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Appealing to a Higher Authority 

We respond to the latest ruling in the Guardian's lawsuit against us.

Wednesday, Jul 23 2008
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On Friday, July 18, San Francisco Superior Court Judge Marla Miller, as expected, rejected arguments to overturn or modify the jury's verdict in the predatory pricing lawsuit filed by the San Francisco Bay Guardian against SF Weekly, the East Bay Express, and parent company New Times Media (now Village Voice Media).

The judgment will be appealed immediately, announced Jim Larkin, Village Voice Media CEO, in response to Miller's ruling.

Damages from the case, which were statutorily trebled, amount to over $15 million to compensate the Guardian and its owner, Bruce Brugmann, for "lost profits" purportedly caused by the Weekly. The judgment, which covers a seven-year period between 2001 and 2008, represents more money than the Guardian earned in profits in its entire 40-year history.

"Bruce Brugmann's lawsuit is economic terrorism," said Larkin. "As she has throughout the trial, Judge Miller, in the end, ignored case law, precedent, and a judge's prior rulings on this very lawsuit, not to mention the law of the land.

"Incredibly, we were found liable under Judge Miller's direction for keeping SF Weekly alive during the very difficult years after the dot-com bust and 9/11. Our multi-million dollar investment to cover losses in the San Francisco paper in this difficult economic environment was cited by the judge and Bay Guardian to the jury as de facto proof of our intent to injure the Bay Guardian."

Brugmann charged that his alternative newspaper competitors schemed to put him out of business by selling ads below cost. This plot, claimed Brugmann, deprived the Guardian of revenue that he believed was his, and his alone.

The conspirators purposely lost millions of dollars to ruin him, claimed Brugmann. Furthermore, Brugmann and his lawyers openly advocated price fixing as the cure for an ailing economy and the rigors of competition.

In 2006, Brugmann's paper was marginally profitable. Brugmann's lawyers argued that his decline in overall revenue had nothing to do with the dot-com bust, 9/11, the Bay Area's financial doldrums, Craigslist, or the Bush economy.

SF Weekly, the East Bay Express, and New Times Media were, Brugmann argued, the sole engines of the Guardian's woes.

In reality, the Guardian and everyone else sold advertising during the Bay Area's recession for whatever advertisers were willing to pay. (The San Francisco Chronicle, for example, lost over $330 million between 2000 and 2006.) Brugmann's lawyers attacked the Weekly in court for its unwillingness to engage in price-fixing with the Guardian.

"Miller's naiveté regarding competitive markets in times of economic turbulence is breathtaking," observed Larkin. "She should not be trying cases involving competitive or economic issues. Mom-and-pop advertisers in San Francisco will suffer from her handiwork, as will any aggressive new business in the city that attempts to challenge a larger, established competitor."

Instead of a bad economy and competition in the marketplace lowering prices, Brugmann explained his fortunes — or lack thereof — as a result of a plot in which he was the lone target.

This conspiracy spanned more than a decade, involved scores of salespeople who willingly sacrificed sales commissions, numerous publishing executives, thousands of small business owners in the Bay Area and across the nation, bookkeepers, accountants, and comptrollers.

Despite the size, complexity, and thousands of individuals who connived to silence Brugmann's "progressive" voice, total omerta was achieved by the conspirators.

Not a single advertiser testified in support of Brugmann's attempt to shake down his rivals.

Brugmann's legal theory was that because SF Weekly lost money, it did so to put the Guardian out of business. Brugmann used an obscure California statute authored in the Depression that outlaws documented attempts to kill competition with predatory pricing.

Brugmann could not find a single beneficiary of this alleged conspiracy to take the stand on his behalf.

If evidence was not available, Brugmann and his lawyers nonetheless had a ready solution to the ills of competition. They repeatedly suggested that the Weekly join the Guardian in a price-fixing plot targeting the small businesses in San Francisco that advertise in the two papers.

"As Brugmann's lawyer pointed out to the judge and jury repeatedly and on the record, all SF Weekly had to do to avoid this litigation was to raise advertising rates to match the Guardian's rate card. This is a plain invitation to price fixing and SF Weekly consistently declined the Guardian offer," noted Larkin. "And so we were found guilty of selling below cost with an intent to injure them."

During the trial, Guardian attorneys asked New Times witnesses why the Weekly hadn't simply "raised its prices to the same level as the Guardian and let the customer decide," effectively endorsing a price fixing plan where Brugmann would set advertising rates.

"If you believe your product is better, why not charge the same price and let the customer decide?" attorney Ralph C. Alldredge asked New Times corporate controller Jeff Marrs.

Brugmann's attorney repeated the question when former Weekly publisher Chris Keating was on the stand.

After Keating testified that, as the local publisher of SF Weekly, he had full authority to set rates, Brugmann's lawyer asked him why then he didn't just charge the same rates as the Guardian.

"You could have said, 'We will meet them, but not beat them,' couldn't you?" Alldredge inquired. "You could have told your ad salespeople not to go below the Guardian, couldn't you?" the attorney continued. "You could have offered the advertiser the opportunity to choose between the two papers at the same price, couldn't you?"

No, we couldn't. Throughout the period in question, the Weekly had a smaller circulation than the Guardian and thus couldn't simply charge the same rates as its bigger rival.

Referring to the price fixing and the pending appeal, SF Weekly attorney Don Moon predicted that the verdict would be overturned promptly at the appellate level.

"This case would never have made it to trial in the federal courts or in the courts of any other state — and the Guardian's lawyers never disputed this," said Moon. "And the California appellate courts have made it clear that competition law is about protecting consumers — in this case small advertisers — who value low prices, and not individual publishers like Mr. Brugmann, who value high prices and a guaranteed profit in a competitive marketplace."

Michael Lacey is the executive editor of Village Voice Media.

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Michael Lacey

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