UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

UNITED STATES OF AMERICA;

Plaintiff

vs.

NAT, L. C., and, D.R. PARTNERS d/b/a/ DONREY MEDIA GROUP;

Defendants.

Civil Action No.: [filed 28 March 1995, Case number 95-5048]

COMPLAINT

The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain equitable and other relief against the defendants named and alleges as follows:

1.	The United States brings this antitrust case to prevent the only two local daily newspapers serving the cities of Fayetteville and Springdale, the Morning News of Northwest Arkansas and the Northwest Arkansas Times, from being combined under substantially common ownership and control. These two newspapers are each other's primary competitor in the sale of local daily newspapers to readers and in the sale of local advertising in such newspapers.

2.	If the combination of these two daily newspapers were permitted, the previous vigorous competition for readers of local daily newspapers would be

substantially reduced or eliminated and newspaper readers in the Fayetteville metropolitan area would be likely to pay higher prices and to receive lower levels of quality and service.

3.	In addition, the combination of these two daily newspapers would substantially reduce or eliminate competition for local advertising in local daily newspapers in the Fayetteville metropolitan area and local advertisers would be likely to pay higher prices and to receive lower levels of quality and service for their advertisements.

JURISDICTION, VENUE, AND DEFENDANTS

4.	This Complaint is filed and this action is instituted under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, and Section 4 of the Sherman Antitrust Act, 15 U.S.C. § 4, to prevent and restrain defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1337.

5.	NAT, L.C., an Arkansas corporation, was formed for the purpose of acquiring the assets of the Northwest Arkansas Times ("Times") from Thomson Corporation. On February 6, 1995, NAT, L.C., acquired all of the assets of the Times. NAT, L.C., transacts business, maintains offices, and is found in the Western District of Arkansas.

6.	D.R. Partners is a Nevada partnership. D.R. Partners, through Donrey Media Group, owns The Morning News of Northwest Arkansas ("Morning News"). D.R. Partners transacts business, maintains offices, and is found in the Western District of Arkansas.

7.	The defendants are both engaged in interstate commerce and in activities substantially affecting interstate commerce. The defendants purchase substantial quantities of news and feature services, equipment, and supplies, including newsprint, for use in their respective businesses from sources located outside of Arkansas.

TRADE AND COMMERCE

8.	Local daily newspapers sell two products (services) to two sets of customers. To readers, they sell daily newspapers. To advertisers, they sell access to their readers. Each of these products constitutes a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act.

9.	The Fayetteville metropolitan area, which consists of the cities of Fayetteville and Springdale, Arkansas, is a section of the country, or relevant geographic market, within the meaning of Section 7 of the Clayton Act.

10.	Local daily newspapers provide a unique package of services to their readers. They provide national, state, and local news in a timely manner. The news stories are detailed, as compared to the news as reported by radio or television, and the daily paper covers a wide range of stories of interest to local readers, not just major news highlights. Newspapers are portable and allow the reader to read the news, advertisements, and other information at his or her own convenience. Readers also value other features of local daily newspapers, such as calendars of local events and meetings, movie and TV listings, classified advertisements, commercial advertisements, legal notices, comics, syndicated columns, and obituaries. Readers of local daily newspapers do not consider weekly newspapers, radio news, or television news to be adequate substitutes for local daily newspapers. Accordingly, if the price of previously competing local daily newspapers were increased, significant numbers of readers would not switch to other sources of local news and information, such as weekly newspapers and radio and television news.

11.	Advertising in the Morning News or the Times allows local advertisers to reach a broad cross-section of consumers in the Fayetteville metropolitan area with a detailed message in a timely manner. A substantial portion of local advertisers do not consider other types of advertising, such as advertising in weekly newspapers, on radio, or on television, as adequate substitutes for advertising in a local daily newspaper. Thus, if the price of previously competitive daily newspaper local advertising were increased, significant numbers of local advertisers would not substitute these other types of advertising for advertising in a local daily newspaper.

12.	The Morning News and the Times are each other's primary competitor in the sale of local daily newspapers in the Fayetteville metropolitan area. These two papers are the only local daily newspapers with significant circulation in that area. Both papers cover local news in Fayetteville and Springdale. The two papers have competed aggressively for readers. This competition has been instrumental in giving readers in the Fayetteville metropolitan area higher quality, better service, and lower prices. A combination of these two newspapers under substantially common ownership and control would substantially reduce or eliminate that competition and would decrease incentives to maintain high levels of quality and service and to keep prices low. The readers of both papers would be harmed.

13.	A newspaper's ability to attract readers and build its circulation is not only critical to competition for readers; it also directly affects its ability to compete for advertisers. A newspaper that has more readers is more attractive and more valuable to advertisers. Thus, one important reason that the Morning News and the Times compete for readers is so that they can better compete for advertisers.

14.	The Times and the Morning News are the only local daily newspapers with significant circulation in the Fayetteville metropolitan area. The figures below, measuring circulation in the Fayetteville metropolitan area, are cumulative figures for the four zip codes which cover Fayetteville and almost all of Springdale (as well as some areas outside the cities): 72701, 72703, 72762, and 72764. These four zip codes represent the best available measure of circulation in the Fayetteville metropolitan area. Based on audited figures for daily circulation for the year ending September 30, 1994, the Times had a daily circulation of 9,863 and the Morning News had a daily circulation of 14,122. Based on audited figures for Sunday circulation for the year ending September 30, 1994, the Times had a Sunday circulation of 9,156 and the Morning News had a Sunday circulation of 15,206. If the two papers combine under substantially common ownership and control, the combined entity will have virtually 100 percent of the sales of local daily newspapers to readers, both daily and Sunday, in the Fayetteville metropolitan area. Even if a larger area were considered to be the relevant geographic market for circulation, such as an area including Rogers, the transaction would nonetheless increase concentration significantly and would be anticompetitive.

15.	Some other daily newspapers circulate in the Fayetteville metropolitan area. The Arkansas Democrat-Gazette ("Democrat-Gazette"), a daily newspaper based in Little Rock, Arkansas, also has subscribers in the Fayetteville metropolitan area. The Democrat-Gazette had a daily circulation of 3260 and Sunday circulation of 4795 in the Fayetteville metropolitan area for the year ending March 31, 1994. Although it does not provide as much local news and information to newspaper readers in the Fayetteville metropolitan area as the Morning News and the Times, the Democrat-Gazette provides greater regional and national coverage. In addition, two other daily newspapers had some circulation in the Fayetteville metropolitan area in the year ending March 14, 1994. The Tulsa World had daily circulation of 640 and Sunday circulation of 807 and USA Today had daily circulation of 832. Even if all of these daily newspapers are included in the market, the combined entity would control about 84 percent of the sales of daily newspapers and 81 percent of the sales of Sunday editions of daily newspapers to readers in the Fayetteville metropolitan area -- a substantial increase in concentration in what is already a highly concentrated market. Using a measure of market concentration called the HHI, defined and explained in Appendix A, the combination of the previously competing Morning News and Times under substantially common ownership and control would increase the HHI, based on daily circulation, by about 3378 points from 3740 to 7118, and would increase the HHI, based on Sunday circulation of daily newspapers, by about 3102 points from 3772 to 6874.

16.	The Morning News and the Times are each other's primary competitor in the sale of daily newspaper local advertising. The two papers compete aggressively for the business of local advertisers. The Morning News and the Times also compete for advertisers by competing for readers. This competition for advertisers has resulted in lower advertising rates and better service to local advertisers. Consequently, a combination of these two daily newspapers under substantially common ownership or control would substantially reduce or eliminate that competition and decrease incentives to maintain high levels of service and to keep advertising rates low. Local advertisers in the Fayetteville metropolitan area would suffer from the loss of competition.

17.	A newspaper's ability to attract advertisers is not only critical to competition for local advertising; it also directly affects its ability to compete for readers. A newspaper that has more advertisers is more attractive and more valuable to readers. Thus, one important reason that the Morning News and the Times compete for local advertisers is so that they can better compete for readers.

18.	In 1994, the Times had total local advertising revenues (including local display ads, classified ads, and legal ads) of $3,564,305. The Morning News had total local advertising revenues of $6,530,567. A large percentage of this advertising revenue comes from advertisers seeking readers in the Fayetteville metropolitan area; approximately 75% of the Times' readership and 46% of the Morning News' readership are located in this area. If the two papers combine under substantially common ownership and control, the combined entity will control all of the daily newspaper local advertising aimed at residents in the Fayetteville metropolitan area.

19.	The Morning News and the Times are under substantially common ownership and control. The Morning News is owned by D.R. Partners, a Nevada general partnership doing business as Donrey Media Group. D.R. Partners is owned 99 percent by Stephens Group, Inc., ("Stephens Group") and one percent by Stephens Holding, Inc. According to its Partnership Agreement, management of D.R. Partners is exclusively vested in Stephens Group. The Class A Common Stock of Stephens Group, which is the voting stock, is owned by four Stephens family trusts: J.T. Stephens Trust One, Bess Stephens Trust, Warren A. Stephens Trust, and a trust benefitting Wilton R. Stephens. The Class B Common Stock of Stephens Group, which is the non-voting stock, is also owned by a number of Stephens family trusts, including the same four Stephens family trusts listed above, as well as the Pamela Stephens Rose Trust One, Elizabeth Ann Stephens Campbell Revocable Trust, and Warren A. Stephens Trust No. One. Ninety-five percent of NAT, L.C., which owns the Times, is also owned by several Stephens family trusts, all of which also own stock in Stephens Group.

20.	Entry into the local daily newspaper market in the Fayetteville metropolitan area would not be timely, likely, or sufficient to prevent any harm to competition.

VIOLATIONS ALLEGED

21.	Pursuant to an Asset Purchase Agreement, dated February 6, 1995, NAT, L.C. acquired substantially all the assets of the Times from Thomson Corporation. As a result of this transaction, the Morning News and the Times are under substantially common ownership and control.

22.	This combination is likely substantially to lessen competition and unreasonably to restrain trade both in the market for local daily newspapers and in the market for local advertising in such newspapers in the Fayetteville metropolitan area, in violation of Section 7 of the Clayton Act and Section 1 of the Sherman Antitrust Act.

23.	The combination will have the following effects, among others:

a.	actual and potential competition between the Morning News and the Times in the sale of local daily newspapers in the Fayetteville metropolitan area will be substantially reduced or eliminated;

b.	actual and potential competition between the Morning News and the Times in the sale of daily newspaper local advertising in the Fayetteville metropolitan area will be substantially reduced or eliminated;

c.	competition generally in the sale of local daily newspapers in the Fayetteville metropolitan area is likely to be substantially lessened; and

d.	competition generally in the sale of daily newspaper local advertising in the Fayetteville metropolitan area is likely to be substantially lessened.

REQUEST FOR RELIEF

Plaintiff requests a judgment:

1.	That the acquisition of the Times by NAT, L.C., and the substantially common ownership and control of the Times by NAT, L.C. and the Morning News by Stephens Group, and the resulting indirect acquisition of the Times by D.R. Partners, be adjudged a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1;

2.	That the Court's preliminary injunction be continued until such time as the defendant, NAT, L.C., divests itself of the assets of the Times;

3.	That NAT, L.C. be required to divest itself of these assets within two months after the date of the Court's Order, and further that:

a.	pending sale, the assets be put under the control of an independent trustee, who is given the power and incentive to maintain the value and competitive viability of the assets, and

b.	that this trustee be directed to sell the assets to a person that is competitively suitable and capable of managing the Times effectively and is not affiliated in any way with Stephens Group, with any Stephens family member or any trust, partnership, or corporation or entity with which a Stephens family member is affiliated, or affiliated in any way with D.R. Partners or with any trust, partnership, corporation, or entity with which D.R. Partners is affiliated;

4.	That plaintiff have such other relief as the Court may deem proper; and

5.	That plaintiff recover the costs of this action.

Anne K. Bingaman	Craig W. Conrath

Assistant Attorney General	Chief, Merger Task Force

Constance K. Robinson	Allee A. Ramadhan

Director of Operations	Phillip R. Malone

Burney P.C. Huber

Nora W. Terres

Anne M. Purcell

Alexander Y. Thomas

Brigid L. Kerrigan

Attorneys

U.S. Department of Justice

1401 H St., N.W.

Washington, DC 20530

(202) 307-5779

Dated: _____________________

Appendix A

"HHI" means the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, a market consisting of four firms with market shares of 30, 30, 20, and 20 percent, has an HHI of 2,600 (30 squared + 30 squared + 20 squared + 20 squared = 2,600). The HHI, which takes into account the number and size distribution of the firms in the market, ranges from virtually zero to 10,000. The index approaches zero when a market consists of a large number of firms of relatively equal size. The index increases as the number of firms in the market decreases and may also increase as the disparity in size between the leading firms and the remaining firms increases. Thus, a market of two firms with shares of 60 and 40 percent would have an HHI of 5200 (60 squared + 40 squared = 3600 + 1600 = 5200).

The Department of Justice and Federal Trade Commission 1992 Horizontal Merger Guidelines consider that markets in which the HHI is between 1000 and 1800 are moderately concentrated and those in which the HHI is in excess of 1800 points are concentrated. Transactions that increase the HHI by more than 100 points in moderately concentrated and concentrated markets presumptively raise antitrust concerns under the Merger Guidelines.

5.	That plaintiff recover the costs of this action.

/s/	/s/

__________________________	___________________________

P.K. Holmes, III	Anne K. Bingaman

United States Attorney	Assistant Attorney General

Western District of Arkansas	/s/

6th and Rogers, Room 216	___________________________

P.O. Box 1524	Constance K. Robinson

Fort Smith, Arkansas 72902	Director of Operations

/s/	Craig W. Conrath

Chief, Merger Task Force

Allee A. Ramadhan

Phillip R. Malone

Burney P.C. Huber

Nora W. Terres

Anne M. Purcell

Alexander Y. Thomas

Brigid L. Kerrigan

Attorneys

U.S. Department of Justice

1401 H St., N.W.

Washington, DC 20530

(202) 307-5779

[March 28, 1995]

Dated: _____________________

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