly for Gannett and Lee Enterprises Inc., publisher of the city's larger newspaper, the Arizona Daily Star. The state contended the decision was made simply to make more money.

A partnership jointly owned by Gannett and Lee handled printing and other non-editorial functions for both Tucson newspapers until Saturday. Under that joint operating agreement, the two companies shared costs, profits and losses.

Collins said that while "it is true the closing of the Citizen is an irreparable harm," the state didn't prove any violation to the 1970 Newspaper Preservation Act, which created such JOAs as an exemption to federal antitrust law.

JOAs have given newspapers competing in the same market a way to survive _ by sharing business operations, such as advertising, publishing and distribution costs, while keeping newsrooms separate. But they became less profitable as newspaper readership and advertising revenues began to decline, and costs to report and publish the news went up.

Nancy Bonnell, chief of the state attorney general's antitrust unit, argued in court Monday that because the Citizen was losing money, Gannett and Lee determined their joint business entity, Tucson Newspapers Inc., "would make more money if they closed one of the papers" and operated only the profitable Star.

"Even in recession last year, the parties made $16 million _ but that wasn't enough," Bonnell said at the hearing.

Collins' ruling denied the state a temporary restraining order, but the state is entitled to continue with its lawsuit alleging antitrust violations. The attorney general's office hasn't decided whether to file an appeal.

The ruling means the Citizen can proceed with plans to turn the brand into an opinion-and-commentary Web site and a printed Tucson Citizen editorial weekly to be distributed inside the Star.

Although the Tucson JOA was terminated, Gannett and Lee are continuing to share costs and profits equally from those lingering Citizen operations and the Star's.

Kate Marymont, vice president for news with Gannett's community publishing division, said that even though the company won't be printing its own newspaper, it is allowed to earn money from the partnership because it will help pay the costs of producing the rival newspaper. She said Gannett and Lee both come out ahead by eliminating the costs of producing the money-losing Citizen.

It isn't the first time a company keeps making money from a JOA after closing its money-losing newspaper, said Rick Edmonds, a media analyst at the Poynter Institute. He pointed to the 1988 demise of The Miami News, whose owner, Cox Enterprises Inc., continued to share profits from The Miami Herald, now owned by McClatchy Co.

David Ganezer, publisher of the Santa Monica Observer newspaper and a shareholder of a company that wanted to buy the Citizen from Gannett, said the ruling was disappointing.

The judge evidently felt "there was no demonstrable harm to advertisers and readers having only one newspaper in town," he said.

At one time, there were 28 JOAs in the U.S., but only six remain: Detroit; Charleston, W.Va.; Fort Wayne, Ind.; Las Vegas; York, Pa.; and Salt Lake City. Seattle's JOA dissolved with Hearst Corp.'s March decision to turn the Seattle Post-Intelligencer into a Web-only operation.

Ganezer said Tuesday's ruling sends a message to those companies still with JOAs.

"Those 12 companies now know that they can produce only six newspapers and make a monopoly situation in six more U.S. cities," he said.

The JOA had required both Gannett and Lee to publish newspapers in Tucson through 2015, and any changes needed U.S. Justice Department approval. According to a document Gannett filed in the case, when Gannett advised Justice of its intention to stop printing the Citizen, the department reviewed the case for 6 1/2 months and decided not to object on antitrust grounds.

The afternoon Citizen has struggled for years against the Star, a 102,000-circulation morning newspaper. During the Citizen's heyday in the 1960s, circulation was about 61,000, but it had fallen to about 19,000.

Don Kaplan, a lawyer representing Lee Enterprises, has said that if partners in a JOA can't help out a healthy newspaper by shutting down the one that is failing, "then this industry is in very serious trouble." The Citizen, he said, was losing more than $10,000 a day.

Bonnell argued Monday that Santa Monica Media Co. LLC, the company Ganezer has shares in, offered to buy the Citizen for $250,000 immediately or $400,000 over time for Citizen assets. Gannett said the newspaper's assets were assessed at $760,000, and its asking price was $800,000, according to court documents.

In Tuesday's ruling, Collins determined that the state didn't prove there was a buyer ready to pay a fair market value for the Citizen's assets.

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On the Net:

http://www.tucsoncitizen.com

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Associated Press Business Writer Andrew Vanacore in New York contributed to this story.