By Michael Swanger

Chances are that if you're reading this story, you made the conscientious effort to pick up Cityview at a multi-titled newspaper rack that houses printed products by locally owned independent publishers, as well as those by national media outlets.

For that, we thank you.

Our nation has always believed in the fundamental importance of freedom of the press. It is one of the liberties we enjoy as citizens of a free society. And for those of us in the newspaper business who aren't afraid to ruffle a few feathers within our industry to help create a level playing field, the only thing we value more than protecting our right to print the news is ensuring the public's freedom to access it, no matter what the source. It is perhaps the most hallowed ideal of journalism (community, alternative or otherwise), one that solidifies our relationship with our readers. To paraphrase Voltaire, we may disapprove of what others say, but we defend their right to say it - and to distribute it.

The Gannett Corp., however, doesn't share our view.

In the past year, we have witnessed one of its dailies, The Des Moines Register, launching a competing free publication entitled Juice and employing unsavory distribution tactics to gain an edge. The competition, mind you, doesn't bother us. We welcome it. What concerns us, as well as other publishers and industry watchdogs, is the fact that Gannett dailies across the country have launched similar products while they have entered the business of distributing and displaying free papers as a way to control which papers can be on their racks, what spots they get, and what fees to charge them in what appears to be attempts to stymie, even eliminate competition.

We called Rick Bell, vice president of circulation at The Register, to talk about such practices by Gannett in other markets. He replied, "I'm not aware of that."

Then we asked him if The Register had any intention of charging competing local publications to be distributed on Juice racks. He responded, "Our program is working perfectly," then ended the conversation.

However, Editor & Publisher, a respected nationwide industry observer, devoted considerable time and energy to reporting on Gannett's objectionable business strategy in its July issue. Here's how the trade magazine summed up the situation in one of its reports:

"In exchange for exclusive display rights at outlets such as convenience stores and supermarkets [restaurants and bars, too], the Gannett daily installs multi-titled racks and handles the delivery and cleanup of the papers. Typically, the daily charges a fee to other free papers that use the rack. Papers that don't participate can't distribute on the outlet's property."

E&P quoted Gannett spokeswoman Tara Connell as saying "This is not big, bad Gannett doing something new, and bullying everybody into it. This is a win-win for everyone involved."

Then E&P weighed in with an op-ed piece:

"Like newspapers everywhere, these Gannett papers are busy spinning off new free niche papers - everything from auto and help-wanted books to their own versions of youth-oriented alternatives. ... These dailies are using their marketing muscle to sell retail outlets on the idea that they can clean up the 'clutter' of all these free papers with some tidy gang racks. ... They then present competing free papers with a Hobson's choice: Hand over distribution of your paper to us, or get out of the store. ... Gannett says this gang rack scheme is not a companywide initiative. But the way it's spreading around the chain, it looks at the very least like a best-practices swap meet on steroids. Corporate should bring it to a halt."

Association of Alternative Newsweeklies Executive Director Richard Karpel says controlling distribution of a competing newspaper is a matter of antitrust. Antitrust laws were designed to combat business trusts, commonly known as cartels, and protect the core values of free enterprise. They were created to prohibit the use of power by big businesses to control the marketplace through tactics like predatory pricing and vendor lock-in.

"This business model isn't unique," Karpel says. "Other companies do this stuff, including Distribu Tech and Trader [two of the biggest distributors of free publications in the country]. The difference with Gannett is they're doing it to control what papers go on their racks. It's not enough that they own 95 percent of a market; they want 97 percent."

Along those lines, Karpel says, Gannett's tactics also have free speech implications.

"It's free speech in the sense of having as many voices as possible," he says. "Having said that, we're probably expecting too much if we're asking Gannett to be guarantor of our free speech rights. Gannett is owned by shareholders; they're worried about dividends, not free speech."

But if you are, maybe you'll read a little further.

Fighting back

The battle between newspapers, big and small, is heating up in markets from Boise, Idaho, to Sioux Falls, S.D., to Lafayette, La., where Gannett, the nations' largest newspaper chain, is squeezing the competition by launching The Distribution Network (TDN). Industry leaders say it's happening in Des Moines, too, though not to the same extent seen in other markets - yet.

Along the way, there have been casualties, including MetroBEAT, a free alt-weekly in Greenville, S.C., that once had a circulation of 20,000 and now exists only online. The paper was forced out because it couldn't afford TDN's high prices, estimating it would have had to pay $100,000 a year if it bought into all of TDN's boxes in its circulation area.

The most talked-about fight is the one between the Jackson Free Press and Gannett's The Clarion-Ledger in Jackson, Miss. A few months ago, The Clarion-Ledger offered retailers a nine-slot outdoor box under the premise of cleaning up the "clutter" of free papers. They also offered them 23 percent of the boxes' revenue (excluding cuts from its own newspapers). All the merchants had to do was sign one-year contracts with TDN, which would give The Clarion-Ledger exclusive control over the display and distribution of free publications, including the Jackson Free Press. But in order for competing newspapers to be distributed by TDN, they would have to pay tens of thousands of dollars, a fee most papers couldn't afford. In some cases, it would drive publishing costs up as much as 20 percent.

When The Clarion-Ledger's circulation manager approached Jackson Free Press Publisher Todd Stauffer about this "exciting new service," Stauffer launched a media campaign railing against the McLean, Va.-based company's "forced circulation."
"We're evicted unless we pay for the 'right' to place ourselves in their racks - to distribute in places where we used to distribute simply with the permission of the manager or owner," Stauffer wrote in a column. "I understand the Mafia in New York City has a similar system."

Stauffer, along with all the other independent publishers in Jackson, refused Gannett's offer and formed the Mississippi Independent Publishers Alliance. Its members vowed not to enroll in TDN, leaving the Gannett daily newspaper without income from the boxes, therefore also affecting retailers who were promised a percentage of TDN's revenues.

"I like what they're doing in Jackson," says Karpel. "You have to fight back. They've kicked up a shit storm. If you shed light about what Gannett is doing, the people will get it."

According to a story published last month by The Independent Weekly in Lafayette, La., Stauffer received a letter in May from The Clarion-Ledger stating that his paper had one month to remove its racks from 167 locations. The Jackson Free Press' attorneys responded by saying Gannett's contracts with retailers were invalid since Gannett misleadingly used the Jackson Free Press' name in its marketing materials.

"If this was truly a free enterprise," Stauffer was quoted as saying in The Independent Weekly, "they wouldn't have to put 'exclusive' [in the contract]. ... They're not truly offering a product, and that's how I know their scheme is more evil empire than it is a service. The problem I've got is that my competitor is going to be setting the rate on the box, and they're basically using the strong arm of a Virginia-based corporation to try to buy their way into something they haven't done particularly successfully just through sweat and tears."

On June 20, the Jackson Free Press reported that its readers had spotted its racks, as well as those of other independent publications, lined up next to dumpsters.

Des Moines' turf war

Booting competitors from their racks, even stealing their racks, is also part of the business acumen employed by The Des Moines Register's circulation department. Last June, shortly after the launch of Juice, Cityview Publisher Shane Goodman received a call from Jim Jones of The Register's circulation department to inform him that he had "about eight or nine" Cityview racks and asked what to do with them. In a June 7, 2005, letter to Mary Stier, The Register's publisher, Goodman says he asked Jones under what authority he removed the racks, and Jones responded by saying that: 1) in some cases, the store owner or manager asked them to be removed; 2) in some cases, he and others suggested they be removed; and 3) in some cases, he and others simply took them out without anyone's permission.

Goodman says Jones acknowledged that he was "clearly instructed" to no longer remove Cityview's racks, and that if a store owner or manager requested such action, he was to instruct them to contact Cityview's office. Jones agreed to return the racks, along with a list of the locations they were taken from. The racks were returned, but the list of locations was not provided.

"Upon further review," Goodman continues in his letter to Stier, "I have found that more than 'eight or nine' of our racks have been removed. I need to be assured that our property will be returned to us immediately and that this practice will no longer continue. At the bare minimum, these practices can be construed as theft. To a larger degree, this can certainly appear to be a predatory effort to gain an unfair competitive advantage."

In this month's Editor & Publisher, Calla Scott, who runs the local edition of the free employment publication JobDig, was quoted as saying that when Juice racks were introduced in Des Moines, she was told she could use them. JobDig, which launched its Greater Des Moines edition in 2004, distributes between 15,000 to 20,000 copies each week through about 1,000 sites. Cityview obtained a copy of an e-mail to Scott from Trent Miller, retail sales manager for Juice, asking JobDig to remove its hanging racks from Juice stands.

"I don't know if you know anything about it, but can you please have them removed from our racks?" Miller writes. "Also, we will be using our shelves on most of our racks, due to the increase of publication size of Juice and some of our existing products. We request that you stop delivery of the JobDig on our racks."
Miller did not return Cityview's phone calls.

"That's how they did it in Sioux Falls, too," Scott tells Editor & Publisher. In South Dakota, JobDig belongs to a group of independent publishers who formed a coalition to establish their own distribution network.

Toby Dayton, president and chief operating officer of JobDig, says his company has since reached an agreement with Juice in which JobDig hangs about 50 of its racks on Juice newsstands. Still, Dayton says, he hears stories about how JobDig racks have disappeared in this market without explanation.

"With Gannett, you never know who's doing what," Dayton says. "We've had racks disappear and never knew what happened. We've had some instances where [retail] employees told us distributors for The Register threatened to pull the paper out of their stores if they continued to distribute JobDig. They haven't done it yet."

Like most publishers, Dayton says he doesn't mind competition. He just wants to be able to distribute his product without unreasonable interference.

"You've got to have a level playing field, and you can't allow one paper to establish a monopoly on the distribution side," he says. "Businesses need to understand that strong, lively publications are good for the community."

Even if Juice isn't charging competitors to be on their racks yet, they've already muscled their way into the local distribution game and have shown signs of wanting to expand. Retailers, for example, are encouraged to remove competing racks and install Juice racks under the auspices of "clearing clutter."

"I don't buy that angle," says Rod Kabel, publisher of ArtScene. "The people we have deliver the paper are really good, and they keep things nice. It's an excuse to get businesses concerned about clutter and a way to make small independent papers look bad."

Even worse, some retailers have had Juice racks dumped off at their stores without their permission. Matt Johnson, co-owner of Cup O' Kryptonite on Des Moines' South Side, is one such business owner. He says that last April, someone left a large Juice rack in his store unbeknownst to him. He called The Register immediately to remove it.
"I booted them out of the shop," says Johnson, who before opening Cup worked for four years as a television news producer. "I would never allow exclusivity."

John Ray, owner of Community Racks, has been distributing free publications for nearly 30 years. He owns about 1,300 "big stop" racks in Iowa, Arkansas and Oklahoma. In Central Iowa, he has about 250 "big stop" racks, most of which can be found at Hy-Vee, Dahl's, Wal-Mart, Fareway and K-Mart. They house dozens of publications including JobDig, Iowa Reality, Welcome Home, Apartment Finder, The Real Estate Book, Auto Trader, ArtScene, Datebook, Juice and Cityview - all of which rely on him for distribution at those venues.

Though Ray says national chains like Distribu Tech (49,000 locations nationwide) and Trader Distributions Services (63,000 locations nationwide) are his two biggest competitors - he leases racks from them at locations like K-Mart and Wal-Mart - he says Gannett has twice offered to buy his business in the past three years.

"They've approached me a couple of times, but couldn't get serious about the numbers," Ray says. "Then again, I've also turned down exclusive rights for distribution from Distribu Tech even though I knew they would cause problems for me."
Even if Gannett wanted to establish its own distribution system in large supermarkets, Ray says, they would have a difficult time because they have poor relationships with some big businesses.

"They don't get along with Hy-Vee," he says, "not to mention Iowa Realty."
Ray also says that before The Register could conceive expanding its distribution, it has to address problems with existing equipment.

"They've started putting racks in Des Moines and they're not happy with them, but they don't want to admit they made a mistake," he says. "They're using mine instead of their own because theirs are poorly designed. The pockets aren't thick enough, and they don't display the products properly."

Though the thought of potentially losing distribution at places like supermarkets and giant retail outlets scares most publishers, Ray says most businesses, including chain stores, strive to keep everyone happy.

"If a publisher calls to complain or if you have a big name like Cityview, they will work with you," he says. "They realize their customers are going to want it."

Marketplace of ideas

Like many Gannett dailies, The Des Moines Register has launched several niche publications, including a car classified shopper, a home classified shopper, a parenting magazine, a career classified shopper and a young adult weekly as a reaction to declining readership of its daily newspaper, and those niche products have helped fatten the bottom line. Some say Gannett's distribution plan is just another ploy to increase profitability and control the entire market.

"They [Gannett] shouldn't feel threatened by the free publications," Stauffer tells The Independent Weekly. "But the truth is they are because they don't do a great job - at least in our market - of being the paper of record. I wish they would take their vast resources and focus more on reporting, investigating and telling us the stories we need to hear, as opposed to trying to knock the Thrifty Nickel out of business."

Henry Phillips, who has worked for and competed against The Register, concurs. The 54-year-old associate publisher of Breeze Newspapers in Cape Coral, Fla., was employed as vice-president of advertising for The Register. Later, he served as publisher of The Press Citizen, a multi-zone competing paper that The Register purchased in 2004 and recently ceased publishing with the exception of one edition. He says newspapers that claim to protect First Amendment rights -theirs and the publics - should not impede the same rights of other newspapers.

"I think for The Register to control these outlets is very dangerous because the fox is in the henhouse," he says. "It's one of the worst examples of how corporate Wall Street is coming to Main Street. They lose sight of what fundamental principles papers are about. It's a dangerous precedent.

"On one side you have their newsroom saying 'freedom of speech,' and on the business side they're saying 'freedom of speech costs $25 a week - and if we don't like the speech, you can't buy it at any price.'"

But what most concerns Phillips - or any good publisher worth his weight in ink - is the public's ability to choose from a variety of news sources.

"I look at it from the consumers' standpoint because the public suffers," he says. "Johnny Ray's system of distribution is more consistent with the public's right to know. It's what America was founded on. If it wasn't for alternative papers, the public would miss out on a lot of useful information."

All of the publishers contacted for this story say they are hopeful that it won't take the closing of a newspaper to make retailers and the public aware of Gannett's distribution tactics. But some are more optimistic than others.

"If something happens, I think the public would stand up," Kabel says. "This would be an incredibly bad move because they're the daily paper 'Iowa depends on,' and how could they do that to small business. I think they would get beat down by the public."

Several local independent newspaper publishers and owners were contacted for this story but did not return our calls. The handful who did talk to Cityview declined to comment on record for fear of retribution from Gannett, even though they stand to lose their businesses if Gannett one day controls their distribution.

"I appreciate you writing this story," JobDig's Dayton says. "It doesn't fit with our publication, but it is one people need to be aware of. The public needs to be aware of the long-term implications it has and the monopoly it creates." CV

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