If you are going to wind up with a merged operation and with single ownership of both the morning and the afternoon papers, isn't it in the public interest to explore some avenue within the law to preserve independent outlets, independent editorial voices in a community?

The CHAIRMAN. Would you say those agreements should cover all needs, all of these operations that you mention? Would, for example, a joint printing outfit be sufficient-I don't know, I am asking for information-without making an agreement as to advertising rates, for example?

Mr. EDMONDSON. Well, I am going to ask experts in newspaper management to answer that question.

The CHAIRMAN. I don't think the Department of Justice would proceed against any kind of arrangement which would involve merely a joint printing operation. I think, if I remember correctly, in my conversations with the former Director of the Antitrust Division, Mr. Turner, he indicated that.

Mr. ÉDMONDSON. How about joint circulation?

The CHAIRMAN. They were concerned with the agreements because they covered so many different operations, revenue distributions, circulation rates, advertising rates, circulation solicitation, and various business and industry operations which are usually competitive between newspapers and are certainly competitive in nonnewspaper industries. If there could be some limitation only on printing, I don't think you would have much trouble.

Mr. EDMONDSON. I think there are degrees of values in combination that the committee will properly consider. To my way of thinking the more joint use of facilities that you could get-printing facilities, circulation facilities, business office facilities-the more economies could be effected, and I think very definitely the newspapers would be interested in getting as much of the business operation in a position for joint use as they could.

From the public standpoint-I hate to keep coming back to the same record and playing it over and over again—I just can't see why in this Times-Picayune case they held that you could have combination rates without violating antitrust laws in a merged operation.

Now, why is it lawful in a merged operation to have combination rates but in a joint newspaper printing operation it is not lawful?

The CHAIRMAN. If you have two newspaper dailies, you have a company called A and a company called B, and they have an agreement as to rates or prices, they violate the antitrust laws. That is price fixing and that is inherently in violation. It is repulsive to business in every dimension on that score.

Mr. EDMONDSON. I can remember a time, Mr. Chairman, in one community in my own district, and I won't name it, when you could advertise in the morning paper or you could advertise in the afternoon paper, or you could advertise in both, and you paid different rates as you went through that process. Something has happened in the antitrust laws because that operation is still a merged operation under single ownership but today if you advertise in one of them you pay the same rates that you pay to advertise in both of them and it is held lawful under the antitrust laws to do it. To me that is a situation that if it is permissible for a merged operation I can't see any reason why

it shouldn't be available also to a joint newspaper operation arrangement such as in here.

The CHAIRMAN. You made that point. You made that very emphatically. But I still wonder whether or not some modus operandi cannot be developed along the lines of a joint printing agreement that I suggested. I wonder whether or not the Newspaper Publishers Association couldn't get together with the Department of Justice and work out something in that regard, work out something that might be agreeable to the Department of Justice and be imperious to any suit that the Department of Justice could bring or would bring against such an arrangement.

I don't see why something of that sort couldn't be worked out.

Mr. EDMONDSON. I think the efforts have been made for some time to get a recognition of the values that are present in this joint operational agreement or arrangement over at the Department of Justice without success.

The CHAIRMAN. Any further questions?

Mr. McCLORY. Mr. Chairman, I yielded right in the middle of my questioning.

The CHAIRMAN. Pardon me.

Mr. McCLORY. I would like to ask this question: If a joint newspaper operating arrangement is entered into in a community, doesn't the arrangement create a formidable barrier to entry of new newspapers? Isn't this thwarting competition too, and preventing new competition, new enterprise, from developing?

Mr. EDMONDSON. It is certainly not intended to do so. It is certainly not confronting a new newspaper with any situation that is less advantageous than prevails today under the existing interpretation of the antitrust laws where you have single ownership of a morning and afternoon paper.

Can the gentleman show me how it is any worse from the standpoint of anybody wanting to come in and compete than it is under the existing operation in which you have single ownership or a merged ownership?

Mr. McCLORY. Well, in the merger situation there would be but a single successful competitive unit operating in the market, whereas the type of operation that would be authorized under this legislation would be one which was economically unsound, presumably, with regard to one of the newspapers and yet that economically unsound operation would be competing against a newspaper that had to make money in order to survive.

Mr. EDMONDSON. Yes, but it is only economically unsound because it does not have the benefits of joint use of business facilities and production facilities that are available in the single ownership or a merged operation.

Mr. McCLORY. It may be failing because of poor management, because of poor copy, poor editors, and all sorts of other things. It may not have anything whatever to do with the physical equipment which is involved.

Let me ask this further question: Is there any precedent for the provisions of section 5 which in summary require the court to reopen and set aside a final judgment and to vacate a decree which had already been entered?

Mr. EDMONDSON. Is there any precedent for this particular language?

Mr. McCLOY. That is a new legislative wrinkle as far as I am concerned. I just wonder whether we have ever legislated like that before. Mr. EDMONDSON. I would like to have permission to submit precedents for it to the committee. I think precedents can be submitted. Mr. McCLOY. Very well. Thank you very much.

The CHAIRMAN. Any other questions?

We are very grateful to you, Mr. Edmondson.

Our next witness is our distinguished Representative from Hawaii Mr. Matsunaga.

Mr. EDMONDSON. Thank you, Mr. Chairman, very much.

TESTIMONY OF HON. SPARK M. MATSUNAGA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF HAWAII

Mr. MATSUNAGA. Mr. Chairman, and members of the subcommittee, as a cosponsor of the bill H.R. 19123, the Newspaper Preservation Act, I thank you for this opportunity to present my views with respect to this legislation. H.R. 19123 is an amended version of H.R. 7446, which I introduced on March 20, 1967, and S. 1312, introduced by Senator Carl Hayden on March 16, 1967.

As H.R. 19123 declares, I believe we can all agree that it is in the best public interest to maintain the historical independence of the news media throughout the Nation. We can also agree that in a democracy such as ours it is preferable to have more than one editorial voice in any of our cities, communities or metropolitan areas.

A study of the newspaper industry readily shows_that_rapidly changing economic conditions in recent years have contributed greatly to the failure of many independent newspapers. This has been especially true in the metropolitan areas. Newspapers receive a considerable portion of their revenues from subscribing readers, but their primary source of income is from advertising. It is in the area of advertising that newspapers have encountered real problems. Competition from other advertising media, such as television, news magazines and suburban news publications, has taken its toll. Consequently, these newspapers have suffered a steady decline in their share of the local and national advertising dollar. The population shift to the suburbs has lured local, retail and classified advertising to suburban newspapers, while television has made major inroads on national advertising.

Competitive advertising media, together with competition with other newspapers for the disappearing advertising dollar, has frequently set in motion a vicious cycle. The reduced revenues from advertising force a newspaper to cut back on news, editorial, and feature content, which in turn makes it less attractive to the potential reading public, resulting in a downtrend in circulation. Due to the fact that advertising rates are based on consumer exposure, a downward trend in circulation may require a reduction in advertising rates. Once this downward plunge is underway it more often than not ends with the newspaper suffering a complete financial failure.

Another bleak aspect of newspaper economic problems is the rise in publishing costs. Since World War II the cost of labor has almost

tripled for several of the largest metropolitan dailies. Newsprint, the second most important cost item, has, during the same period, more than doubled.

The newspaper publishing business also has other built-in economic peculiarities. For example, a single newspaper with its own publishing facilities may be able to use only a small part of its capacity. An afternoon daily, for instance, may operate its presses at full capacity for only 3 or 4 hours out of 24, yet be required to keep on a working crew for a minimum of eight hours per day.

The CHAIRMAN. I notice the International Paper Co. made a pronouncement they were increasing newsprint price by $5 a ton. I take it according to practices that have usually prevailed in the past all the other newsprint manufacturers will follow the principle of follow the leader and they will likewise increase by $5 per ton newsprint, and that is something that has been going on for many, many years.

We took the tariff off newsprint in the interest of the American newspapers and yet with the thought that the Canadians would keep down their price but they haven't kept down the price. The prices have steadily advanced. Many of the important newspapers in this country own their own newsprint plants.

Mr. MATSUNAGA. Well, of course the chairman will agree that it is in the exception rather than the rule that newsprint factories are owned by the newspapers. Most of the larger newspapers do not own the manufacturing plants of newsprint and therefore

The CHAIRMAN. There are numerous newspapers in this country that do own their newsprint source.

Mr. MATSUNAGA. I suppose that is an area which the antitrust people could look into but then what we are concerned with here are the newspapers which do not have newsprint factories and which have no control whatsoever over the price of newsprint and are placed in this dilemma of having to pay higher costs of publication.

The CHAIRMAN. Some years ago this committee made inquiry into the operation of newsprint plants and with a view to finding out whether there were any violations of the antitrust laws. We were confronted with every conceivable objection. We were constantly frustrated in getting material and we finally had to give up the search. The Canadians even went so far as to have laws passed in the Canadian Provinces making it a criminal offense-think of that-a criminal offense, a crime against the Canadian laws, for any witness who is a Canadian to come down to testify at our inquiry, or to give any information to the Judiciary Committee of the House of Representatives to the operation of newsprint plants. And the International Paper Co., which is partly Canadian and partly American, refused to give us any of their records. All the records of the Canadian operation were privileged against inquiry by this committee. We were just completely stymied on this matter which shows to what degree these newsprint people will go to resist any kind of inquiry. The newspapers, small and large are in the grip of these operators.

Mr. MATSUNAGA. The fact is, Mr. Chairman, there are many newspapers facing the dilemma of having to close down and the question is, what are the remedies available for the newspaper that is in dire financial straits today? The only feasible remedy which many newspapers have found is a joint operating arrangement with other failing

newspapers. In some cases the only practical solution has been actual merger or a complete unifying of operations. Newspapers in at least 22 cities have been forced into joint operating arrangements in order to survive.

These arrangements involve joint production, distribution, or advertising solicitation, but not joint editorial policies. Separate and independently owned newspapers can, under these arrangements, continue to serve the public, competing and operating as editorially distinct news sources as before, on a sound financial basis.

In Honolulu, the capital city of Hawaii, there are two leading dailies: one is a morning newspaper and the other is an afternoon newspaper. Each of the two newspapers has kept abreast with, and contributed in substantial measure to, the growth and progress of Hawaii. Each has a competent staff and independent editorial policies. News and editorial competition is friendly but keen between the two newspapers.

About 6 years ago the Honolulu Advertiser, the morning daily, found itself in dire financial straits. For survival it entered into a joint operating plan with the Honolulu Star-Bulletin, the afternoon newspaper. The ownership, editorial policies and staffs of the newspapers were unaffected by the joint operating plan, and has remained separate and independent. With the savings effected from the joint operating plan, the Advertiser has not only managed to survive, but it has also been able to nearly double its editorial budget, greatly enlarge its staff and news space, and considerably improve its service to the public. Finally, the two Honolulu dailies are now able to provide the public with, and I quote from a public statement by a leading labor leader in Hawaii, “far more sophisticated coverage, and in-depth material, than ever before."

It is apparent that the Advertiser could have followed one of two alternative courses, neither of which would have benefited the people of Hawaii. The first of these alternatives would have led the Advertiser to complete cessation of its operations and the liquidation of its assets to satisfy creditors. The other alternative would have resulted in a full merger and a single ownership of the two Honolulu dailies. Either of these less satisfactory alternatives would have left the public with a single editorial policy and without any news competition.

With the last hope for the survival of a failing newspaper may be through a merger, or joint operating arrangements, current antitrust and enforcement policy often severely inhibit these devices. Although the courts have sometimes approved mergers or acquisitions of certain "failing companies" the criterion applied is that the acquired company be virtually beyond salvage. When consideration is given to the special needs of newspapers and the public importance in preventing a further decrease in the number of newspapers, the criterion applied is questionable. Since the most important assets of a newspaper are its personnel and reputation, these may be lost as financial failure. approaches. By the time the newspaper is sufficiently in trouble to satisfy the present "failing company" doctrine, as it has been in cases of industrial companies, it may have little value as an acquisition by another newspaper.

This, I believe, will answer the question put by counsel earlier to Mr. Edmonson.