A U.S. District Court judge has approved a temporary restraining order to block Tribune Publishing's purchase of the Orange County Register and Riverside Press-Enterprise, a decision that the owner of the Los Angeles Times has described as a "death-knell" to its bid.
The order, approved late Friday by U.S. District Court Judge Andre Birotte Jr., prohibits Tribune from moving forward with its $ 56-million cash offer for the two newspapers owned by bankrupt Freedom Communications.
Birotte scheduled a hearing for March 28 to decide whether to block the sale beyond that date on antitrust concerns that the sale would harm consumers and advertisers.
The Justice Department argued that the deal would allow Tribune to raise prices to advertisers and subscribers by controlling 98% of English-language local daily newspapers for sale in Orange County.
In Riverside County, Tribune, which purchased the San Diego Union-Tribune last year, would own four of the top five English-language newspapers by circulation, according to the department.
Tribune and some media and antitrust experts have criticized the government’s argument as outdated.
"The Division is living in a time capsule, with a framework that predates the arrival of iPhones, Google, Facebook, and modern media outlets that are killing the traditional newspaper industry," Tribune Publishing spokeswoman Dana Meyer said earlier this week. "It wasn’t competition from the L.A. Times that forced the Register into bankruptcy. It was the Internet and related technology."
But Birotte said that the government has shown "a likelihood of success on the merits of its claim."
He noted that many online websites don't produce original content, but "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," Birotte said in his decision. "It further stands to reason that local advertisers in search of print advertising would choose to advertise with local news providers."
Tribune's winning bid was scheduled for approval at a hearing in U.S. Bankruptcy Court on Monday. It is unclear what impact the restraining order will have on that proceeding.
In a court filing Friday, Tribune said the restraining order would, in effect, shut it out of the sale because a bid must be approved quickly in U.S. Bankruptcy Court. The publishing company said that Freedom will run out of financing March 31.
The Bankruptcy Court may be forced to award Freedom's assets to a rival lower bidder that isn’t facing an antitrust battle.
Digital First Media, the owner of the Los Angeles Daily News, probably would be next in line — though its bid was valued as much as $ 13 million less for the estate, according to Tribune’s filing.
A group of Freedom insiders pulled out of the auction prior to its start, but their attorney, Leonard Shulman, has said they are willing to step in as a third alternative.
Alan Friedman, Freedom's bankruptcy attorney, told the Register it was too early to say how the restraining order might impact the sale. He said it opened the door to a backup offer from Digital First Media, publisher of the Los Angeles Daily News and eight other Southern California newspapers.
"There are several options we have to consider," Friedman told the Register on Friday night.
Reach me by email at andrew.khouri@latimes.com or on Twitter @khouriandrew
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