Citizen Publishing Co. v. United States

Before 1940, the City of Tucson, Arizona, had two major daily newspapers, the Star and the Citizen, which competed against each other aggressively. Of the two newspapers, the Star was more successful in attracting advertising revenue, while the Citizen (defendant) generally ran a deficit. In 1936, the Citizen came under new ownership. One of the new owners moved to Tucson and was ready to invest resources to keep the Citizen afloat while attempting to make the Citizen more competitive. At no time did the new owners appear to contemplate selling the Citizen or obtain a market appraisal of the Citizen’s value. In 1940, the Citizen reached an agreement with the Star to merge certain components of their respective operations. Under the agreement, both the Citizen and the Star would continue to operate, but their manufacturing and printing processes would be consolidated and their profits would be shared equally. A corporation, Tucson Newspapers, Inc., was formed to manage the joint enterprise. The stated intent of the merger was to end competition between the Citizen and the Star through a combination of fixed pricing, profit sharing, and prohibition of competition. After the merger, profits for both newspapers skyrocketed over the next 24 years. Eventually, the United States (plaintiff) brought an action against the Citizen and the Star for violating § 7 of the Clayton Act. At trial, the only defense presented by the Citizen was the failing-company doctrine. The district court held that the doctrine did not apply and found the Citizen liable for an antitrust violation. The Citizen appealed the decision.