Thirty-two employees will lose their jobs at the part-Fairfax-owned Metro Media Publishing after the suburban newspaper company announced an unprecedented closure of seven Melbourne mastheads this morning.

In a blow to media diversity in an already ailing news market, MMP chief executive Antony Catalano says he was left with no choice but to close 90% of titles in the firm’s east division after he discovered they were losing millions of dollars in revenue a year to News Limited.

The former Fairfax Community Network titles to close on June 17 are Casey Weekly, Frankston Weekly, Casey Weekly Cranbourne, Knox Weekly, Monash Weekly, Maroondah & Yarra Ranges Weekly and the Peninsula Weekly. Only the 148-year-old Dandenong Journal will remain open for business in the 80-employee strong group.

In an email announcing the layoffs this morning, obtained by Crikey, Catalano blames a potentially illegal “kickback” program run by News involving the payment of millions of dollars in benefits to real estate agents to encourage them to spend their marketing outlay with the rival Leader group.

“Our ability to gain new real estate advertising clients has been undermined by the millions of dollars News Limited is paying to agents across Melbourne and particularly in the south-east, which has made it impossible to compete fairly… it is ironic that a media organisation’s kickback program is the cause of media jobs being lost.”

Catalano said he had lodged official complaints with the state government and Consumer Affairs Victoria in the past 12 months but that the authorities had been slow to act.

A spokesperson for the Media, Entertainment and Arts Alliance released the following statement this morning:

“Today is a sad day for the community in Melbourne’s east. These newspapers have served their local communities with dedication and passion for many years and their reporting on local news, sport and culture will be sorely missed by readers.

“Our members will continue to strive to provide the highest standard of professional journalism elsewhere in the industry and the union is with them every step of the way through this difficult period.

“The union is optimistic about the future of the Dandenong Journal which will continue to be a flagship masthead for the community.”

Crikey understands that Fairfax, when the merger was being examined by the Australian Competition and Consumer Commission last year, argued that without the 50-50 tie-up its entire suburban stable would shutter, substantially lessening competition.

In today’s email to staff, Catalano acknowledged the “East division was losing several million dollars at the time of the merger with Fairfax in July 2012. We went into the deal aware of the substantial losses and committed to trying to turn the business around.”

“While we have done a good job of reducing the losses, the unprofitable titles remain a financial drain on the company. We have certainly tried a lot of things over the past 12 months to attempt to reinvigorate the business, and we have given it our best shot. We should all be very proud of what we have achieved over a long period of time.”

The layoffs were first foreshadowed by Crikey in April, when MMP announced that 20 staff would be affected by redundancies and roster changes at its 11-masthead central group. They followed an initial 29 layoffs last October when photography and writing tasks in the east group were outsourced to labour hire firm The Media Gang.

It brings to 12 the number of titles closed since last year’s merger. The Melbourne Weekly, Melbourne Weekly Port Philip and Melbourne Weekly Bayside were shuttered to make way for four “Review Locals“. However, two of those, the Review Local Port Phillip and Review Local Bayside, closed earlier this year. An MMP spokesman said this morning seventeen titles remain in the group.

The decision comes as MMP becomes further embroiled in a bitter fight with News for market share in Victoria’s second city of Geelong, where the company is suing boutique agent Hayeswinckle for allegedly welching on the terms of an advertising deal and cosying up with News’ Geelong Advertiser.

Fairfax originally paid $35 million in cash and $35 million in assets for a 50% stake in MMP in December 2011.