The Wikipedia page for Coalinga, California (where I assume this is taking place) estimates the 2007 population at just over 18,000 people. (http://en.wikipedia.org/wiki/Coalinga,_California). It seems that the paper involved, the Hanford Sentinel, services all of King County (http://en.wikipedia.org/wiki/Kings_County,_California) which has a little over 150,000 people total. Granted, I am sure the LA Times or some other large circulation paper could condemn them, I doubt they cater to the same audience as those subscribing to a small-town oriented paper like the Sentinel.
Still, I agree with your point - people need to shun this circulation for its lack of journalistic integrity. Sadly, there aren't a lot of competitors (to my knowledge - someone have better knowledge?) to wag their finger at them.