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Chain Gang: Small Town
Publisher, Takes on the Giant
Gannett Publishing Empire and Wins, 2100 words
by Peter Werbe
Successful David and Goliath stories are rare these days since the big guys are usually huge governments or multi-national corporations whose superior strength is usually adequate to overcome upstart challengers. But Richard McCord, author of The Chain Gang: One Newspaper Versus the Gannett Empire (University of Missouri Press), didn't let the odds stop his one-man crusade to save his New Mexico weekly and a Green Bay, Wisconsin daily from destruction by a major media conglomerate.
McCord has been an investigative reporter for Newsday in New York and editor of the Santa Fe Reporter. His work has been honored for excellence by the Scripps Howard Foundation, the National Press Club and the National Newspaper Association.
Q: How big is the Gannett empire?
Richard McCord: Gannett is the nation's largest newspaper chain by far. The total number of daily newspapers they operate currently is around 92 or 93. It tends to go up and down slightly because they'll buy a newspaper and then, perhaps sell one that's not performing well. Their most prominent newspaper is USA Today, but they also have some very large newspapers such as the DeMoine Register, the Louisville Courier Journal, and, as you certainly know, The Detroit News. But their fortune was really built on a large number of small- to medium-sized papers, almost every one located in cities where there was no daily competition so they could make enormous profits by running a monopoly.
Q: What were the circumstances of your conflict with Gannett?
McCord: I put together a little bit of money, a small group of investors, and started a weekly newspaper called the Santa Fe Reporter. We threw a lot of energy into our product, started winning a lot of readers and a fair amount of advertising. But we started presenting some competition to the daily, which was sold to Gannett from its local, independent ownership. Gannett transferred in a new general manager to run their Santa Fe paper, and I discovered he had been the number-two man in a campaign that destroyed a prosperous Salem, Oregon weekly newspaper. I was concerned he had been sent to Santa Fe to do a similar job on us. I discovered there had been an anti-trust lawsuit filed against Gannett by the defunct newspaper, but neither the people who had run the newspaper nor their lawyers would talk to me because the court had placed a gag order on the file.
Q: Competition is the nature of this system, and when you say "destroyed the other paper," that's what businesses look to doeliminate the competition. What's inherently wrong with Gannett trying to force other newspapers out of business?
McCord: That was the very question at the heart of the anti-trust suit that had been filed. That was to be determined in court, whether Gannett had played fair under the competitive rules of our society, or whether it had crossed a line over into illegal activity. But, Gannett had gotten this gag order, claiming any discussion of their tactics would reveal their trade secrets, which would harm them. At this point I was doubly worried because I gathered they had used some very rough methods, but no one would tell me what they were, so it was hard for me to figure out how I was going to defend my newspaper against them.
Q: What steps did you take?
McCord: I went to Salem because even though I was editor and publisher of a weekly newspaper, my background had been as an investigative journalist. I went to the courthouse and innocently asked to see the file, expecting to be told, you can't see that file, it's sealed, no one is allowed to look at it. Instead, through the carelessness of a clerk, I was handed the file. It was about 18 inches thick, and it spelled out in great detail exactly how Gannett had destroyed a small, weekly competitor in Oregon.
Q: The thesis of your book is that this was not an aberration, but the way Gannett often or always functions toward its competitors.
McCord: I would not say always, but I would say often. I got a call just yesterday from the publisher of a small newspaper in Indiana, and she had just finished reading my book and said the same tactics I described were being used against her newspaper.
Q: What did you find in the eighteen inches of charges against the Gannett empire?
McCord: Gannett sent a new publisher to Salem. The first day he was there, he stood up on a desk in the newsroom, gathered all the employees around him, and vowed that his competitor, The Community Press, would be out of business by Christmas. Then he launched something they called Operation Demolition. The people they hired to work on Operation Demolition were called the Dobermans. They unleashed the Dobermans to demolish the Community Press. The techniques they used were to give free ad space to businesses who stoped advertising in the weekly newspaper. They gave free vacations to Reno and Tahoe to advertisers who would stop using the weekly. They threatened to stop doing business with anyone who continued advertising in it. They visited the headquarters of large chain stores to suggest the reason the local outlets were using the weekly newspaper was because the managers had been bribed. They started false rumor campaigns that the weekly was in deep financial trouble and would soon be out of business, and then they paid bonuses to their employees, their Dobermans, who planted these rumors when the people they had told it to were heard repeating it around town. They also paid bonuses not just for selling advertising, but for driving small accounts out of the other newspaper. Gannett called these meat-and-potatoes accounts, and internal documents in the files said that if we can drive the meat-and-potatoes accounts out of the Community Press, they'll have a difficult time surviving.
Q: Pretty slimy, but are we talking about anything that's illegal?
McCord: Oh sure. The tactics I just described go way beyond just tough competition. There are anti-trust laws on the books. They're not enforced always as stringently as they might be, but when you deliberately set out to destroy another business, not just to sell more than they do, or give better service, but when you seek to destroy them through tactics like this, particularly if you're huge and much, much bigger than your small competitor, you very quickly cross over into the realm of illegality. I came back home from Oregon with this information. and issued a major report in our own newspaper, spelling out in detail how they had driven the Community Press out of business. We wanted to create a climate making it impossible for the same tactics to be used against us. And we succeeded in that, because we did not face a similar campaign. Gannett, in the meantime, instead of going to court in Oregon and having their tactics discussed in detail and facing a jury as to whether they had broken the law, made a multimillion-dollar settlement with the company they had driven out of business.
Q: So, that was an admission of wrongdoing?
McCord: It sure seems that way to me. They paid a large sum of money.in Oregon, yet they still came away with what they desired. The other paper was out of business and they had the town to themselves. When you talk about what they've done around the nation and whether it's just good, clean, tough American business, I subsequently found that Gannett has been convicted of fraud in Connecticut. It's been convicted in criminal price fixing cases. They've been sued several times on anti-trust charges. They've run circulation scams, where they falsify their circulation in order to drive up their advertising rates. They've been convicted of breach of contract for failing to keep their obligations. They have a very dirty record. Maybe that's the way the corporate world is, but the press is not supposed to be this way. The press is supposed to be society's watchdog. The press is supposed to report this kind of illegality and unethical practices, so, a very scary line is crossed when the nation's largest newspaper chain is out there committing the kind of acts they should be reporting on page one.
Q: Who's in charge at Gannett's Virginia headquarters? Why do they operate like this? Who are the brains behind the evil empire?
McCord: The way Gannett does business was established under their former president, Allen Neuharth, who is now retired. Before he took over the company, they did not have a record like the one I described. Nueharth presided over the chain's greatest expansion, added the most newspapers, and also took the chain's earning way, way up. He brags about this in his autobiography, Confessions of an SOB. He never went so far as to openly admit committing fraud in Connecticut or price fixing in California, but he brags about his cutthroat business tactics and how much good they have done for Gannett.
Q: What's at stake in Detroit newspaper strike?
McCord: Oh, there's a lot at stake. The Joint Operating Agreement (JOA) between the two newspapers, was phoney from the start. When Gannett came in and bought The News, Neuharth testified that he had no intention of entering a JOA. It later came to light, when this issue went to court, that he and Knight-Ridder, which owns the Free Press, discussed this even before Gannett entered the playing field. Then they ran a number of maneuvers to make it look like one of the newspapers was failing, which is a JOA requirement. At that point, they can divide up the advertising pie. They're not competing with each other anymore. They can drive up advertising rates. They can reduce the quality of the newspaper and reduce expenses. They increase subscription rates. They can write their own ticket in a huge market like Detroit.
They either didn't figure the unions would go out on strike, or, if they did, it would be a good opportunity to break the unions. They were willing to suffer extreme losses in order to come away with broken unions and a market they completely control. The company is so rich from its other papers, most of them nonunion shops, that they can take enormous hits in Detroit and do it for years. They'll recover their costs farther on down the line.
Q: Who is running the strike? The local execs down on W. Lafayette or the Gannett corporate offices?
McCord: There's very strong control from their headquarters as to what Gannett does. It's not just a case of bizarre local managers running amok.
Q: As you indicate, Gannett appears to be willing to take any loss. The Detroit News circulation has been driven down from the ninth largest circulation afternoon paper in the country, to that of a daily in Tulsa.
McCord: That's right. And the Free Press has dropped, too. Interestingly enough, the Free Press was supposedly the weaker newspaper, the failing newspaper. During this long struggle in Detroit, both newspapers have dropped precipitously in circulation, and yet The News has dropped much more.
Q: We hear about The News going out of business. Would Gannett do that?
McCord: They just might. In Little Rock, Arkansas, Gannett bought the Arkansas Gazette, the larger, dominant newspaper in town and found itself in a fight with a smaller, scrappy newspaper. The Gazette had a Pulitzer Prize heritage and was the oldest paper west of the Mississippi. Gannett vowed they would fight to the end, but after a while, as the smaller paper continued to fight and continued to make progress against the Gazette, one day Gannett just got tired of the losses and just shut it down. Ultimately, it's the bottom line. It's whether enough money is being made or potentially is going to be made, which rules Gannett.
Q: Is the strike winnable in your estimation?
McCord: I'm not a labor expert, but under the current circumstances perhaps the only way they can win is with government intervention. If a strong case is made that the labor law has been violated by the two chains, Knight-Ridder and Gannett, then you've got another huge organizationthe governmentworking with the strikers. But for these strikers, the way they've been pushed around and the way they've struggled, to just some day win it on their own, seems like a very long shot to me.
Peter Werbe is the Public Affairs Director for WRIF in Detroit.
ATTENTION EDITORS: Cut of McCord book jacket and photo of author availabe from publisher. Dramatic action photos of Detroit newspaper strike available at photographer's price.
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Last modified: October 21, 1997