Where There's Smoke....

There's fire....:

The newspaper world has temporarily diverted its gaze from its collective navel to Rosemont, Ill. That's where, reports James Warren in the Atlantic, top executives from major papers have gathered to plot the future of their business. Machers from, among others, the New York Times, Gannett, E.W. Scripps, Advance Publications, McClatchy, Hearst Newspapers, MediaNews Group, the Associated Press, Philadelphia Media Holdings, Lee Enterprises, and Freedom Communication Inc. were scheduled to gather for a "discreet" "discussion about content models," including the possibility of charging for Web content. This comes barely a month after a similar meeting in San Diego, where CEOs at the "Newspaper Association of America convention [held] a clandestine meeting to discuss, among other topics, whether and how to start charging readers to view articles and other content online."

...Warren likens the Rosemont confab to the Yalta conference or, perhaps, the infamous 1957 mob summit in Apalachin, N.Y. But if the news honchos aren't very, very careful, the more apt analogy may be a 1994 meeting in a Hawaii hotel room at which representatives of agricultural-products giants gathered under the guise of a trade-association meeting to fix prices for a chemical called lysine—a story that ended up with federal criminal convictions and Archer Daniels Midland and others paying hundreds of millions of dollars in fines (not to mention a movie starring Matt Damon).

Antitrust law is complicated, but one principle is very simple: Competitors cannot get together and agree on price or the terms on which they will offer their services to their customers. It doesn't matter if the industry is ailing or if collusion would be "good" for society or necessary to preserve democracy. An agreement regarding pricing is "per se"—automatically—illegal under Section 1 of the Sherman Act, the main federal antitrust law.

All but a few newspapers currently give away their Web content for free. Many would like to start charging but are afraid that if they're the first to make the leap, their readers will abandon them for the remaining free alternatives. One obvious solution would be for them to agree to make a collective leap behind a pay wall.

But such an agreement would be blatantly illegal, says Kenneth Ewing, a partner at Steptoe & Johnson who, as head of his firm's antitrust practice, advises corporations on how to stay out of trouble. "It's Antitrust 101. If you're a competitor of another company, you violate federal and state law if you agree on the price or the general terms on which you are willing to compete."

...And Ewing and Blecher—who both stressed that they don't know the specifics of what newspaper execs have discussed and who aren't accusing them of wrongdoing—certainly aren't the first to recognize the risks of chumminess among competitors. In The Wealth of Nations, Adam Smith himself warned, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

In fact it's the "merriment and diversion" component of meetings that can be the most perilous, says Blecher. The biggest danger isn't what goes on in the official meetings, where lawyers "make sure everything is lily white and virgin pure," he said. But "we don't know what happens when they go out to dinner."

Of course, newspaper execs will never admit that they have collectively decided to start charging. But what if, one by one, over the next few months, each of them "independently" announces a new online subscription plan? Is that enough to send plaintiffs racing to the courthouse seeking treble damages?