A Sacrifice Most Free Newspapers Have to Make

A town with two daily newspapers is as vanishingly rare in California as elsewhere. When a business battle between them is resolved in court, you'd expect it to be reported—if only by the winner. But so far, neither paper has mentioned this case, which may have a lot to do with the survival of the loser.

So here goes.

Legal advertising (or, as called in the trade, public notice advertising) is that densely and often opaquely worded fine print material often found near—and visually somewhat resembling—the classified ads in a newspaper. The difference is that this advertising is legally required to be published in qualifying newspapers—no alternative media buy is permitted. Some public notice ads are required for governmental processes, e.g. new city ordinances or public hearings on important policy issues. Others involve government action but must be purchased by private parties, for example “doing business as” names announced as part of obtaining a local business permit.

As mypublicnotices.com points out,

If you haven't looked at your newspaper's public notice section lately, here are a few things you may have missed:

• the restaurant at the end of your block applied for a liquor license
• government agencies are buying the products your company makes
• a proposed tax increase is on the school board's agenda
• the assets of your late aunt's estate are being distributed
• your neighbor has applied for a permit to enlarge her house
• the sewer authority is issuing bonds to finance a new plant
• your client filed articles of incorporation with the help of another law firm
• the state treasurer is holding unclaimed tax refunds
• business and residential properties are going up for sale

One way of looking at this phenomenon is that it's a rare case—maybe a unique instance—of the government caring more about the public's getting significant information than the press itself sometimes does: "We can't count on the newspaper telling you about this development, so we'll see to it that it's paid to carry it."

California law requires these notices to be published in a “newspaper of general circulation”—a term of art meaning a publication entitled by a court decree to satisfy the publication requirement. Having obtained the decree, a newspaper is thus said to be “adjudicated a newspaper of general circulation,” and you can often find the adjudication reference, right down to the court decree number and date, in or near the newspaper’s masthead.

From the law’s perspective, public notices should be visible in a publication by virtue of its demonstrated roots and permanence in the local community or region. It serves no public purpose to require publication to a defined community if the notice appears only in a newspaper circulated miles away. Accordingly, the process of obtaining a decree involves satisfying the court with either one or the other set of evidence as to local presence and community exposure.

Petitioning newspapers that are actually printed where they are published, that is, in the same city or county, can be adjudicated by showing a “bona fide list of paying subscribers,” which need not be a very large number. Those printed outside the city or county of their publication have a higher and clearly quantitative bar. They must show “substantial circulation” to paying subscribers in the home jurisdiction.

The older adjudicated newspapers in the state—those dating from the 19th and earlier 20th centuries—got their decrees easily enough because they had their own presses in days when owning a press was not a relatively huge financial investment. But for the last 40 years or so, almost all new newspapers have started up by being printed by someone else with a press.

Competition and the scarcity of newspaper web presses being what they are, that someone else was unlikely to be a publisher in the same town, or in more sparsely populated areas, even the same county. So smaller new papers had to travel to find an affordable out-of-town printer, and if they wanted to become “adjudicated” to get that fairly steady public notice income, they had to prove “substantial” paid subscription. More daunting yet, they typically had to do so in a contested court proceeding, with the locally established newspaper—anymore typically owned by a chain publisher—attacking the size or authenticity of their proffered subscriber list.

That gauntlet understandably led new community publishers to seek creative alternatives, and one was to have a free newspaper backed by a voluntary contributors’ list, like a public broadcaster, that could be offered to satisfy the requirement for a “bona fide list of paying subscribers.”

That door was closed last week by the California Court of Appeal for the First District, ruling in In re Establishment of THE EUREKA REPORTER as a Newspaper of General Circulation. When the Eureka Reporter, a daily newspaper established in 2004, went to the Humboldt County Superior Court last year to obtain its adjudication, the court agreed, over protests of the competing daily, the long-established Eureka Times-Standard, that the contributor members of the Reporter’s Voluntary Pay Program,

although having no obligation to do so, have paid for the receipt of the [Reporter]. The court believes this is sufficient to meet the statutory requirement of “paying subscribers” particularly in light of the communities within Humboldt County wherein the funds have been generated.

The court then entered judgment for the Reporter, and the Times-Standard appealed. Last Friday the appellate court reversed the judgment and ordered denial of the Reporter’s petition. Its principal conclusion was that a “subscriber” in the meaning of the law is one who contracts to receive something, not a volunteer contributor:

Participants are not paying for a certain number of issues of the Reporter. They are, in the words of the Reporter, “contribut[ing] to help cover the expense of home delivery” in the form of a “[s]ponsorship[].” Indeed, a contribution is not required to receive home delivery of the Reporter: residents of Humboldt County who do not participate in the Program will receive the newspaper “as a gift of [t]he [] Reporter.”

The underlying assumption in all this is that when a public agency or a private party is required by law to advertise a fact to bring it to the community’s attention for public policy—as opposed to commercial—reasons, the advertisement should appear in the pages of a newspaper that people care about enough to open up and read: one they have paid to receive on a regular basis.

This assumption may sound a bit wistful in a period when the younger generation of readers is said to rely so much on the Internet for news, and is increasingly likely to subscribe to no newspaper at all. But there is some systematic evidence for optimism in a new study by the Readership Institute showing, as one observer puts it, that “reading customers aren't deserting newspapers at anything approaching the rate that advertising customers are.” If that’s the case, then paid circulation still counts in the choice of where to require legally mandated ads to appear.