John Fry, head of Johnston Press - the second-largest local newspaper in the country, made his comments on FT.com.
The article mentions East End Life, which is published by Tower Hamlets council and is said to have added to the financial struggles of the East London Advertiser, a paid-for title.
Mr Fry also quotes examples in Hammersmith, Hackney and Brent, arguing councils no longer need to pay to place their ads in the commercially-run local press.
"If you look at it on a commercial level, it is damaging," writes Mr Fry. "But you also have to wonder what these council-run papers do for democracy if they put the only independent voices out of business."
Mr Fry also criticised the BBC which he claimed took newspaper content and, with little added work, reproduced it on local and regional websites, undermining the internet strategy of commercial companies.