they reason that, since newspapers in the JOA still need to publish separate editions and
maintain the look and feel of a newspaper in each of its editions, the actual consequence
may be that the two newspapers carry more advertising than a monopolist would. More-
over, since JOAs eventually end at some point, the assets of both newspapers will even-
tually be available for sale. Rather than force the weaker of two newspapers in a JOA to
disappear, it may be rational to have it remain a viable publication, in the hopes that a
future investor will acquire it, and this also requires that this newspaper carry sufficient
advertising. They estimate models of advertising rates for newspapers in 30 large cities
during 1989–1999. They find evidence that JOAs act as constrained, rather than uncon-
strained, monopolists while setting ad rates. Thus they conclude: “The loss of economic
competition inherent in the formation of a JOA may not have as serious a welfare effect as
is sometimes assumed.”
Bucklin et al. (1989) predict in their study of newspaper predation (discussed in
Section 9.2) that the monopolies in US central-city newspaper markets are inevitable.
They conclude, therefore: “little can be said against joint operating agreements that
preserve an independent editorial voice even if they do not preserve competition in
advertising.” By contrast,
Noam (2009) argues that JOAs have largely failed due to their
focus on the wrong side of the market; he argues that newspapers have far greater econ-
omies of scale in newsgathering, and on the content side more generally, than on the
advertising side.
9.6.3 Vertical Price Restrictions
Issues concerning resale price maintenance occur periodically in the newspaper industry.
Readers with an interest in antitrust economics will recall the case of Albrecht vs. The
Herald Co., decided in 1968 by the US Supreme Court. The Herald Co. was a newspaper
firm owning a number of periodicals including the Globe Democrat, published daily in
St. Louis. The company hired carriers to deliver newspapers to subscribers, giving these
carriers exclusive territories. The Globe Democrat printed its suggested retail price on the
cover.
11
One of the carriers hired by the Globe was Albrecht, which exploited its monopoly
carrier status among the 1200 subscribers in its territory, to charge a higher cover price
than the one suggested by the newspaper. The two firms ended up in court, and even-
tually the Supreme Court found in favor of Albrecht, ruling that the Herald’s efforts to
force a specific retail price amounted to price fixing in violation of the Sherman Act.
As economists would recognize, this situation was an excellent example of the double
marginalization problem and there are strong arguments to support the Herald company’s
position. Indeed the Supreme Court reversed its stand on the issue in a 1997 court case.
11
The material in this description is drawn from Albrecht v. The Herald Co., 390 U.S. 150 (1968), and
summarized in
Pepall et al. (2005).
432
Handbook of Media Economics
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