Guardian trial heats up

The fireworks have started to explode in the trial of the Guardian's lawsuit against the SF Weekly
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tredmond@sfbg.com

The fireworks have started to explode in the trial of the Guardian's lawsuit against the SF Weekly and its chain parent corporation as three witnesses testified that the chain's top executive had vowed to put the Guardian out of business.

Lawyers for the Weekly and Village Voice Media, which owns the San Francisco paper and 15 others, tried aggressively to undermine the critical testimony. The Guardian is claiming the SF Weekly sold ads below cost for years in an effort to damage the local competitor. That's illegal in California.

The Weekly lawyers aren't putting up much of a fight so far over whether the paper sold ads at such cheap rates that it was losing money. In fact, evidence presented in court shows that VVM has lost $25 million over the past 11 years in San Francisco and the East Bay, where the chain until recently owned the East Bay Express.

But VVM lawyers H. Sinclair Kerr and Ivo Labar have contended the Weekly and the Express were simply cutting rates to meet competition or were trying to increase market share — and harming a competitor was never a motivation.

Three Guardian witnesses provided evidence to the contrary. Jennifer Lopez, Carrie Fisher, and Andrew O'Hehir all worked for the Weekly when the chain, then known as New Times, bought it in 1995. Lopez sold ads, Fisher was copublisher, and O'Hehir was the editor.

All three testified that Mike Lacey, one of the two top executives at the chain, arrived at the Weekly offices in January 1995 to announce the sale and told a meeting of the staff that he intended to wipe out the local competitor. At one point, Fisher said, Lacey picked up a copy of the Guardian, threw it on the floor, and said, "We don't just want to compete — we want to put the Guardian out of business."

Two of the early witnesses were Guardian copublisher Jean Dibble and me. Dibble talked about how the paper had survived recessions, economic changes, and legions of competitors over the years but was put on the ropes by the chain's predatory tactics. I talked about the impact — how the Guardian, which has to live on its revenue and has no chain with deep pockets to subsidize it, has been forced to cut costs, lay off staff, and reduce the size of the paper.

Kerr and Labar pushed us both, trying to make the case that it was the rise of the Internet and the changing demographics of the city that caused the Guardian's problems. But in fact, Dibble stated, the Guardian has lost very little display advertising business to the Internet.

On Feb. 4 the Guardian lawyers read from the depositions of Jim Larkin, VVM's chairman, and Scott Tobias, the chain's president. Among the fascinating information: Larkin testified that VVM paid between $5 million and $6 million for the East Bay Express and sold it for around $3 million, taking a big loss on the deal. Larkin also said both the Weekly and the Express were profitable when the chain bought them but that they've lost money ever since.

Most important, both Larkin and Tobias testified that they received monthly "Guardian reports" focusing on how the Weekly and the Express had been competing with the local alternative newspaper in San Francisco.