the long run, the way you get independence is when you have independence of economic incentive. Mr. MCCLORY. Some of these individual writers in the editorial departments of these newspapers are reported to compete for annual awards with the quality of their writing. Mr. ZIMMERMAN. Right. Mr. McCLORY. Would that be the type of competition that you would consider adequate? Mr. ZIMMERMAN. No; I don't think so, because I would guess the managerial decisions on how much they will pay in incentive awards would be significantly affected, because this comes out of the other fellow's pocket as well. This is precisely where I think that in the long pull you are not going to get what you would get if you had separate commercial competition. Mr. McCLORY. Thank you very much, Mr. Chairman. Mr. KASTEN MEIER. Counsel, do you have questions? Mr. HARKINS. Mr. Chairman, I would like to place in the record at this point, following Mr. Zimmerman's testimony, a July 24, 1968, letter from the Deputy Attorney General on the committee's request for comments on this legislation. Mr. KASTENMEIER. Without objection, that will be included. (The letter follows:) Hon. EMANUEL CELLER, Chairman, Committee on the Judiciary, House of Representatives, Washington, D.C. JULY 24, 1968. DEAR MR. CHAIRMAN: This is in response to an informal request for the views of the Department of Justice on a committee print, dated June 19, 1968, in the nature of a substitute for S. 1312, the "Failing Newspaper Act." This committee print would exempt from the antitrust laws all joint newspaper operating arrangements which involve one or more "failing" newspapers, and like the original S. 1312, would apply to newspaper joint operating arrangements a concept of "failing company" which appears to be substantially different from that applied under present merger law to industries generally. The committee print differs from the original bill in that it (a) does not apply to mergers and (b) makes explicit the continuing antitrust prohibition against predatory and other conduct that would be illegal if engaged in by a single newspaper. The Department of Justice voiced its strong opposition to the enactment of S. 1312 in testimony delivered April 16, 1968, by former Assistant Attorney General Donald F. Turner, before the Subcommitee on Antitrust and Monopoly of the Senate Judiciary Committee. At that time the reasons for the Department's opposition were set out in detail. We believe that the committee print poses the same if not greater, problems. By eliminating the proposed antitrust exemption for mergers, the proposed substitute for S. 1312 would actually encourage joint activities by newspapers-such as price fixing and profit pooling agreementsthat are per se illegal under present law. Despite the substitute bill's presumed intention of preserving separate editorial policies of jointly operated newspapers, its effect would be not only to channel the newspaper publishing business into arrangements creating serious economic harms, but also to eliminate truly independent newspaper operations in many instances where they could be preserved. By requiring that a newspaper show only that it "appears unlikely to remain or become a financially sound publication," the bill imposes a standard much easier to meet than the present failing company defense applicable to mergers, which is available only to a company that is clearly facing disappearance as a viable entity and that cannot find a preferable buyer willing to keep it in the market. Therefore newspapers facing business difficulties would be encouraged to enter into anticompetitive arrangements rather than attempt to resolve their problems or to sell to independent interests who would keep competition alive. For example, it may be that a newspaper's inability to "remain or become a financially sound publication" is due to nothing more than its inability to conduct its operations with skill and efficiency. We question that there is any public interest to be served in granting to such a newspaper the right to remain in business by pooling profits and fixing prices with its competitor. Such an arrangement would inhibit entry of new competitors and compensate the "failing newspaper" for its lack of success by an agreement which eliminates commercial competition and permits it to share in the profits of a commercial monopoly. The commitee print of S. 1312 would not affect the application of the traditional antitrust "failing company" defense to newspaper mergers. It is not clear, however, that the joint operating arrangements which the bill encourages are preferable to outright mergers. A joint operating arrangement involving price fixing and profit pooling might well be even less desirable than full merger with a competitor, since the joint operating agreement is likely to maintain higher barriers to entry by new competitors in the future. Moreover, although the apparent purpose of the revised bill is to preserve separate editorial policies while permitting joint operating agreements, whether meaningful editorial independence would be maintained in the face of the complete identity of economic interests that would result from price fixing and profit pooling agreements is open to serious question. To the extent that the legitimate goal of preserving separate editorial voices in a city can be furthered by limited joint production and distribution arrangements, legislation is unnecessary since the antitrust laws presently permit such joint arrangements among newspapers in appropriate circumstances. Finally, if newspapers were afforded special exemption from the antitrust laws, claims for special treatment would surely be presented by other industries whose products or services would similarly be claimed to be uniquely important to the public. For these reasons, we believe that there has been no demonstration of countervailing public interest that would warrant the exemption from antitrust policy proposed in the committee print of S. 1312. Accordingly, we oppose its enactment. A copy of Mr. Turner's earlier testimony, which sets out in greater detail the reasons for our opposition, is enclosed and we incorporate it by reference. The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the Administration's program. Sincerely, WARREN CHRISTOPHER, Mr. KASTEN MEIER. The Chair would again like to express thanks to the witness for his testimony this morning, and that will then conclude the hearing this morning. The Chair would like to announce that hearings will continue on H.R. 19123 and other bills relating to the same subject tomorrow at 10 a.m., Thursday, September 26, in this room, at which time the committee will hear the Newspaper Committee for a Free and Competitive Press, consisting of six publishers, the National Newspaper Association, and Georgia Press Association. Until 10 o'clock tomorrow morning, the committee stands adjourned. (Whereupon, at 12:12 p.m. the subcommittee recessed, to reconvene at 10 a.m., Thursday, September 26, 1968.) NEWSPAPER PRESERVATION ACT THURSDAY, SEPTEMBER 26, 1968 HOUSE OF REPRESENTATIVES, The subcommittee met at 10:30 a.m., pursuant to recess, in room 2141, Rayburn House Office Building, Hon. Robert McClory presiding. Present: Representatives Donohue and McClory. Staff members present: Kenneth R. Harkins, chief counsel; and Howard W. Fogt, Jr., associate counsel. Mr. McCLORY (presiding). The subcommittee of the House Judiciary Committee will be in order. The chairman, the Honorable Emanuel Celler, is en route to the meeting, and he has requested that I preside, pending his arrival, which will be very shortly. I am going to call our first witness, who is Stuart Paddock, and present him to the committee. Mr. Paddock is a third generation publisher of the very successful and very influential chain of newspapers that circulate largely in the 11th District of Illinois, and other parts of the Illinois urban area. His papers are principally triweekly publications. He is also serving as president of the Newspaper Committee for a Free and Competitive Press. He testified previously before the Senate committee on the related bill, and we are pleased, indeed, to have you with us here this morning to testify, Mr. Paddock. Will you proceed? TESTIMONY OF STUART R. PADDOCK, JR., PRESIDENT, PADDOCK PUBLICATIONS, INC., ARLINGTON HEIGHTS, ILL.; ACCOMPANIED BY COUNSEL, SHELDON I. COHEN, OF CHAPMAN, DISALLE & FRIEDMAN Mr. PADDOCK. Thank you, Congressman McClory. I certainly do appreciate being introduced by the presiding chairman this morning. I would also like to introduce our counsel seated next to me, attorney Sheldon I. Cohen, of Chapman, DiSalle & Friedman. Mr. COHEN. Mr. Chairman, my name is Sheldon Cohen. I am an attorney with Chapman, DiSalle & Friedman. Our firm represents the Newspaper Committee for a Free and Competitive Press, a national committee of newspaper publishers. A few of its members are here today to testify against H.R. 19123, a bill to grant an antitrust exemption to the newspapers. Michael V. DiSalle, chief counsel for the committee, had intended to be here today, but due to a rescheduling of our appearance before this committee from yesterday to today, he was unable to avoid a longscheduled commitment in another part of the country. Therefore, I am speaking on his behalf. Mr. McCLORY. Excuse me, Mr. Cohen. What is the newspaper committee? What does it consist of? Mr. COHEN. The newspaper committee is a committee which was organized about 15 months ago for the purpose of preventing the passage of legislation which would grant special antitrust exemption for newspapers. This committee is composed of several hundred independent newspaper publisher from every section of the country, who publish probably close to a thousand newspapers. It has not function other than to insure and see that the free enterprise system will continue in the newspaper publishing industry. Mr. McCLORY. I wonder, then, if we might move to Mr. Paddock's testimony, in view of that statement. Mr. COHEN. Before Mr. Paddock proceeds, there are a number of Congressmen in this room who would like to introduce some of our other witnesses. They have other commitments, and if we could ask them to do that Mr. McCLORY. Very well. I would like to accommodate them right now, then. Mr. COHEN. Congressman Murphy and Congressman Pucinski. Mr. McCLORY. I see. Mr. Paddock, will you proceed, then. Mr. PADDOCK. I am here today in a dual role, first as president of Paddock Publications, Inc., publishers of 16 suburban triweekly newspapers northwest of Chicago; and second as one spokesman of the Newspaper Committee for a Free and Competitive Press, an organization founded 15 months ago for the express purpose of protecting and preserving the small and independent editorial voices of rural and suburban America. This organization represents several hundred newspaper publishers whose economic survival is dependent upon the action taken by this Congress on S. 1312 in the Senate and H.R. 19123 in the House of Representatives. I refer principally to the exemption from the antitrust laws provided in these identical bills. We have been told that these bills were born out of a desire to consecrate the joint operating agreements, the Tucson arrangement in particular, because it had already been accused of anticompetitive practices, price-fixing, pooling of profits, and other violations of our antitrust laws. Joint operators in 21 other cities started to shudder, especially those who were guilty of similar acts in creating monopolistic empires. The publishers I represent stood in shocked disbelief that such a bill would even be introduced. To these people, the failing newspaper bill is no more than a bill to legalize burglary, rape, and outright murder. That it should now be given the anomalous title of the Newspaper Preservation Act is an example of the audacity of the proponents in attempting to becloud the issues at stake in this bill. We are referred to as the "grassroots of America." Individually, we are small and will never be listed on Wall Street, but collectively we are the virtual strength and moral fiber of this Nation. We are closest to the people in our communities, closest to their needs and feelings, we slake their thirst for knowledge of their friends and neighbors, their schools, their stores, and their community problems. We are their household library, their counselor, their serviceman, their provider. We meet them face to face, know their names, relate their successes and commiserate when they are in trouble. We know what makes them tick, what makes them happy or sad, and they know we care about them. These are the newspapers for which I am here to defend and for which I am asking that you preserve. I am here to defend them against the weight of power and money; to defend against annihilation by the confiscatory and predatory practices which this bill seeks to sanctify. These are the practices which are relished and employed by some of the larger newspaper chains and joint operators who wish to escape the country's antitrust laws in order to widen the scope of their monopolies, multiply their profits, and control the mind and voice of their community. These giants are no different than the giants in other industries who feed upon and devour their less fortunate or less successful counterparts. These are the giants who seek freedom from Government's scrutiny, freedom from justice, all in the name of freedom of the press. What happened to freedom of enterprise? Is it a long lost cause? Is it something we must no longer venerate? I know that many of the Congressmen in Washington come from small communities in which there may exist a small weekly newspaper published by an honest, forthright, and respected member of the press. He usually considers himself and his paper a public servant. He is usually responsible for what happens in his community. There are many hundreds like him across the country. These are the backbone of America and they deserve consideration. These need the protection of the antitrust laws to stay in business and continue their dedicated tasks. These laws were born out of a need to control vast accumulation of power in the hands of a few individuals. Nowhere is the danger of a concentration of power greater than the power to control the public press. H.R. 19123 would remove these controls. I would like to speak more specifically on circumstances and developments in the area in which our newspapers are located. I know of what I speak because of what has occurred in our own front yard. Paddock Publications began in Arlington Heights, Ill., founded by my grandfather, H. C. Paddock, in 1898. He was a teacher and country editor and launched his career in journalism by purchasing the first newspaper of an eventual group for $275. He covered the same territory we have today by horse and buggy, traveling from farmhouse to farmhouse to solicit news and subscriptions, many of which were obtained by trading for food for his family's table or oats for his horse. H. C. Paddock was an aggressive and outspoken editor who proclaimed on his masthead, "To Fear God, Tell the Truth, and Make |