Business

Two deaths in the family

Doug Fetherling September 8 1980
Business

Two deaths in the family

Doug Fetherling September 8 1980

Two deaths in the family

When Al Capone and Bugs Moran promised not to trespass on each other’s bootlegging territory, it was the last straw. Yet last week when Canada’s two largest newspaper chains reached a similar accord, the outcry, though loud, was impotent. What happened, in effect, in one of the most significant financial whammies of recent years, was two deals. For $57.4 million, Thomson Newspapers Ltd. surrendered the Vancouver market. Simultaneously, it reached a non-monetary gentleman’s agreement with Southam Inc. whereby Thomson bagged Winnipeg and Southam bagged Ottawa after each put its money-losing papers to the sword.

The reaction of newsmen, some politicians and the public was predictable— and predictably in vain. The whole affair raised anew some thorny questions in the publishing business. Does a proprietor have the moral right to kill an

institution simply because it isn’t profitable ( the Ottawa Journal, said Kenneth Thomson, in a twist of his father’s crack about Scottish television, was “a licence to lose money.”) And does the government have an obligation to prevent such shutdowns if they eliminate competition? As the newspaper business took its worst body-blow in many years, the controversy began to centre on Canada’s mealymouthed and ineffectual Combines Investigation Act.

“We’ve informed the Combines people in Ottawa of the situation,” said Southam chief St. Clair Balfour last week, hours after watching the Ottawa Journal die, buying the opposition Vancouver Sun and terminating his own Winnipeg Tribune. “We feel we’ve done the right thing.” He was referring to an 8 a.m. meeting between lawyers for

Southam and Thomson and Robert J. Bertrand, head of the combines investigation squad in the federal ministry of consumer and corporate affairs. Later, some members of the cabinet promised an investigation, perhaps even an inquiry (said Multicultural Minister Jim Fleming: “If it isn’t illegal, it should be”), and an NDP spokesman suggested upping the ante to royal commission status.

But in truth, observers agree, nothing much is likely to be done. The reasons are two. The first is the weight of precedent. In 1971, the act was powerless when The Toronto Telegram imploded, giving an afternoon monopoly to the rival Toronto Star, and in 1976 the authorities failed to make stick a conviction against the K. C. Irving interests, which control all but one of New Brunswick’s English-language daily papers. The second is the fact that, as

many people believe, the anti-combines legislation poses no threat to monopolists anyway because it acts as little more than a whitewash.

At bottom, it is another manifestation of the otherwise laudable Canadian desire to counter the influence of the United States. Since the early years of the republic, and particularly since the administration of Theodore Roosevelt, the U.S. has maintained a consistent aversion to “trusts” or near-trusts. In July, 1970, for instance, a special act of Congress—the Newspaper Preservation Act—had to be passed to exempt newspapers that had set up joint housekeeping together in one plant from anti-trust laws. The two Vancouver dailies had shared their facilities without any prior permission whatever. If the U.S. veers to this one extreme,

then Canada veers to the other. To be actionable under Canadian law, a deal must inhibit competition “unduly” as well as being deemed against “the public interest,” and such terms are open to flexible interpretation. Throughout it all, one thing seems certain: Kenneth Thomson, though he lost two dailies last Wednesday, ended up showing an overall gain of one paper for the day. As events were unfolding in Ottawa, Winnipeg, Vancouver and Toronto, Thomson men in the U.S., accompanied by batteries of high-priced anti-trust lawyers from New York and Washington, were concluding the long, drawn-out purchase of three newspaper properties in Michigan.

When the smoke cleared, the job of assessing the changes began. The London Free Press, one of the dwindling number of independent papers, was typical in its eulogy: “The closings are regrettable, but inevitable. For these Ca-' nadian cities, there will no longer be a plurality of views in the daily print media.” Other damage was more quantifiable. The loss of two major customers was another headache for the newsprint sector of Canada’s pulp and paper industry, already troubled by labor strife, technological backwardness and increasingly resourceful competition from the U.S. Sun Belt. And what’s bad for paper is perforce bad for Canada’s railways, which traditionally have made up in hauling newsprint what they lose by hauling grain. The close-outs also augur badly for The Canadian Press, the co-operative wire service (already $450,000 over budget for the year, it will lose another half million because the Journal and the Tribune won’t be buying its copy anymore). Yet in a way the greatest upset was one of image.

After Kenneth Thomson purchased the Hudson’s Bay Company in 1979 (the Bay had already swallowed the Robert Simpson Co.), there were private and public mutterings about his acquiring more power in the Canadian economy than perhaps any single person should possess. The chorus was repeated when he later bought the original FP newspapers. But the majority opinion still seemed to be that his sense of responsibility, which everyone recognized, would outweigh the temptation to conduct business in a manner uncongenial to the widely perceived public good. But after Black Wednesday there was, to careful listeners, a distinct change in the tone of the vox populi. Whatever harm was done to 800 newspaper employees thrown out of work, the wear and tear on Thomson himself may ultimately prove more serious. For most people in the industry as for many outside, Thomson had lost his nice-guy image. Doug Fetherling