The Guardian v. SF Weekly trial swung into high gear today with both sides presenting opening statements and the first Guardian witnesses taking the stand. The early presentations gave a clear sense of where the trial will go.
Ralph Alldredge, representing the Guardian, laid out the essence of the case:
Over the past 11 years, the SF Weekly, later joined by the East Bay Express, have systematically sold ads below cost. The cost-cutting was so dramatic, he said, that during that period the two papers lost a total of $25 million, and those losses have been escalating.
That, he explained, was not because the people who run the Weekly and ran the Express are bad managers. It’s because they were attempting to damage the locally owned competitor. “If you’re not trying to make a profit,” he asked, “what are you trying to do?”
In fact, while the Weekly lawyers have argued consistently (and would argue later in the day) that the market is packed with different competitors, and that the Weekly didn’t see the Guardian as its only or even primary competition, internal memos show that Weekly and New Times staffers were obsessed with beating the Guardian. The memos consistently refer to the “battle” and “the way” and use terms like “frontal assault.” And those memos weren’t discussing the entire universe of competition – they focused only on the Guardian.
In fact, New Times executives put together a quarterly “Guardian report” focused entirely on how well the Weekly was doing taking ads away from the local paper.
In just one instance that Alldredge mentioned, The Weekly inked a deal with Clear Channel in 2005 that was designed in part to take ads away from the Guardian. Under the terms of the deal, the Weekly would get the bulk of the company’s alternative weekly ads – and “the competing paper [the Guardian],” a memo from a Clear Channel official states, “gets 15% to 0.”
H. Sinclair Kerr, attorney for the Weekly, didn’t deny that his client had sold ads below cost; in fact, he admitted it, right up front. But he insisted that all of those sales were perfectly legal because they were done either to increase the paper’s market share or to meet competition.
Kerr posted a graphic showing that the Bay Area is home to more than 140 newspapers and scores of radio and TV stations, and he argued that all of those outlets were part of the Weekly’s competition. “The reason we were selling below cost,” he said, “is because that’s the only price we could get.”
However, memos from his clients that were presented by Alldredge don’t mention any other newspapers or other types of media. It appears clear from the evidence presented so far that the Weekly and New Times executives considered the Guardian their single most important competitor.
The presentations today suggest that the trial will come down to the question of intent and the damage that the Weekly and its chain owners have done to the Guardian.
