By Lukas I. Alpert and Keach Hagey
When Doug Reynolds bought the largest paper in West Virginia out
of bankruptcy in 2018, he knew he would have to fight hard to save
a business hammered by a dramatic shift of readers and advertising
online.
That fight just got a lot bigger.
Last week, his company, HD Media LLC, filed a federal antitrust
lawsuit against Alphabet Inc.'s Google and Facebook Inc., claiming
they are manipulating the digital-advertising market, making it
difficult for his paper, the Charleston Gazette-Mail, and others to
survive.
The lawsuit is the first of its kind filed by a news outlet,
according to the News Media Alliance trade group. It follows years
of complaints by industry executives that the so-called digital
duopoly has siphoned away their ad revenue and taken ever more
control over news organizations' ability to reach their
audience.
"These companies are more powerful than Standard Oil in its
heyday, so no one wants to be the first to take them on," Mr.
Reynolds said in an interview, referring to the company founded by
John D. Rockefeller that was one of the first monopolies broken up
by the U.S. government. "We felt the political and legal climate
have moved in our favor and are ready to go ahead."
The suit, which was filed in the U.S. District Court for the
Southern District of West Virginia, comes on the tails of similar
antitrust suits filed late last year by the U.S. Justice Department
and the attorneys general of dozens of states.
A Google spokeswoman declined to address the West Virginia suit,
but pointed to the company's response to a similar case filed by
the Texas attorney general, which called claims about a deal
between Google and Facebook misleading and denied rigging the ad
market. A spokesman for Facebook declined to comment.
Mr. Reynolds, 44, the president of a pipeline-services company
as well as an attorney and a former state legislator, already owned
several papers in West Virginia when HD Media bought the Charleston
Gazette-Mail out of bankruptcy for $11.5 million in 2018. A year
earlier, the paper had won the Pulitzer Prize for investigative
reporting for articles examining the distribution of prescription
opioids in the state.
In its first year under new ownership, the Gazette-Mail doubled
digital subscribers to around 4,500 and created several podcasts.
Still, the publication -- whose daily print circulation was around
33,000 in 2017, the last year it was independently audited --
remained highly reliant on dwindling advertising dollars. The paper
cut back its comics and editorial pages and eliminated some staff,
while letting vacancies go unfilled.
The company wouldn't disclose its recent financial performance,
but the lead lawyer on the suit, Paul Farrell, said its digital
advertising revenue has fallen even as its digital audience has
grown. "That dynamic is core to what this is all about," he said.
He said HD Media's revenue declines accelerated as a result of the
coronavirus pandemic.
Based in West Virginia's capital, the Charleston paper traces
its roots back to 1873. Its current incarnation resulted from the
combination of two publications -- the Gazette and the Daily Mail
-- in 2004. That sale triggered a Justice Department antitrust suit
which was resolved when the papers' owner, the Chilton family,
agreed to transfer some intellectual-property and oversight rights
to the Mail's prior owner, MediaNews Group Inc.
As the paper's financial situation eroded, the Chiltons merged
the two papers in 2015 and sold dailymail.com to Britain's the
Daily Mail for $1.5 million to pay off debt. MediaNews sued, saying
the moves had been done without its consent, and an arbitrator
ordered the Gazette-Mail to pay $4 million in damages. The paper
said the ruling helped knock it into bankruptcy.
"Newspapers have had to operate under strict antitrust
regulations for decades," Mr. Reynolds said, a standard he argues
hasn't been applied to Facebook and Google. He said both companies
were allowed to buy up dozens of competitors, amassing control of
the online advertising ecosystem with little to no regulatory
oversight.
Mr. Reynolds said he has spoken to other publishers and expects
some will eventually join the suit. David Chavern, the president of
the News Media Alliance, said he believed it could be expanded into
other content businesses.
Many allegations in the West Virginia suit echo the government
suits, notably one led by the Texas attorney general. That suit
alleged that Google runs an illegal digital advertising monopoly
through its domination of the technology that connects publishers
to advertisers online. It further alleged that Google and Facebook
colluded to rig digital ad markets through an agreement nicknamed
"Jedi Blue."
Google and Facebook have denied the allegations.
Some of the West Virginia suit's allegations are more specific
to newspapers, such as a charge that Google's search and news
functions had become a "monopolistic intermediary" between
newspapers and their online readers.
For his suit, Mr. Reynolds -- the scion of a powerful West
Virginia industrial and banking family -- has assembled a group of
lawyers with deep experience taking on big corporations.
Mr. Farrell, the lead attorney in the case, is a principal
lawyer in the national prescription-opioid lawsuit representing
2,400 communities against the pharmaceutical industry. Another
lawyer, Paul Geller, settled a class-action privacy lawsuit with
Facebook last year for $550 million. A third lawyer, Clayton
Fitzsimmons, helped secure a $2 million disability settlement from
the National Football League for the estate of former Pittsburgh
Steelers star Mike Webster in the league's first payout for
traumatic brain injuries. The league later reached a $1 billion
settlement with hundreds of similarly injured players.
"Doug Reynolds has pledged his family fortune to save the
newspaper industry in the state of West Virginia and we intend to
help him see that through," Mr. Farrell said.
The lawyers are working on contingency, so will front the costs
and only be paid if they win. The case awaits responses from Google
and Facebook and a decision by the judge on whether to proceed.
Write to Lukas I. Alpert at lukas.alpert@wsj.com and Keach Hagey
at keach.hagey@wsj.com
(END) Dow Jones Newswires
February 04, 2021 11:06 ET (16:06 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Alphabet (NASDAQ:GOOG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Alphabet (NASDAQ:GOOG)
Historical Stock Chart
From Jul 2023 to Jul 2024