Jury says chain illegally undercut weekly, must pay

This isn't a rural story, but it's about a victory for community-based journalism. A jury decided yesterday that a chain-owned alternative newspaper, SF Weekly, must pay millions of dollars to the locally owned, award-winning San Francisco Bay Guardian for undercutting it with bargain advertising rates and subsidies from the 16-paper chain, Village Voice Media of Phoenix.

The verdict of $6.39 million could grow to as much as $15.6 million because the state-court judge in the case can triple the award, reports Meredith May of the San Francisco Chronicle. Guardian Publisher Bruce Brugmann, in photo, "said the battle was a classic case of a national chain trying to squeeze out the little guy, and the competition was so unfair it could have pushed his paper, which he founded with his wife in 1966, out of business," May writes. "Although offering a lower price is the golden rule of good business, it can be illegal in California if a company purposely undercuts a rival with the specific intention of bankrupting the competition." Other states have similar laws.

Guardian Executive Editor Tim Redmond told May, "It's a victory not just for the Guardian, but for small business and independent publishers in California and everywhere because it shows that a small business has a right to a level playing field when competing with a big national chain." SF Weekly's attorney lawyer said the paper would appeal. "I do not think the evidence supports the verdict," H. Sinclair Kerr Jr. said, "and I'm confident we'll prevail in the California Court of Appeals." Village Voice Media has owned SF Weekly since 1995.

May reports, "In court, Kerr argued that outbidding your competitor is not illegal, and that Brugmann had failed to see his paper's decline was part of a national newspaper revenue slide brought on by the Internet, the dot-com bust and Sept. 11. All those factors make the competition for readers more intense for everybody, not just the Guardian, he said. Since 2000, the Guardian's annual revenue has dropped from $11 million to $6 million. The Weekly has dropped from $9 million to $6 million over the same period." (Read more)

For the Guardian's edgy coverage of the verdict, click here. For the Weekly's corporate press release, presented as a blog item, click here.