IN THE COURTS : High Court to Hear Newspaper Case : Justices Will Decide Whether Detroit Paper Was ‘Failing’

The Supreme Court agreed Monday to decide whether one of Detroit’s two daily newspapers is a “failing” enterprise that should be permitted to merge its business operations with its rival. The high court action likely will put off the long-delayed merger for at least another year.

The justices during the fall will review a decision by former Atty. Gen. Edwin Meese III granting the newspapers an exemption from the antitrust laws and allowing the merger of the newspapers’ business operations.

Overruling a magistrate who had heard the case, Meese concluded just before leaving office in August, 1988, that the Detroit Free Press qualified as failing--one of the conditions for newspaper mergers in such cases--since it was losing an estimated $10 million a year. Its parent corporation, Knight-Ridder Inc., had said it would shut down the newspaper if it was not permitted to merge some operations with those of the rival Detroit News.

But a group of readers, advertisers and union employees challenged the merger on grounds that the Free Press was not failing, but rather was generating losses as the result of an intense competition backed by multibillion-dollar media chains. Knight-Ridder and Gannett Co., which owns the News, are among the nation’s largest newspaper companies, they noted.

More Profits, Fewer Jobs

Under the Newspaper Preservation Act of 1970, newspapers that are failing financially may be permitted to merge their advertising and production operations while maintaining separate news and editorial staffs. These “joint operating agreements” have been justified on grounds that they prevent cities from being left with one monopoly newspaper.

A business merger of the two Detroit newspapers, first proposed three years ago, would immediately stem the flow of losses and would be expected to generate big profits for both companies. However, about 450 business and production workers could be expected to lose their jobs as a result and advertisers foresee an increase in ad costs under those circumstances.

“This process has been an extraordinary lesson in patience,” Free Press Publisher David Lawrence said in a prepared statement after the court’s announcement. “The people of the Free Press have already waited more than three years to assure this newspaper’s future.” Lawrence has contended throughout the legal battle that the fate of the Free Press rides on whether the merger gains approval.

William Schultz, a lawyer for the Public Citizen law firm representing those challenging the merger, said he is delighted the court has agreed to hear the appeal. Earlier, a federal appellate court in Washington, on a 5-4 vote, had refused to overturn Meese’s order, and in March, the justices refused to act on a preliminary appeal seeking to block the merger. Schultz said the case gives the court its first opportunity to determine what the 1970 law meant by a “failing” newspaper.

In agreeing to hear the case (Michigan Citizens vs. Thornburgh, 88-1640) on Monday, at least four of the nine justices must have concluded in their closed-door deliberations that Meese’s action had raised a troubling issue of federal law.

For the last decade, the Detroit newspapers have been engaged in a bruising battle for circulation and advertising. As of Sept. 30, 1988, the morning Free Press had a daily circulation of 629,065, while the News--which has morning and evening editions--averages 677,385 a day in circulation.