Daily Journal: Trial to start in Bay Guardian's suit over rival's ad costs

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SAN FRANCISCO - For the 30th anniversary edition of The San Francisco Bay Guardian, founders Bruce B. Brugmann and Jean Dibble, his wife, posed for a cover shot in front of their home.

Dibble wore an apron and an overall-clad Brugmann held a pitchfork, recreating one of this country's most famous paintings, Grant Wood's 1930 "American Gothic."

The photo was a nod to the couple's Midwestern roots. Wood's portrait depicted an Iowa dentist and his sister; Brugmann and Dibble came to San Francisco from Rock Rapids, Iowa, to start the Guardian in 1966.

But it wasn't a pitchfork that got the unapologetically left-leaning newspaper going. It was a lawsuit.

In 1970, Brugmann sued the San Francisco Newspaper Agency, which operated the San Francisco Chronicle and the San Francisco Examiner under a joint operating agreement. Brugmann's complaint asserted that the agreement constituted a monopoly.

The case settled for $500,000, and Brugmann used the money to increase the frequency of his publication.

Forty years later, Brugmann is back in court with another anti-competitive lawsuit.

This one, against SF Weekly and its parent chain, New Times Newspapers, asserts that the Weekly sold its advertisements below what it cost to produce them in an effort to push the Guardian out of business. Bay Guardian Co. v. New Times Media, 435585 (S.F. Super. Ct., filed Oct. 19, 2004).

Jury selection is set to begin Thursday in San Francisco County Superior Court, Judge Marla J. Miller's courtroom.

Brugmann's suit also claims below-cost ad sales or "predatory pricing" by the East Bay Express, which New Times bought in 2001 but sold last year. New Times merged with and became Village Voice Media in 2006. Its 17 publications make it the largest chain of alternative newsweeklies in the United States.

New Times executives and its attorneys deny that either the East Bay Express or SF Weekly sold ads below cost in an effort to rid the market of the Guardian.

Experts say predatory-pricing cases are interesting because of the inherently economic and somewhat theoretical aspect of the claims. What is cost, and how should it be determined? And, perhaps more important, does the plaintiff need to prove that the defendant would be successful post-predatory pricing?

In California, at least, the latter may be debatable.

SF Weekly launched in 1989. When New Times bought the Weekly in 1995, the Bay Area became one of three places New Times had a direct competitor in the market. In the second and third places, Cleveland and Los Angeles, New Times competed with rival Village Voice Media papers. In 2002, a "market-swap" deal between the chains eliminated head-to-head competition in those cities but caught the attention of the Justice Department. In January 2003, both companies signed a consent decree agreeing to aid competition by selling the rights to their former paper names. Neither admitted wrongdoing.

Brugmann points to that incident as evidence that New Times has a history of eliminating competition, but a pretrial motion from New Times barred any reference to the deal at trial.

The Weekly and the Guardian are both distributed free and depend largely on advertising revenues.

Although generally more politically moderate - and far less likely to take on such constant Brugmann targets as Pacific Gas and Electric Co. - the Weekly closely parallels the Guardian's other qualities, including ubiquitous advertising for medical-marijuana clubs, "escort" services and bars and restaurants.

San Francisco Kerr & Wagstaffe attorneys H. Sinclair Kerr, James M.