PRESS

The case against the media giants

Ian Austen October 3 1983
PRESS

The case against the media giants

Ian Austen October 3 1983

The case against the media giants

PRESS

Ian Austen

Seven thick black binders are the focus of attention in a Toronto courtroom. Between their covers are 230 confidential documents that federal combines investigators seized from the filing cabinets and waste-baskets of Canada’s two media giants, Thomson Newspapers Ltd. and Southam Inc., in raids in September, 1980. The papers are Crown counsel Claude Thomson’s main ammunition in his bid to prove that the two newspaper chains participated in an unlawful conspiracy that ultimately wiped out newspaper competition in four Canadian cities and eliminated some 1,745 jobs in the process. The trial, on monopoly charges under the federal Combines Investigation Act, will likely continue at least until Christmas. But the first week of testimony provided an intriguing glimpse into the case that will emerge from the prosecution’s black binders.

The events that brought Southam and Thomson Newspapers to court began with the closing of The Montreal Star on Sept. 24,1979, leaving the country’s second-largest city with just one English-language daily paper, The Gazette. Then, 11 months later, on Aug. 27, 1980, Southam shut down the Winnipeg Tribune and Thomson closed the Ottawa Journal, while Southam took control of both Vancouver dailies, The Province and the Sun. The series of moves left Southam papers with an effective monopoly in Vancouver, Ottawa

(The Citizen) and Montreal, and Thomson alone in Winnipeg with the Free Press. Those moves sparked both the Combines Investigation Branch probe and the 1981 Kent commission on the industry, which subsequently criticized the media giants roundly and proposed a federal newspapers act.

Prosecutor Thomson began his case with the startling claim that two combines investigators and a team of lawyers had managed over the past three years to piece together an incriminating paper trail. The seized documentary evidence— along with the testimony of about 12 witnesses—will reveal, the prosecutor declared, that meetings involving top executives of ostensibly rival newspaper chains, starting as early as the mid-1970s, ultimately led to agreements to close three newspapers. Indeed, one undated memo that a so-far-unnamed Southam executive wrote before the closings foresaw events with amazing accuracy. Referring to Thomson Newspapers, it says: “They get out of Ottawa. They get out of Montreal. They get out of Vancouver. They get control in Winnipeg.”

Prosecutor Thomson introduced less than half of the evidence contained in his black binders during the first week,

but already his revelations have fascinated media watchers. Some documents revealed the concern that developed within the chains in the 1970s over competition in Ottawa, Montreal and Vancouver. Southam Vice President J. Patrick O’Callaghan, then publisher of the Edmonton Journal, wrote in a confidential memo in October, 1978: “We are in a game with no winners, only los§ ers. How do we achieve an I accommodation in Winni§ peg [where Southam’s I Tribune lagged behind ^ the Free Press] without balancing it against possible reciprocal moves in Calgary, Ottawa and Montreal?” At a meeting that same month, Southam’s board of directors discussed turning Montreal into a one-paper town by offering the Star’s owner, FP Publications, which Thomson took over in January, 1980, a share of The Gazette.

Concerns over the Star’s future were also growing at FP, which then also owned Ottawa’s Journal, Winnipeg’s Free Press, Vancouver’s Province and the Toronto-based Globe and Mail. In June, 1979, following a strike that shut the Star down for eight months, FP’s board, fretting over continuing losses at the Star, authorized its president, George Currie, to begin negotiations with Southam. A July 4 memo bearing Currie’s initials outlined three alternatives for the Montreal market. One would have kept the editorial, circulation and advertising departments of the Gazette and Star separate, but combined production facilities. Estimated profits: $10.7 million a year. A similar arrangement would have combined everything but the editorial department, producing estimated earnings of $8.7 million to $11.6 million a year, in addition to cost savings of $8.3 million. Finally, the memo forecast that a monopoly situation could have cut costs by $27.3 million and produced $30.7

million in annual profits.

Seized minutes of a board meeting later that month show that Southam’s directors met to consider the Montreal situation. The Gazette, which traditionally lagged well behind the Star in circulation, had benefit.!;ed from its competitor’s strike. But its new popularity brought problems. For one thing, The Gazette quickly outgrew its printing capacity. According to Crown evidence, Southam President Gordon Fisher, obviously eyeing the Star’s modern, sophisticated presses, said,“We need their assets.”

Although Montreal was a major problem, it was not the chain’s sole concern in the late 1970s. A consultant’s study that FP commissioned painted a bleak future for the Ottawa Journal. “We see no point in laying long-term plans for the Journal,” wrote analyst David Jolley, now president of Toronto Star Newspapers Ltd., on Nov. 16,1978. He recommended that FP pump just enough money into the Journal to keep it alive, pointing out that its reasonably healthy existence would give FP a “trader” in case of a future deal with Southam in Winnipeg.

Yet to come in the complex trial is key evidence about the role of Thomson Newspapers, a family-controlled firm headed by Kenneth Thomson, son of the late Lord (Roy) Thomson of Fleet. The testimony will continue for months, but there is still a good chance that the trial will reach its conclusion long before the proposed Canada newspapers act becomes law. As it is now, the federal government’s draft legislation has avoided Kent commission suggestions to preserve editors from corporate interference and to force the big chains to sell off some newspapers. Instead, the bill would freeze Thomson and Southam at their current levels of ownership (respectively about 21.2 per cent and 27.3 per cent of national daily circulation) and prevent emerging chains from controlling any more than 20 per cent of national circulation. But since last month’s cabinet shuffle, no minister has been responsible for the proposed act. What is more, unconfirmed reports circulating in Ottawa suggest that the cabinet may water down the bill before it reaches Parliament.

Meanwhile, the mass of paper evidence at the government’s disposal does not assure it success in the Toronto trial. In 1976 the Supreme Court of Canada overturned a Combines Act conviction against K.C. Irving. It said that, although he had acquired all five of New Brunswick’s English-language dailies, the Crown had not established that his actions were detrimental to the public. The Crown’s task in this case is no less daunting.

Dave Silburt