Battle For Ad Dollars Turns Nasty p. 9

By: M.L. Stein Political, racial overtones surface in competition for San
Francisco's legal notice ads; free-distribution paper charges
Examiner with predatory pricing, 'redlining' circulation sp.

A BATTLE WITH strong political and racial overtones is being waged between the San Francisco Examiner and a tri-weekly newspaper for a lucrative contract to publish the city's legal notice ads.
The Examiner has submitted a low bid of $302,000 for the business, $191,000 less than that proferred by the free-distribution San Francisco Independent, which now holds the contract.
The City of San Francisco's purchasing department has recommended that the Board of Supervisors accept the Examiner's offer but the issue has been tied up for months in political wrangling. The San Francisco Chronicle, which has the Bay Area's largest circulation, submitted the highest bid.
Supervisor Terrence Hallinan and other board supporters of the Independent have taken up the weekly's argument that the Examiner's circulation is smaller and that it has "redlined" certain black neighborhoods, refusing to deliver there.
The Examiner's daily circulation, which is mostly single-copy sales, averages 137,000, but its Sunday paper, which is combined with the Chronicle, its joint operating agreement partner, hits 730,318.
Independent publisher Ted Fang says his audited newspaper reaches 207,000 San Francisco homes out of a total of 300,000.
Under city regulations, the public notice contract must be given to the lowest-bidding newspaper with a weekly circulation of at least 50,000.
Fang accuses the Examiner of "predatory pricing" designed to drive the Independent out of business. He also claims the Examiner's bid is misleading in that it does not take into account its higher ad rate for the Sunday paper in which some legal notices appear. If the Sunday edition is factored in, the true cost to the city would be more than $500,000, the publisher asserted.
"But no matter what their rates are, their circulation is so low that the city would be awarding them a contract without looking at the poor returns," Fang said in an interview.
Fang, whose paper has had most of the city's legal advertising since July 1990, insists the Examiner is redlining particular areas.
"If you live in a black neighborhood you can't subscribe to the Examiner," he said. "If that's not redlining, I don't know what is."
Richard Randles, metro circulation manager for the San Francisco Newspaper Agency, which handles the business side of the joint operating agreement, denied Fang's allegation of predatory pricing and redlining.
He acknowledged that the Examiner's independent carriers have refused to deliver in certain neighborhoods for "safety reasons," but added that those pockets are served by racks, retail outlets and mail subscriptions.
Scoffing at Fang's "predatory pricing" allegation, Randles said of the Examiner's bid: "We look at our rates very closely. We don't sell advertising unless it's going to make a profit."
Randles also disputed the Independent's stated circulation coverage, charging that it is not delivered to seven downtown zip codes.
Fang conceded the gap but countered that the streets in question contain mostly stores and office buildings that can obtain delivery on request. The section also is served by racks, he said.
The advertising war has become a cause c?l?bre in politically volatile San Francisco. Examiner editor and publisher Will Hearst has made a personal pitch to supervisors in addressing the redlining issue.
"There are no areas where the Examiner is not for sale," he declared. "The Independent has whole sections of the city where it doesn't deliver."
In April, more than 150 community activists rallied at the Irish Cultural Center to back the Independent's bid. Among the speakers was state Sen. Quentin Kopp of San Francisco, who was on the board of supervisors that passed the charter amendment governing contract bidding.
Kopp said it was never the board's intention to award a contract solely on the basis of a low bid. The amendment's purpose, he added, was to open up the bidding to more newspapers to recognize what non-daily papers could offer the public, such as free delivery.
Several speakers at the meeting said some residents cannot afford the Examiner's 50? newsstand price to learn about city hall meetings and other activities.
Also at the rally was Bruce Brugmann, publisher of the weekly San Francisco Bay Guardian and a longtime foe of JOAs generally and the San Francisco JOA in particular.
Brugmann, whose paper competes marginally with the Independent, contended the two dailies' antitrust exemption under the JOA enabled the Examiner to undercut the Independent's bid.
"This is a monopoly issue, a predatory pricing issue and a sunshine issue," Brugmann said.
Earlier, Brugmann engaged in a steaming argument with Wynne Car-vil, a SFNA attorney, in a City Hall corridor following a hearing on the bids.
According to the San Francisco Daily Journal, Carvil confronted the publisher on his accusation that the agency is trying to drive the Independent out of business with an unfairly low bid.
The exchange grew so heated that Carvil reportedly invited Brugmann to "step outside" to settle the matter.
By that time, someone had called police, who rushed in to calm the pair.
Interviewed by phone, Brugmann confirmed the encounter, saying that he ignored Carvil's invitation to a fight outside.
Carvil told the Daily Journal he merely had wanted the discussion to continue on the street because of the noise in the hallway.
"What really griped me was that he said I wasn't even a resident of San Francisco," Brugmann recalled. "I've been living in this town for nearly 30 years."
In other developments, the newly-formed San Francisco Free Press Coalition, comprised of 35 weekly newspapers ? many of them ethnic ? which claims a 1.3 million circulation, sent a letter to Angela Alioto, president of the Board of Supervisors, urging the board "not to be intimidated" by the Examiner's "efforts to monopolize the publishing of the city's public notices." The two top signers were Fang and Brugmann.
The Board, which is expected to make a final decision on the bid this month, also was petitioned on behalf of the Independent by the San Francisco Council of Democratic Clubs; the East and West Castro Improvement Club, a neighborhood organization; the Lesbian, Gay, Bisexual Voters Project; the Asian Business Association and other groups and individuals.
The Asian Business Association plugged for the Independent as a "minority-owned small business," but Fang, who is a Chinese American, rejected that argument, maintaining that he is seeking the contract "strictly on the merits."
Independent columnist Warren Hinckle, a former Examiner columnist, entered the fray with his published blast against the Examiner's "The Insiders" column, which charged that Fang set up dummy political clubs to help him win the contract. Fang denies this.
Supervisor Hallinan, the board's main flag bearer for the Independent, is urging his colleagues to think beyond circulation and price in deciding the ad issue. He has proposed legislation that would abolish the low-bidder requirement and leave the choice to the board.
But Supervisor Bill Maher said the current rules should be kept.
"There's too much room for political influence and unethical behavior," he was quoted in the Examiner as saying. "It starts as a political favor and can turn into much more far-reaching political corruption. If we want to change the process in the future, fine. But not now, not after you open the bids."
?(This is a monopoly issue, a predatory pricing issue and a sunshine," said Bruce Brugman, publisher of the weekly San Francisco Bay Guardian. Earlier, Brugmann engaged in a steaming argument with Wyne Carvil, a San Francisco Newspaper Agency attorney, in a City Hall corridor following a hearing on the bids.) [Photo & Caption]