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Judge throws out exclusivity lawsuit.

The longtime practice of providing newspapers with territorial exclusivity for syndicated features has withstood another legal challenge.

In a decision issued April 9 in Chicago, U.S. District Judge David H. Coar dismissed the lawsuit Paddock Publications, publisher of the Daily Herald in Arlington Heights, Ill., had pursued for more than two years against the Chicago Tribune, Chicago Sun-Times, and eight of the biggest syndicates and news services in the business.

Coar ruled that an amended lawsuit Paddock filed last November had the same flaw of the original suit filed in December 1993: Because the suburban Daily Herald does not claim that its big-city newspaper competitors conspired with each other and the syndicates in licensing syndicated features, it cannot allege that antitrust laws were violated.

The judge reaffirmed a ruling he made last October, when he dismissed the suit, but allowed Paddock to Me an amended complaint. At the time, Coar wrote that he agreed with a 1994 finding by a U.S. magistrate that the Daily Herald's suit was based on an "unusual" antitrust legal theory.

"The magistrate judge observed, and this court agrees, that Paddock's antitrust theory is atypical," Coar wrote then." Paddock does not challenge the legality of each individual exclusive licensing agreement between the Tribune, the Sun-Times and supplemental news services and syndicates; rather, it argues that the connective effect of these exclusive licensing agreements has inhibited its ability to compete with the Tribune and Sun-Times because the exclusive licensees deny it access to better quality supplemental news services and more popular features.

"The notion that lawful, non-collusive conduct by the Tribune added to law-ful, non-collusive conduct by the Sun-Times produces in the aggregate an unlawful effect requiring divestiture of otherwise legal exclusive agreements simply makes no sense," the judge added.

But an attorney for the Daily Herald, James T Malysiak, said the judge erroneously ignored case law - including a 1953 U.S. Supreme Court case - that has held such actions can constitute violations of antitrust law.

And Paddock's president and chief operating of ricer, Dam E. Baumann, said the" judge just threw it out on

"We didn't even get our day in court," he said." the judge just threw it out on technical grounds. We think we're owed our day in court."

Indeed, as recently as late March, the newspaper was asking the judge to put die case on a fast track and decide the lawsuit's merits quickly.

"This case is important not only for Paddock but also for the future of the newspaper industry and for the millions of newspaper consumers in the Chicago area," Malysiak wrote.

Perhaps fittingly for a case in which the Daily Herald was defeated at nearly every turn, the judge turned down the request for a prompt decision - and a few days later dismissed the suit.

Even its appeal is likely to be an uphill battle: The U.S. Seventh Circuit Court of Appeals is regarded as a generally pro-business court with justices, such as Frank Easterbrook and Richard Posner, who are notoriously inhospitable to antitrust claims".

Paddock's appeal win be filed by early May. If there are no long delays in the process, a decision could be reached by early or mid-1997, Malysiak said.

Managers of syndicated services sometimes portray territorial exclusivity as a kind of mixed blessing for them. But the syndicates fought the Paddock suit as aggressively as the Tribune and Sun-Times.

"We definitely did want to win this lawsuit,' said Al Leeds, who is president and editorial director of the Los Angeles Times-Washington Post News Service.

For its part, the Tribune said the result was not surprising. "We've said all along that what we do is perfectly lawful," Tribune attorney Dale Cohen stated.

As for the planned appeal, Cohen added,"Frankly we're mystified that they continue to pursue this matter."
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Title Annotation:Chicago, IL, US District Court
Author:Fitzgerald, Mark
Publication:Editor & Publisher
Date:Apr 27, 1996
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