By Andy Van De Voorde
As expected, the judge in the Bay Guardian’s predatory pricing lawsuit against SF Weekly and its parent company has issued an injunction designed to protect the Guardian against any “injury” from its longtime rival.
In a decision handed down on May 19, Superior Court Judge Marla J. Miller ordered the Weekly not to sell any advertising below cost unless it is ready to go to court and prove that its pricing decisions weren’t intended to harm the Guardian.
Miller also formally entered the judgment in the case, ordering the Weekly and New Times Media (now Village Voice Media) to pay the Guardian $15.6 million plus another $320,000 in pre-judgment interest. Additionally, she held the Weekly responsible for the Guardian’s costs and attorneys’ fees. The amount of those charges has not yet been determined.
The Weekly has said it intends to appeal the verdict, meaning that no money will change hands before the case has been heard by the California Court of Appeals.
The Weekly had urged Miller not to enter the judgment or issue an injunction, arguing that a huge award coupled with government monitoring of its day-to-day activities would constitute a violation of its constitutional rights and threaten to put it out of business.
Weekly attorney James M. Wagstaffe noted in post-trial motions that the jury award exceeds the total damages awarded and affirmed in every reported California sale-below-cost case in the last seven decades combined.
The award is also far greater than the Guardian’s total profits since its founding in 1966.
Arguing on behalf of the Weekly at a May 9 hearing, attorney Forrest A. Hainline told Miller that an injunction would force his client either to slash its costs or price its advertising at levels that local clients simply won’t pay, meaning the ads couldn’t be sold at all. Either option, he said, would represent improper meddling with the First Amendment rights of a newspaper, which ought to be able to spend whatever it wants on producing journalism.
Hainline, of the firm Goodwin Procter, made it clear that the Weekly plans to pursue the First Amendment argument as part of its appeal. Just because the Guardian has chosen to slash its editorial staff and rely heavily on unpaid interns in an effort to “live within its means,” he said, doesn’t mean the Weekly and VVM should be forced to follow suit.
However, Miller expressed skepticism about the free speech argument at the May 9 hearing, suggesting that for purposes of her ruling she didn’t see any difference between a newspaper and a company that sells “cooking oil or flour.”
That comment prompted Hainline to respond, “This isn’t Crisco, it’s advertising. It’s protected speech.”
Given the judge’s earlier comments, it came as no surprise that she chose to rule in favor of the Guardian, which recently published a story describing the Weekly’s First Amendment arguments as “whining.”
In fact, in issuing the injunction and judgment, Miller didn’t bother to create a new document, instead taking the proposed judgment submitted to her by the Guardian and simply writing in the amount of the judgment by hand.
Miller’s one change was a scrawled provision noting that the injunction does not apply to classified advertising. The Guardian had included allegations regarding classified advertising in its original complaint, but dropped that claim prior to trial, perhaps because allegations about “below cost” classifieds might appear bizarre in a Bay Area market where Craigslist has prospered by giving away such ads for free.
However, the judge made it clear she intends to closely monitor the Weekly’s sale of display advertising, which is its main source of income. And her injunction singles out the Guardian for special protection from Weekly prices—or even proposed Weekly prices.
“For a period of ten years beginning on the date of this judgment, the SF Weekly LP is enjoined from offering or selling advertising space in the SF Weekly, or any other publication in competition with plaintiff, at a price below the fully allocated average cost of that space for the purpose of injuring plaintiff the Bay Guardian Co., Inc., unless SF Weekly LP can establish by a preponderance of the evidence that an offer or sale alleged to violate this injunction falls within an affirmative defense to the below cost sales prohibitions of the Unfair Practices Act,” reads the injunction.
The only relevant affirmative defense provided under the UPA is a “meeting competition” defense. According to Miller’s Jury Instruction No. 32 in the case, that defense can only succeed if a defendant “meets but doesn’t beat” a competitor’s price. In other words, in seeking to comply with the Depression era statute, the Weekly could legally offer the same price as a competitor, but couldn’t intentionally offer a lower one.
And in fact, at the May 9 hearing, Guardian attorney Ralph C. Alldredge told Miller that if the Weekly simply charged the same rates as the Guardian, it would have an ironclad defense with regard to any alleged violations of the judge’s injunction.
Alldredge made the comment despite the fact that the Weekly has always had a lower circulation than the Guardian, and thus would be expected to offer lower prices.
Now that Miller has entered the judgment, the Weekly is allowed to file motions asking the judge to grant a new trial or set aside the verdict. Assuming the judge denies those motions, the paper would have sixty days to take its case to the Court of Appeals.