## Facts

- Citizen Publishing Company and Arizona Daily Star, Inc. published the only two daily general-circulation newspapers in Tucson, Arizona.
- After years of competition, the papers entered a long-term joint operating agreement (JOA) in 1940, later extended to 1990.
- The JOA preserved separate editorial and news departments but combined business functions through a jointly owned entity, Tucson Newspapers, Inc. (TNI), which handled circulation, advertising sales, and other business operations.
- The agreement required joint setting of subscription and advertising rates, pooled profits under an agreed formula, and barred the parties (and certain affiliated persons) from engaging in competing publishing businesses in the county.
- The combination ended business competition between the papers and coincided with a large increase in combined profits.
- In 1965, Citizen’s shareholders acquired the Star’s stock pursuant to an option contained in the agreement.
- The United States brought a civil action alleging violations of Sherman Act §§ 1 and 2 and Clayton Act § 7; the district court found § 1 per se violations, found monopolization after trial, found a § 7 violation, and ordered divestiture and modification of the JOA.

## Issues

1. Whether the JOA’s joint rate-setting, profit-pooling, and non-competition provisions constituted per se unlawful restraints of trade under Sherman Act § 1.
2. Whether the “failing company” doctrine justified the arrangement.
3. Whether the combination and conduct amounted to monopolization in violation of Sherman Act § 2.
4. Whether the stock acquisition substantially lessened competition in violation of Clayton Act § 7.
5. Whether the First Amendment insulated newspapers from antitrust enforcement for such an arrangement.

## Decision

- The Supreme Court affirmed the judgment against the newspaper defendants.
- The Court held the § 1 violations were clear: joint price setting is illegal per se; fixed-ratio profit pooling suppresses incentives to compete; and the non-competition covenant was an unlawful division of markets.
- The Court rejected the failing-company defense because the allegedly failing paper was not shown to be on the brink of failure or facing liquidation, and the arrangement was not shown to be the last available alternative.
- The Court sustained the findings of monopolization under § 2 and substantial lessening of competition under § 7.
- The Court held the First Amendment provides no exemption from generally applicable antitrust laws.
- The remedial decree requiring divestiture and removal of the anticompetitive JOA provisions was upheld.

## Legal Principles

- Agreements among direct competitors to fix prices are per se unlawful under Sherman Act § 1.
- Profit-pooling arrangements that allocate returns by inflexible formula can function as restraints by removing incentives to compete on price, output, or quality.
- Covenants that prevent competitors (and affiliated persons) from entering or operating in a market may constitute unlawful market division under § 1.
- The failing-company doctrine is narrow and requires proof that the firm faced imminent failure and that the challenged combination was essentially the only reasonable means to avoid liquidation.
- Media entities are subject to antitrust laws; the First Amendment does not immunize anticompetitive restraints affecting pricing and market structure.
- Structural remedies, including divestiture and modification of contractual restraints, are available to restore competition.

## Conclusion

The Court held that a newspaper joint operating agreement combining business operations through joint rate-setting, profit pooling, and a broad non-competition covenant violated federal antitrust laws, that the arrangement could not be saved by a failing-company justification, and that the First Amendment did not bar antitrust relief requiring divestiture and removal of the restraints.


Citizen Publ'g Co. v. United States, 394 U.S. 131 (1969)