The California Supreme Court let stand Nov. 23rd a landmark ruling protecting small business from predatory chains, denying without comment an attempt by SF Weekly and its chain parent to get the high court to hear the case.
The decision brings to an end more than two years of appeals by the Weekly and Village Voice Media and effectively concludes the legal case.
The Bay Guardian sued the Weekly and the New Times chain, now known as Village Voice Media, in 2004, charging that the Weekly had systematically sold ads below cost in an effort to harm the local, independent competitor. By taking advantage of the resources of a large company, the Weekly was able to stay in business despite losing money every year, and was using below-cost pricing as a way to take ads away from the Guardian.
“We have before us the case of an ongoing, comprehensive, below-cost pricing scheme,” the Appeals Court concluded. You can read that ruling here (pdf)
The Appeals Court noted that shortly after New Times bought SF Weekly in 1995, New Times Executive Editor Mike Lacey announced that he would use the chain’s deep pockets to assault the Guardian. “The essence of Lacey’s message was that he wanted to ‘put the Guardian out of business,'”he ruling states. “The sales representatives were made aware that advertising could be ‘sold below cost’ if needed ‘in order to make a sale’ and the resources of New Times would cover the loses, even over a term of many years.”
That sort of behavior is specifically barred by California’s Unfair Practices Act, which was designed to protect small business from big chains.
SF Weekly and VVM tried to argue in their appeals that the state law should be consistent with federal antitrust law, which sets a much higher standard for proving predatory pricing. But the Appeals Court and the Supreme Court disagreed. California, the ruling now says, has every right to provide greater protections for small business than the federal government does.
There are 20 other states that have laws similar the the California Unfair Practices Act.
The ruling is a victory not just for the Bay Guardian but for small business across the state. The appellate courts have made it clear that predatory pricing is a violation of law — and the ruling can now be used by any independent merchant fighting big chains. As Ralph Alldredge, one of our laywers, noted after the Appeals Court ruling: “Think of what that means for big-box retailers, which have used below-cost selling on some products to attract customers away from small, independently owned grocery, hardware, drug, and department stores.”