Court upholds Bay Guardian verdict

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In a dramatic victory for small independent businesses in California, the state Court of Appeal ruled Aug. 11th that the state’s Unfair Practices Act protects the victims of predatory pricing as long at they can prove that a bigger company sold its product below cost and did so with the intent of damaging the smaller competitor. You can read the decision here.

The ruling in the Bay Guardian's case against SF Weekly and its chain owner could have lasting implications on anti-competitive conduct in the state.

The Bay Guardian sued the Weekly and New Times, now owned by Village Voice Media, alleging that the chain had systematically sold ads below cost in an effort to harm the locally owned independent paper. In 2008, after a six-week trial, a San Francisco jury agreed with the Guardian, and awarded more than $6 million in damages. Trial court judge Marla Miller then trebled part of the award. Today, with interest and attorney’s fees, the judgment is worth more that $22 million.

The Weekly and New Times appealed, arguing, among other things, that the California law that bars predatory pricing should require proof that the predator would be able to recoup its losses down the road – a nearly impossible standard that has eviscerated federal unfair practices cases.
In an unanimous decision, the three-judge panel rejected that claim and concluded that the state law was designed to protect small businesses from precisely the type of anticompetitive behavior demonstrated by the Weekly.

In the state law, the Court ruled, “the very gravamen of the offense is the purpose underlying the anticompetitive act, rather than the actual or threatened harm to competition.  The intent or purpose of the below-cost sale is at the heart of the statute, and distinguishes the violation from a below-cost pricing strategy undertaken for legitimate, nonpredatory business reasons.”

In fact, the Court concluded:

“The history of the amalgamation of statutes that comprise the UPA “teaches that a primary concern in the enactment of the UPA was the protection of smaller, independent retailers, especially grocers, against unfair competitive practices of the large chain stores.  As a contemporary commentator explained, the prohibitions added in 1933 on secret rebates and unearned discounts (now section 17045) and below-cost sales (now section 17043) ‘are designed to protect the retailer whose more powerful neighbor is attempting to drive him out of business.’ “

We’ll be covering the case in depth in next week’s paper. 

Comments

How much money do you wonder that the Village Voice folks spent on this litigation, only to lose in such a spectacular fashion? Seems like at least $5 million in legal fees, on top of the judgment. No wonder their company is in such sad financial shape. If they had used that money to pay down their bank debts they probably wouldn't be in default of their loans. As it is one has a hard time figuring out how they avoid bankruptcy now.

Posted by Guest on Aug. 11, 2010 @ 8:32 pm

SFWeekly don't intend to actually pay this "award" and the attorney fees are tax-deductible, so they probably figure it a sound investment.

In the charged atmosphere of civil litigation, sometimes a defendant will decide that they'd rather spend down their money and assets by giving it to a lawyer rather than giving it to the plaintiff.

It also gives them the option of ducking the judgment by filing bankruptcy. In which case, a better question would be why is the SFBG is spending so much on lawyers' fees?

Posted by Folly on Aug. 11, 2010 @ 11:32 pm

Bankruptcy should be a real hoot to watch! All the shareholder equity gets wiped out, companies are auctioned off to satisfy the banks, and 2 out of 3 employees are laid off with the rest having basically zero prospects of advancement anytime soon.

Maybe they can sell the skeletal remains of the company to Live Nation! LOL

Posted by Guest on Aug. 12, 2010 @ 7:06 am

Contigency - that's how.

Posted by BJS on Aug. 13, 2010 @ 10:18 am

Good for you Bay Guardian for sticking to your principles. You fight for all of us.

Posted by Guest on Aug. 11, 2010 @ 9:37 pm

This will be a boon to other slobs who can't do their job properly and rely on uniformed goons to force their betters to be less "competitive". We live in a world of sharing and caring, not greedy profiteering and resourcefulness!

Excelsior!

Posted by Guest on Aug. 12, 2010 @ 3:21 pm

The unemployed masses won't be solved by protecting failed businesses from big coporation. They will be just as unemployed and getting poorer by the moment.

Posted by Guest on Aug. 12, 2010 @ 6:34 pm

hey bay guardian... how about you work on improving your paper so that advertisers actually want to place adds in your paper. instead of whining, crying and litigating your competitor to death. truth is this decision will not make your third rate paper with third rate journalists any better. nor will it make advertisers more inclined to buy adds in your rag of a newspaper. it will, however, make your owners and executives that much richer. which, of course, was the whole purpose behind suing in the first place, now wasn't it?

Posted by ceanf on Aug. 12, 2010 @ 7:42 pm

What business would want to advertise in a paper that wants to put you out of business one tax, fee and mandate at a time?

Posted by matlock on Aug. 12, 2010 @ 8:27 pm

It's obvious you know nothing about the history of the SFBG nor it's owners. Bruce Brugman and his wife are not rich, never have been rich. A lot of their own money finances this lawsuit because their passion has always been to fight for JUSTICE. SFBG was responsible for exposing the illegal practices of PG&E, brought the Sunshine Ordnance to San Francisco politics, has fought against owner-owned evictions, exposed dirty dealings at City Hall and supports anyone who speaks the truth.
As to those "rich...executives", who are they? The people I know at the Guardian are working at the same rate of pay for two years now. Maybe you meant the rich executives at the SF Weekly?

Posted by BJS on Aug. 13, 2010 @ 10:16 am

They have fought their bad faith legal battle to the bitter end and now it's time to treat them like they treated you and everyone in SF. Please don't settle for a penny less than the 22 million and counting that they owe you.

They don't believe in fair business or free markets. They believe in financial dominance and captured markets, everything that is wrong with America now and everything the Guardian has stood up against for decades.

The right thing to do now is SEND A MESSAGE by COLLECTING EVERY PENNY.

SHOW THE WORLD THAT VULTURES CAN'T ESCAPE JUSTICE THROUGH FINANCIAL SMOKE SCREENS.

Please don't let them off the hook now. You don't just fight for yourself now, you fight for everybody who has watched our country collapse because of vulture capitalism.

Everyone is on your side now, the judges, your readers, everybody who has watched these banker scumbags loot America. TEAR THEM APART!!! EAT THEM!!!!

Thank you!!!!!!!

Posted by Guest on Aug. 13, 2010 @ 9:46 am