Department of Justice Statement on the Closing of its Investigation Into the Possible Acquisition of Chicago Sun-Times by Owner of Chicago Tribune
Public Sale Process Resulted in Alternative Buyer of the Chicago Sun-Times
The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigation into the possible acquisition of the Chicago Sun-Times by tronc Inc., the owner of the Chicago Tribune:
On May 15, 2017, the Antitrust Division announced that it was investigating the possible acquisition of the Chicago Sun-Times by tronc because the merger of the two daily newspapers in Chicago would raise significant antitrust concerns.
The Division’s investigation focused on whether the Chicago Sun-Times was a failing company under the Department of Justice/Federal Trade Commission Horizontal Merger Guidelines, which provide that a transaction is not likely to be anticompetitive if the assets of one of the firms would otherwise exit the market. One of the conditions required to be met in order to establish the “failing firm” defense is that the failing firm “has made unsuccessful good-faith efforts to elicit reasonable alternative offers that would keep its tangible and intangible assets in the relevant market and pose a less severe danger to competition than does the proposed merger.” Horizontal Merger Guidelines at § 11. Because this condition may not be satisfied by a confidential sale effort, a seller may choose to undertake a public sale process to augment its effort to elicit reasonable alternative offers.
In this case, Wrapports LLC, the owner of the Chicago Sun-Times, launched a public sale process on May 16, 2017, which the Division monitored closely. This process resulted in Wrapports selling the Chicago Sun-Times to an alternative buyer, ST Acquisition Holdings LLC, which does not currently own an interest in any other newspaper. As a result, the Division will be closing its investigation of the possible acquisition of the Chicago Sun-Times by tronc.
The Division notes that some transactions that rely on a failing firm defense may not be reportable under the Hart-Scott-Rodino Act. Division encourages firms whose non-reportable transaction relies on a failing firm defense to: (i) inform the Division about the proposed transaction prior to consummation; (ii) allow for sufficient time for the Division to conduct a thorough investigation, which may decrease the possibility of a precipitous enforcement action; and (iii) plan in advance for the costs of undergoing such an investigation. At the same time, when voluntarily notified of such a transaction, the Division endeavors to conduct its investigation expeditiously under the circumstances. Here, Wrapports helpfully notified the Division of the Letter of Intent that it had entered into with tronc, which enabled the Division to open its investigation and monitor the public sale process.
The Antitrust Division is the agency responsible for investigating mergers involving newspapers.
Tronc is a Delaware corporation headquartered in Chicago. It publishes major daily newspapers across California, Illinois, Florida, Maryland, Connecticut, Virginia and Pennsylvania. Wrapports is a privately-held Delaware limited liability company based in Chicago. ST Acquisition Holdings is a privately-held Delaware limited liability company based in Chicago.
The Antitrust Division’s Closing Statement Policy
The Division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the Division’s obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the Division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly broad conclusions regarding how the Division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the Division in any future enforcement actions. Guidance on the division's policy regarding closing statements is available at www.justice.gov/atr/public/closing/index.html.