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Tuesday, February 26, 2008

The Last Witness

Posted By on Tue, Feb 26, 2008 at 5:58 PM

After five weeks, testimony concludes in anti-Weekly suit.

By Andy Van De Voorde

The last witness testified Tuesday in the Bay Guardian’s predatory pricing lawsuit against the Weekly, meaning the only thing left is closing arguments.

Those won’t come until Thursday, however, because Superior Court Judge Marla J. Miller is giving attorneys for both sides Wednesday off to prepare final exhibits for inspection by the jury.

As a result, the case should go to the jury late in the day Thursday, meaning a verdict conceivably may not be returned until next week.

The last regular day of trial included testimony from three witnesses, including return appearances by Guardian publisher Bruce Brugmann and his wife, associate publisher and co-owner Jean Dibble.

Brugmann took the stand in person while Dibble, who was watching from the gallery, saw portions of her videotaped deposition played back for the jury.

Dibble’s recorded testimony presumably was presented by the Weekly—and not the Guardian—because parts of it seem to support the defendant more than they do the plaintiff.

For instance, Guardian attorneys have made much hay over the past five weeks about the fact that Weekly publishers regularly prepared “Guardian Reports” which tracked advertising in the rival publication.

The Guardian has argued that those reports reflect an injurious purpose on the part of the Weekly and suggest it was more concerned with hurting the Guardian than it was in bolstering its own profitability.

But Dibble admitted under oath that the Guardian did the same thing.

“Have you ever heard of a document called ‘The SF Weekly Report’ being generated by the Bay Guardian?” asked Weekly attorney Ivo Labar.

Yes she had, said Dibble.

“What was it?” asked Labar.

“It was a report that counted ads in the SF Weekly each issue,” said Dibble, who added that she didn’t think the Guardian was still producing such a document.

The last remark was significant because Guardian attorneys have implied that the Weekly stopped preparing regular “Guardian Reports” after being threatened with a lawsuit.

Labar also asked Dibble whether the Guardian had ever prepared similar reports for any other publication than the Weekly. She said it hadn’t.

Again, the query was relevant: Guardian attorneys have repeatedly argued that the Weekly focused exclusively on their publication to the exclusion of other competitors.

The Guardian’s own history of targeting the Weekly also was reflected in answers to “requests for admissions” that Labar read into the record.

Those answers, provided before the trial even started, showed that the Guardian has already admitted that it went after certain advertisers specifically because those businesses were advertising with the Weekly.

There’s nothing wrong with such activity, of course. But given the Guardian’s repeated attempts to point the finger at the Weekly for similar behavior, Labar apparently felt it was worth emphasizing to the jury.

The same pattern of hypocrisy permeated the twenty-minute video excerpt.

On the question of profitability, Dibble acknowledged to Labar that it took at least eight years for the Guardian to turn a profit after its founding in 1966.

Throughout the trial, the Guardian has trumpeted the Weekly’s losses (the paper actually posted operating profits in 2000 and 2001) as circumstantial evidence of a plot to price ads below their cost in order to bleed the Guardian.

Dibble also discussed the Guardian’s failed attempt to start an East Bay subsidiary in the early 1990s, a publication that shared content with its San Francisco sister and was intended to take advertising away from the East Bay Express.

Again, the action stood in contrast to the “anti-chain” rhetoric the Guardian has leveled at the Weekly and its parent company, New Times (now Village Voice Media). At one point, Guardian executive editor Tim Redmond even told the jury he believes the Weekly “has no soul” because it is owned by a chain.

Dibble’s testimony also was a reminder of the Guardian’s stubborn insistence that the Weekly alone has caused substantial damage to their profitability. The Guardian has bemoaned its plunging revenues and ad volume, but has refused to acknowledge the possibility it is being buffeted by the same winds affecting thousands of other print newspapers. Instead, the Guardian alleges it is the victim of a plot under which New Times deliberately lost more than $25 million over a period of thirteen years just so it could harm Dibble and her husband.

When Labar asked Dibble when she first realized the Internet might present competition, she reiterated her belief that Websites do not compete with the Guardian for local business.

“We don’t hear from advertisers that they’re going to the Internet,” she said.

But as has already been reported, how much Dibble knows about her own advertisers is an open question.

The associate publisher, who was presented to the jury as the person “in charge of the business side” at the Guardian, told Labar she hadn’t been actively involved in day-to-day interaction with advertisers since the late 1960s.

She seemed equally oblivious to other aspects of the Guardian’s overall performance.

For instance, despite evidence presented at trial by the founder of the Media Audit firm that the Guardian’s readership has dropped in recent years, Dibble insisted to Labar that there had been no decline—even though, by its own admission, the Guardian now prints 30,000 fewer copies each week than it used to.

Yet despite her detached role at the paper, Dibble remained certain of one thing: That the Weekly, and no one else, is to blame for the Guardian’s woes.

“I asked you before about the reason for the decline in revenues and profits and you said SF Weekly,” noted Labar. “Are there any other reasons the Bay Guardian has suffered a decline in revenue and profits?”

“No, I don’t think so,” Dibble replied.

Declines in profits—along with a healthy dose of denial—were also the subject of Brugmann’s brief return to the witness stand.

Weekly attorney H. Sinclair Kerr Jr. recalled the Guardian boss to ask him about the fact that, in his previous testimony, Brugmann called into question reports that the San Francisco Chronicle has lost more than $330 million in recent years.

The Chronicle’s poor performance is in line with dozens of other American papers; dailies in Cincinnati and Albuquerque have shut down altogether in recent weeks.

The trend would appear to cast doubt on the Guardian’s claim that external economic forces (at least those beyond the Weekly) are irrelevant to its own condition.

But when Kerr asked Brugmann about the Chronicle in his previous appearance, Brugmann scoffed at the $330 million figure, called Chronicle executives “whiners,” and demanded to know where Kerr had got the information, even asking whether it came from New Times executive editor Michael Lacey.

As Kerr demonstrated yesterday—and which The Snitch reported in a previous post—at the time Brugmann made those statements, the Guardian itself had already run a story (“What We Know Now,” February 7, 2007) citing the $330 million figure.

“The article reports the loss of $330 million, correct?” Kerr asked Brugmann. “Specifically the bottom paragraph on page one?”

“Okay,” replied Brugmann.

The publisher didn’t appear eager to acknowledge that he had angrily sought to discredit information that had been printed in his own paper.

“Isn’t that correct?” continued Kerr.

“I don’t know if it’s correct or not, but that’s what the sentence says,” answered Brugmann.

The publisher then proceeded to repeat his claim that chain papers are not to be trusted when reporting their financial results.

“I’ve been covering [Chronicle owner] Hearst since 1965,” said Brugmann, who failed to note that he has also sued the Chronicle, claiming, just as he has in the present lawsuit, that a competitor was to blame for his inability to sell sufficient advertising. “Their profit and loss statements have been a mystery to me for years.”

There was nothing mysterious about the day’s final witness, Bay Area publisher Bill Johnson.

Johnson, the owner of a six-paper chain, was called as a witness by the Guardian because display advertising sales at two of his papers, the Pacific Sun and the Palo Alto Weekly, were used by Guardian damages expert Clifford Kupperberg to calculate one of his many damage models.

Ironically, Kupperberg used Johnson’s papers in the first place because Weekly attorneys pointed out that his initial damage estimates had made no use of local data.

That meant Johnson came late to the case. But the publisher nonetheless arrived with some very definite opinions.

Among other things, Johnson noted that he had done “joint buys” before with the Guardian, and was personally acquainted with both Brugmann and Guardian attorney Ralph C. Alldredge, with whom he had sat on the boards of trade organizations.

Based on Johnson’s subsequent testimony, those must have been friendly acquaintanceships—especially given his somewhat remarkable insistence that illegal predatory pricing schemes happen “all the time.”

Johnson also told the jury it would have been “very rational” for the Weekly to intentionally lose millions of dollars in an effort to hurt the Guardian.

That assertion contradicted testimony from Harvard economist Joseph P. Kalt, who after studying the case, told the jury he believed it was “economically irrational” for the Weekly to think it could ever prevail in such a costly and time-consuming plot.

And Johnson’s eager endorsement of predation as a normal business tactic seemed to take the Guardian’s case even further than the lofty rhetorical heights Kupperberg had scaled.

At one point, the publisher even told the court that if “Paper A” is competing with “Paper B” for a similar group of readers, “the easiest and quickest and most efficient way” for Paper A to proceed would be to slash its prices in an effort to damage its competitor.

Johnson also lined up with the Guardian on other issues.

He said local advertisers aren’t interested—yet—in the Internet.

He said Kupperberg’s claim that the Guardian could have realized 75 percent profit margins on additional revenue it was wrongly denied thanks to the competitive behavior of the Weekly made perfect sense.

He said 9/11 and the dot-com bust were little more than a speed bump for his papers, thanks in part to his own prescient management style.

But, like Dibble, a good portion of Johnson’s testimony actually seemed to bolster the Weekly’s case, if only accidentally.

For instance, the publisher noted that his company intentionally lost money for several years at the Pacific Sun because it was putting more resources into the paper in a quest for future profitability—a strategy in line with what New Times executives have said about their plan for the Weekly.

Johnson noted that the Palo Alto Weekly lowered its circulation in an effort to increase profitability—a strategy also employed by the Weekly.

Johnson said a previous owner at the Sun had lowered ad rates in an attempt to gain a higher volume of ads—and made no claim that his predecessor must have been engaged in an illegal scam.

Johnson testified that advertisers became “price conscious” after the dot-com bust and the events of 9/11, a rare admission for a Guardian witness.

The publisher also acknowledged that both the Sun and the Palo Alto Weekly compete with daily newspapers—a statement more in league with the Weekly’s insistence that the Chronicle represents competition than the Guardian’s claim that the daily paper is irrelevant.

And under cross-examination from Kerr, it became evident that, for a man who talked so casually and confidently about giant profit margins and predatory plots, Johnson actually leads a relatively quiet life in the suburbs.

All of his papers, in fact, are suburban in nature. Four are what Johnson himself called “community newspapers” which concern themselves with daily life in quiet enclaves.

None of them accept adult advertising, which Johnson told the jury he simply wouldn’t tolerate.

The Palo Alto Weekly, the larger of the two papers Kupperberg used as a measuring stick, is mailed to readers as opposed to the newsstand distribution of the Weekly and the Guardian and runs a much higher ratio of real estate advertising than typical alternative weeklies.

And despite his affection for Kupperberg’s big profit margins, Johnson acknowledged that neither the Palo Alto Weekly nor the Pacific Sun ever posted a 75 percent margin—nor for that matter the 32.2 percent margin that Kupperberg had estimated the Guardian would have earned in 2007 if not for the Weekly.

“In any year since 2000 has the Pacific Sun had a profit of 32.2 percent?” asked Kerr.

No, said Johnson.

“Has it had a profit even half that number?”


“Has it had a profit even a quarter of that number?”

Again Johnson replied in the negative.

Closing arguments are scheduled to begin at 8:30 Thursday morning at the courthouse on McAllister Street.

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Tom Walsh


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