Tie Vote Allows Merger of Detroit Papers : Media: The Supreme Court splits 4-4 on letting the two dailies combine business operations. But the larger antitrust issue remains unsettled.

The Supreme Court, on a tie vote, cleared the way Monday for Detroit’s two daily newspapers to merge their business operations. But the justices left open the pivotal question of what conditions justify giving newspapers a virtual business monopoly.

As a practical matter, the high court action ends a 13-year-old newspaper war in the nation’s sixth-largest metropolitan area and permits the Detroit Free Press and the Detroit News to share their business, printing and advertising operations. The two papers will retain independent news and editorial page staffs.

As a legal matter, however, the court was unable to define the point at which two closely matched and money-losing papers can be offered relief from competition under the 1970 Newspaper Preservation Act. Because the justices were deadlocked 4-4, they issued only a one-line order affirming an appeals court ruling approving the Detroit merger.

The 1970 law created an exemption from the nation’s antitrust laws to save competing newspapers. If one paper is in “probable danger” of “failing,” according to the law, it can ask the Justice Department for a “joint operating agreement” with its competitor.

But according to critics, the law, instead of preserving real competition, is actually permitting large media corporations to create business monopolies.

The two Detroit papers, now subsidiaries of the nation’s two largest newspaper chains, cut their prices and advertising rates in 1976 and then ran up huge losses. Between 1979 and 1986, the Detroit Free Press, a Knight-Ridder paper, said it had lost $81 million, and its directors sought relief under the 1970 law. If the Free Press were not permitted a partial merger with the News, Knight-Ridder officials threatened to shut down their paper.

But a group of Detroit-area advertisers and union workers who challenged the newspaper merger contended that the Free Press essentially manufactured its losses, with the intent of gaining a monopoly. As they saw it, Knight-Ridder pursued a fail-safe strategy. If it could force the then independently owned Detroit News to fold, its paper would have the market to itself. If not, it could then ask the government for the JOA, which creates an advertising monopoly for the two papers. Last year, Knight-Ridder officials refused to talk to William McMaster, a Michigan investor, who said he wanted to buy the Free Press and continue its independent operation.

On Monday, four members of the Supreme Court voted to uphold last year’s decision by former Atty. Gen. Edwin Meese III approving the JOA in Detroit. Four other justices voted to overturn Meese and block the merger. A deadlock was created when Justice Byron R. White bowed out of the case for what he said were “personal reasons.”

In February, a federal appeals court in Washington, on 5-4 vote, had ruled in Meese’s favor, and the Supreme Court’s action Monday upholds that ruling. The court did not say how the justices voted.

Not surprisingly, the court’s 4-4 split brought differing interpretations.

Edward J. Atorino, a newspaper analyst with Salomon Bros., said the court decision means that a JOA “is still a viable out for the newspaper business to save a competing voice in the market.”

But Washington lawyer William Schultz, who represented those who challenged the Detroit JOA, said the close vote in the high court “sends a strong signal for newspapers to think twice” before seeking relief from competition. “It’s our hope this will be enough to keep newspapers competing on their own,” said Schultz. He added that he may file a petition seeking a rehearing by the justices, but such petitions are rarely granted.

Under a JOA, the two newspapers not only save money on printing and other business operations, but they can afford to charge more for subscriptions and advertising. In Detroit, the JOA is expected to convert what had been annual losses of $10 million a year for both papers into an estimated $100-million-a-year profit to be shared by the two companies.

The Justice Department says 23 cities, including San Francisco and Seattle, have newspapers operating under JOAs, but Detroit is the largest.