AJR  Drop Cap
From AJR,   July/August 2000

An Exclusive with a Price   

Some exclusives--such as the merger between United Airlines and US Airways--come with a price. Are they worth it?

By Sinéad OBrien
Sinéad O'Brien is a former AJR editorial assistant.     

W HEN THE JUICY NEWS of a $5 billion merger between two major airlines was delivered on a silver platter to reporters at the Wall Street Journal, the New York Times and the Washington Post, it seemed like manna from heaven. A flack called the papers with news of the exclusive, which they couldn't release until a specified time. The catch? Promise not to call anyone for comment.
That a publicist for United Airlines and US Airways, the two companies involved, would suggest that the papers not seek any outside quotes for the potentially divisive story seemed bold. All three papers accepted, however.
"Basically they said we'll give you the story, but you can't call anyone outside on it," says New York Times reporter Kenneth Gilpin, who covered the merger. He asked permission to get comments after the stock markets closed but was refused.
It is fairly common to get information on a big announcement with an embargo attached--the stipulation that the news not run until a certain time. But this situation reduced stories to a press release, leaving out comments from groups affected by the merger, such as pilots, labor unions and consumers. Some journalists are critical of the arrangement.
Chicago Tribune aviation writer John Schmeltzer says the deal makes for bad journalism. "It handcuffed the reporters. This is a new wrinkle; it even restricted them from going to do their job."
New York Times Business Editor Glenn Kramon defends his paper's acceptance of the conditions: "The old way was to leak only to the Wall Street Journal or don't tell anyone or tell so late you can't do anything about it. Out of those alternatives, we were happy for the heads-up."
The Wall Street Journal referred inquiries to Richard Tofel, vice president of corporate communications, who wouldn't directly address this situation. He did defend the practice, though, by saying: "We make arrangements. If the way to give the best newspaper to our readers today and tomorrow is to make a particular agreement, we do it."
Even with no official advance notice, the Financial Times broke the story on its Web site May 23, the night before it was to appear in the papers. (The embargo also forbade the three papers from running anything on their sites until after midnight.) This scoop green-lighted the three papers to forget the embargo and gave them and others the chance to run the news, with outside comment.
The damage was done, however. The details behind this exclusivity agreement got out, thanks to the New York Times. At the end of its story on the merger, the Times ran two paragraphs detailing the failed embargo.
Some consider this a strange move by the paper. Paul McMasters, the Freedom Forum's First Amendment ombudsman, speculates that the details were printed to have on-the-record evidence that the Times didn't improperly break the embargo. "It wasn't done to help the reader, but to get [the paper] off the hook," he says. Tofel says exclusives with a delayed release are so common the Times would have to run a disclaimer paragraph constantly with stories.
Gilpin says the notice was inserted in response to a request from higher-ups at the paper. He says the airlines knew the embargo was moot as soon as FT.com broke the story. He called the publicist and said, "Your cover is blown."
So, are embargoes of this nature endemic? Gilpin says embargoes are common, though deals restricting outside comments are extremely rare. But Kramon says the latter is not rare, citing instances in which a company doesn't want reporters to tip off the markets or its employees. Tofel says business reporting is rooted in leaks, but this type of request is not typical.
Bill Barnhart, the Chicago Tribune's financial markets columnist, says journalists encounter embargoes all the time, but "this particular situation is unusual. Media were cherry picked and offered exclusive background with the understanding they wouldn't make follow-up calls." Barnhart, vice president of the Society of American Business Editors and Writers, says his organization doesn't have a position on cutting deals. But he thinks the strings-attached practice will get more controversial with time.
McMasters says it's already too prevalent: The publicist "wouldn't have the chutzpah if [the practice] were new or if it were out of line. She probably had a good idea she'd get a bite."
Ethics aside, the Tribune's Schmeltzer says the deal could be illegal. Because the news was leaked while the markets were still open but before all stockholders were notified, Schmeltzer believes Securities and Exchange Commission rules may have been violated.
The episode didn't draw widespread attacks from those who cover the media, though. Washington Post media writer Howard Kurtz explored the situation on May 29. McMasters devoted a column to why such deals are bad for journalism and the public in general on the Freedom Forum's Web site June 1, but other published comments were scant.
McMasters says the dearth of criticism may be due to the fact that arrangements to exclude certain issues have become business as usual. Sports and lifestyle reporters, McMasters says, capitulate to demands that no tough questions be asked during interviews or that certain topics be avoided. Such deals are made by many journalists, he says, so a request not to seek outside comment "seems just a tad over the line, rather than groundbreaking."
But some critics took action: The Tribune's Schmeltzer angrily called United Airlines the day the story broke and demanded a meeting. He hadn't gotten one as of press time. "We had a good story, but we didn't have a story and three sidebars like the New York Times," he says. And it's not just sour grapes. He says such an embargo raises questions about journalism. "We wouldn't have accepted this sort of deal."
In a more symbolic, but nonetheless pointed, move, Gary Ruskin, director of Commercial Alert, a group that opposes excess commercialism, mobilized concerned journalists to react. Professors and members of such groups as Fairness and Accuracy in Reporting and the Center for Media and Democracy signed a letter to the managing editors of the three papers reprimanding them for irresponsible journalism.
The letter said secret agreements limit the scope of discussion in a story about corporate conduct and block out voices that offer perspective. "Even worse," the letter said, "these secret agreements betray readers' trust."
"Journalism plays an important function in our democracy, and newspapers ought to represent the full range of opinion," Ruskin says. "If not, there's a problem."