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The predatory chain
Bay Guardian challenges SF Weekly's anticompetitive business practices

By Tim Redmond

The Bay Guardian has launched the first stage of a legal offensive to stop the SF Weekly, owned by the Phoenix-based New Times Corp., from engaging in anticompetitive business practices that may violate federal and state laws.

The move follows a legal agreement in which a former SF Weekly employee agreed to pay the Bay Guardian $10,000 to settle charges that she stole confidential sales information. The Weekly and New Times remain under a permanent injunction forbidding them from using proprietary documents the employee downloaded from the Bay Guardian's computer files before taking a job at the competing paper.

In essence, the Bay Guardian's charges amount to this: the Weekly, using the money and power of a national chain, is trying to crush a locally owned competitor so that it can have the San Francisco alternative-weekly market to itself.

In a Jan. 11 letter to Weekly publisher Troy Larkin, Thomas Burke, an attorney from the firm of Davis, Wright, Tremaine, which is representing the Bay Guardian, noted that "the evidence ... demonstrates, vividly and unambiguously, the degree to which SF Weekly and New Times remain desperate to drive the Bay Guardian out of business."

The Bay Guardian "remains willing and quite capable of competing – fairly – with SF Weekly/New Times and all other publications in the Bay Area, as it has done successfully for the past 35 years," the letter states. "However, it will not stand idly by and allow SF Weekly/New Times to attempt to monopolize, engage in unlawful below-cost pricing, and compete unfairly in this market."

According to the letter, the Bay Guardian has compiled evidence that the SF Weekly has, among other things:

offered music retailers discounts of 40 percent off published rates and free half- and full-page four-color ads;

offered clubs and club promoters discounts of as much as 70 percent and told smaller clubs that they'd only get a price break if they agreed not to advertise in the Bay Guardian;

offered resort, casino, and travel-related advertisers 13 weeks or more of free full-page ads, and run free ads for real estate and housing clients without the knowledge of the advertisers.

"SF Weekly/New Times is obviously engaged in these efforts to create the entirely false impression for local and national advertisers that SF Weekly is the dominant alternative newspaper in San Francisco," the letter states.

Selling ads below cost in an effort to drive a competitor out of business and create a market monopoly is a violation of state and federal antitrust laws.

New Times has retained Roger Myers of Steinhart and Falconer, a San Francisco law firm that also represents the Hearst Corp. and the San Francisco Chronicle, to respond to the Bay Guardian charges. The Bay Guardian had received no response from the firm at press time.

Calls to Larkin and to New Times officials in Phoenix, including executive editor Michael Lacey and chief executive officer Jim Larkin, were also not returned.

Fast-expanding chain

New Times owns 12 alternative newspapers, in San Francisco, Berkeley, Los Angeles, Phoenix, Denver, Dallas, Houston, Kansas City, St. Louis, Cleveland, Miami, and Ft. Lauderdale. The chain is known for aggressive acquisition and for publishing papers that all follow a similar cookie-cutter editorial model.

In fact, some critics say, New Times wants to be the Gannett or Knight Ridder of the alternative press, buying up publications in cities all over the nation and using the economies of scale that come with a big centralized operation to eliminate local competition.

Sometimes the New Times simply buys the competition and shuts it down. When it bought the Los Angeles Reader and changed it to New Times L.A., it also bought the L.A. Village View and shut it down. In September 2000, New Times outbid two other companies to purchase a Dallas arts and entertainment publication called the Met – and then fired all the employees and rerouted phone calls to the New Times-owned Dallas Observer (see "Alternative Inc.," 1/10/01).

New Times bought the SF Weekly in 1995 from Scott Price, who had started the publication as a twice-monthly music publication called Calendar and took it weekly in 1989. It then operated for six years as an independent alternative, with news, arts, and editorials, in a fierce but friendly competition with the Bay Guardian.

Immediately after the sale was announced, Lacey and Larkin met with SF Weekly staff to announce that the publication's approach was about to change dramatically. "Lacey told us, 'This paper is fucking bullshit,' " one staffer recalled. Another staffer remembered Lacey saying, "We're not doing any more politically correct bullshit" (see "SF Weekly Is Sold," 1/11/95).

Since then the SF Weekly has become a classic New Times publication, with no editorials or endorsements, a generally cynical and often libertarian approach to politics, and little involvement in community issues. Some stories originate in Phoenix (such as the recent series on the gray whale), and some entertainment reviews, particularly movie reviews, are syndicated across the chain; the individual papers also run some solid local features and investigative reports. The design – down to the text typeface – follows the exact same formula as the other New Times papers.

Stolen records

In August 2000, a Bay Guardian advertising executive resigned her job without notice, by e-mail, on a Saturday night and was at work the following Monday for the SF Weekly. The executive printed out more than 1,000 pages of confidential Bay Guardian account records on her last day in the office. The executive consistently denied ever turning any Bay Guardian records over to New Times. No trace of the documents was ever found on the Bay Guardian premises after she left.

In a lawsuit against the executive and New Times the Bay Guardian charged that she had removed the records and taken them to the SF Weekly "in order to enhance the S.F. Weekly's competitive advantages for advertisers." Superior Court Judge Ronald Quidachay quickly issued a restraining order, which is still in effect, barring the executive and any other employee of New Times from using any of that material.

In a sworn deposition the executive admitted that she had accepted a job offer from the Weekly on Thursday morning, Aug. 10, after Larkin upped a previous offer to her by $10,000, then returned to the Bay Guardian offices and printed out the confidential records. Among those records was detailed account information for every single Bay Guardian advertiser, as well contracts and related information for the Alternative Weekly Network, a cooperative organization that sells national ads for alternative papers. AWN directly competes with the Ruxton Group, a national sales organization owned by New Times.

The potential value of the material was "tens of millions of dollars," the Bay Guardian's Jan. 11 letter stated.

The next day, Aug. 11, the executive e-mailed her Bay Guardian supervisor, saying she was sick, and then went on a tour of the SF Weekly offices.

On Monday, upon learning that the executive was working for the SF Weekly and that she had downloaded confidential records on her last day, the Bay Guardian immediately filed for an injunction barring the use of that material and sued the executive for misappropriation of trade secrets, breach of contract, breach of fiduciary duty, and intentional interference with prospective economic advantage.

New Times hired the Irvine law firm of Payne and Fears to represent the executive, who no longer works for New Times.

In a June 9, 2001, settlement agreement, the executive agreed to pay the Bay Guardian $10,000 and accept a permanent court injunction against the use of any of the Bay Guardian's confidential material.

"The Bay Guardian has demonstrated an important journalistic and entrepreneurial principle for the past 35 years – that it is possible to found and develop an independent, locally owned, alternative newspaper that can compete successfully in a big market such as San Francisco," said editor and publisher Bruce B. Brugmann, who cofounded the Bay Guardian in 1966 with his wife, Jean Dibble.

"We have always supported competition in our news columns and editorial pages, and we have for three decades competed with publications big and small, chains and conglomerates. But we insist on fair competition, and we refuse to allow a national chain of papers published in Phoenix to try to put us out of business by using the same kind of anticompetitive and predatory pricing practices as the big daily chains."

E-mail Tim Redmond at tredmond@sfbg.com.