Wednesday, March 5, 2008

Guardian Wins $15 Million;
Express Not Affected

Wed, Mar 5, 2008 at 7:15 PM

A San Francisco jury ruled Wednesday that the SF Weekly and its parent company must pay the San Francisco Bay Guardian as much as $15.6 million in damages to compensate for years of illegal below-cost pricing designed to drive the locally owned paper out of business.



The twelve-member jury ruled unanimously on most issues, the Guardian reported. The Guardian intends to return to court within the next few weeks seeking an injunction barring the Weekly from continued below-cost sales. Village Voice Media, the parent company of the Weekly, said in a statement that it would appeal the jury's ruling. An appeal of the case might drag out for several more years.

The ruling will have no impact on the East Bay Express. Contrary to what has been reported by other news outlets, this paper was not a party to the lawsuit. Rather, the Guardian's lawsuit named "East Bay Express Publishing LP," a holding company controlled by Village Voice Media, this paper's former owner. The current owners of the Express, a handful of investors led by Hal Brody and myself, purchased the assets of the paper last May and have no relationship with that company. In recognition of that, Village Voice Media agreed to indemnify us from any damages in the lawsuit.

During the trial, which had been under way for more than five weeks, lawyers for the Guardian presented evidence that Village Voice Media lost tens of millions of dollars in the Bay Area since 1996. By subsidizing below-cost ad pricing at the Weekly — and also here at the East Bay Express, which the losing party purchased in 2001 — Village Voice Media forced the Guardian to cut its own rates for advertising. Lawyers and witnesses for the Guardian blamed that rate-cutting for the losses their paper sustained in most of the years since 2001.

Lawyers and witnesses for VVM countered with evidence demonstrating that the market for newspaper advertising has worsened since 2001, when recession, the 9/11 attack, and the rise of the Internet began eating away at newspaper profits.

On appeal, Village Voice Media is expected to argue that one of the judge's instructions to the jury was overly generous to the Guardian. According to VVM's take-no-prisoners statement, which was posted on the blog of the Weekly, the judge instructed jurors thusly: "If you find that any defendant sold advertising space below cost, and any below-cost sale injured the Bay Guardian as a competitor, it is presumed that defendant's purpose was to injure competitors or destroy competition." In its appeal, VVM will probably argue that this instruction erroneously relieved the Guardian of the burden of proving actual predatory intent.

However, one aspect of the jury's ruling appears to suggest that it found predatory intent regardless of the judge's instruction. According to the Guardian's story about the ruling, "11 of the 12 jurors agreed that the paper had intended to harm competition." But no doubt the Weekly would have a different viewpoint on that matter, as with everything else about the trial.

Even the exact amount of the damages was unclear from the reporting of the two papers. The Guardian said the damages totaled $15.6 million. The Weekly said "more than $15.6 million." The San Francisco Chronicle said only $6.3 million, with Judge Marla Miller having the option of awarding treble damages of "as much $15.6 million."

Can you imagine a better argument for the importance of alternative media?

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