By: M.L. Stein
A CIVIL COURT jury has found the San Francisco Examiner guilty of unfair business practices by underpricing a twice-weekly newspaper in bidding for the city’s legal advertising-a verdict that could cost the daily over $1 million.
In a second session, the same jury decided the defendants, including Hearst Corp., and the San Francisco Newspaper Agency, should pay $348, 981. Under California antitrust law, Superior Court Judge Donald Mitchell will triple the damages.
The two-month civil trial in San Francisco pitted the Examiner against the free San Francisco Independent. By a 9-3 vote on Nov. 1, the jury determined that the Examiner made a below-cost bid to publish city legal notices in 1994 with intent to harm the Independet. A week later, the jury set the amount of damages.
Hearst is the Examiner’s parent company, and the San Francisco Newspaper bid $302,000-$191,000 below the Independet’s bid, according to court records. At the time, the city’s practice was to award the contract, held by the Independent since 1989, to the lowest bidder.
Fang said circulation of the free, twice-weekly Independent totals 570,000 for the week. The Examiner sells about 115, 000 papers daily.
The Independent since 1989, to the lowest bidder.
Fang said circulation of the free, twice-weekly Independent totals 570,000 for the week. The Examiner sells about 115,000 papers daily.
The Independent won the city contract back in 1995 -after voters approved Proposition J, an Independent-led initiative that created a new bidding system for the legal ads.
The system gives extra points to newspapers with minority ownership and free circulation, and has helped the Independent retain the contract for the past two years-despite sharply higher bids, According to court records, the Independent charged the city $3.38 per line, double the Examiner’s bid of $1.66 per line.
During the trial, Guitar and Steve Falk, the newly named CEO of the newspaper agency, testified that the Examiner did not intend to injure the Independent and was merely trying to obtain a profitable contract. At the time, he testified, Falk was senior vice president for sales and marketing.
Bruce B. Brugman, editor and publisher of the weekly San Francisco Bay Guardian, which supported the Independent in the dispute, hailed the verdict as a “”shot that will be heard around the country for all city hall officials who are in the business of placing legal advertising in local newspaper. The verdict tells them that they can no longer give the legals to a local monopoly daily with the ease of renewing a library book. They must consider the better alternative of using free community newspapers.””
A longer foe of joint operating agreements of the kind in San Francisco, Brugmann, however, placed most of the blame for the Examiner winning the bid in 1994 on city officials, not on the JOA.
“The JOA’s are just trying to get business,”” he said. “”But I blame the city attorneys and the Board of Supervisor for allowing the JOA to use its muscle to break the law by predatry pricing and bid-rigging.””
?(The Examiner’s bid was “” proper, above out fully allocated costs and completely legal. We are disappointed in the verdict.)[Caption]
?(-Lee J. Guitar, publisher, San Francisco Examiner) [Photo]
?(Independent publisher Ted Fang termed the jury rulings “”toal victory”” and labeled the planned appeal a “”smoke screen”” to cover the Examiner’s week case.) [Photo & Caption]