Guardian lawsuit heads to the jury
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After more than three weeks of testimony, a series of expert witnesses, reams of documents entered into evidence, and some stunning admissions on the part of the nation's largest alternative newspaper chain, the Guardian's lawsuit against the SF Weekly is headed for the jury just as this issue hits the streets.
The outcome could impact the future of the alternative press.
The Guardian is charging the Weekly and its corporate owner, Village Voice Media, with predatory pricing, arguing that the Weekly for many years sold ads below cost with the intent of harming the locally owned competitor. That would be a violation of the California Unfair Practices Act.
The Weekly's last few witnesses were slated to take the stand Feb. 26 and closing arguments are set for Feb. 27, when Judge Marla Miller told the jury that it will probably begin deliberating.
The daily newspapers and the mainstream media in general have ignored the case. "That's a shame," Mark Fitzgerald, a columnist for the trade magazine Editor and Publisher, wrote in a Feb. 24 piece that called the trial "sometimes raucous."
In fact, it's been fascinating, and the jurors have seen some remarkable evidence. Since the chain, then known as New Times, bought the Weekly in 1995, the evidence has shown that the paper has never once made a profit. In fact, the corporation has had to ship in $13 million from its Phoenix headquarters to keep the Weekly afloat.
Several top executives, including two former Weekly publishers, Troy Larkin and Chris Keating, have admitted under oath that the Weekly was selling ads below cost. The Guardian's financial expert, accountant Clifford Kupperberg, has presented evidence that the Weekly sold ads below cost as much as 90 percent of the time and that the predatory practices have cost the Guardian between $5 million and $11 million.
On Feb. 22, Everett Harry, an expert witness hired by the Weekly, as much as admitted the same thing, presenting a series of charts that showed consistent below-cost sales.
The Weekly's lawyers are arguing that the 16-paper chain and its senior management never intended to harm the Guardian. Any financial setbacks the Guardian has suffered were due entirely to the dot-com bust, the post 9/11 recession, and the rise of Internet advertising, they say.
They also say that the Weekly and the Guardian have so many competitors in the San Francisco market that it would be foolish for VVM to try to damage a single competing newspaper.
But three witnesses have come forward to testify that Mike Lacey, one of the two principal owners of Village Voice Media, specifically vowed to put the Guardian out of business when he took over the Weekly. Memos from Weekly publishers to the bosses in Phoenix refer to the Guardian as the only significant competitor and discuss how the Weekly can take ads away from the Guardian.
In some memos, Weekly executives talk of how well they are doing in San Francisco, even as the Weekly was losing more than $1 million a year. The clear implication: the Weekly publishers weren't being judged on how much money they made, but on how effectively they've tried to cripple the Guardian.
The jury will have to find that the Weekly sold below cost, that it did so to harm the Guardian, and that the Weekly's behavior played a significant role in causing the Guardian financial harm. The panel can then award damages.
Alternative papers around the country, particularly independents, are watching the trial closely. If the Guardian wins, the jury verdict could send a signal to big publishing outfits in California and in the 20 other states with similar antitrust laws that below-cost selling and attempts at market domination could be risky business.