The Newspaper Preservation Act of 1970 makes it possible for competing newspapers to combine advertising, production, circulation and management functions into a single newspaper corporation. For the attorney general and the courts to authorize a joint operating agreement (JOA) for a "failing newspaper," certain conditions must be met and certain types of financial and economic data must be examined. The most significant test of failure is whether a "circulation spiral" (indicated by circulation and advertising performance) exists, and a second major test is whether a significant disparity exists between the circulation and advertising shares of the two competing papers. Financial losses comprise the third major test in determining whether a paper is failing. A review of 57 newspapers that failed or merged during the past decade suggests that the majority of such failures and mergers has taken place in small- and mid-sized markets rather than in large metropolitan markets. The information also indicates that when the 60% to 40% circulation split is reached, continued operation of two papers becomes unprofitable. These three main tests of failure provide five indicators by which to judge whether failure exists, and newspapers in four of the five cities already granted JOAs (Anchorage, Alaska; Chattanooga, Tennessee; Cincinnati, Ohio; and Seattle, Washington) passed at least four of the five tests. The "Detroit Free Press," currently seeking JOA approval, does not pass the majority of the five tests, and, in fact, provides only two of the five indicators of failure. (Two pages of notes and three tables are included.) (NKA)