Examiner sues Chronicle, alleging predatory ad-pricing scheme

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Today the San Francisco Newspaper Company, which owns the Bay Guardian, announced it was suing the Chronicle, accusing it of below-cost competition. You can read the story, by Joe Eskenazi, below. --Ed.

The parent company of the San Francisco Examiner sued the Hearst Corporation Tuesday, accusing its San Francisco Chronicle of illegally targeting Examiner advertisers with secret, below-cost rates in an attempt to bleed the smaller paper.

The San Francisco Newspaper Company, which owns the Examiner, SF Weekly, and the San Francisco Bay Guardian, alleges that the Chronicle offered ad space to advertisers for a fraction of its cost on the condition that the advertisers not buy ads in the Examiner

"Hearst has demanded and obtained agreements from key advertising customers, which preclude those customers from purchasing any advertising space from the Examiner for a period of a year or more," the suit said. "In many cases, these discounts were specifically conditioned on the advertiser agreeing to purchase advertising services exclusively from Hearst and requiring it to stop doing business with the Examiner. The suit calls for an injunction prohibiting the Chronicle from selling below-cost ads. The suit also requests financial damages "in an amount to be proven at trial." Per the law, that dollar figure could then be tripled.

The California Unfair Practices Act limits a business' ability to sell goods or advertising below cost. It also prohibits secretly offering varying rates to different customers for the same services, or doling out "loss leaders. A loss leader is a giveaway or deep discount on additional services used as an incentive to sweeten a separate deal. In one such instance, the suit says the Chronicle threw in $200,000 worth of free ad space in a deal with one advertiser.

The Examiner claims that Hearst engaged in all three of these activities, which are proscribed by the state's Unfair Practices Act.

This is the same state law that SF Weekly's former owner, New Times, was found to have violated in selling ads below cost with a purported intent to sink the then-independent Bay Guardian. The Guardian ultimately was awarded $15.6 million — though later accepted a much smaller, undisclosed settlement. Ironically, both the Weekly and Guardian were subsequently obtained by the San Francisco Newspaper Company.

The allegations against the Chronicle are reminiscent of those made against New Times: The larger company is accused of using profits from its other cash-generating properties to subsidize below-cost competition against the Examiner, which lacks similar resources. Some of the players are even the same: The Examiner's lead counsel Ralph Alldredge helmed the Guardian's successful case.

Greg Gilchrist, another Examiner attorney, claims the paper can produce material evidence proving the Chronicle not only targeted Examiner advertisers with deep discounts — as low as $1,000 "or even less" for full-page ads listed at between $59,000 and $92,000 on the Chronicle's advertising rate card — but, on occasion, demanded exclusivity in return for secret and preferential rates.

"We believe they are backing up their below-cost pricing with exclusivity obligations — and that makes it very hard to compete," Gilchrist said. Who's getting a deal and who's paying retail isn't coincidental, the suit alleges. "We believe when discriminating and charging secretly low prices, they were particularly apt to do that when they were identifying past, current, or prospective Examiner advertisers," Gilchrist said.

When advertisers purportedly informed Examiner executives that they'd received Chronicle offers too good to refuse — and they could no longer work with the Examiner — management at the papers started talking. Examiner President Todd Vogt met with the Chronicle's Frank Vega, Mark Adkins, and Jeff Bergin. The suit claims that the Chronicle executives professed ignorance of the alleged scheme.

In mid-May, Adkins, the Chronicle's former president, was transferred to Hearst's paper in Beaumont, Texas. This move was characterized as a "promotion" by Vega, the paper's publisher — who abruptly retired one week later. Bergin remains the paper's vice president of advertising. All three are named as co-defendants in the case.


Comments

Definition of insanity: doing the same thing over and over and expecting different results.

Posted by Guest on Jun. 25, 2013 @ 3:27 pm

Taking a page from the Bruce B. playbook.

Did Herr Bruce ever collect the $20 million he was awarded from the lawsuit against the Weekly? And if so, did he put any of his profits back into the SFBG to help keep it afloat?

No? What's Herr Bruce doing with all that dough?

P.S. Where's Johnny Angel these days? I miss his erudite commentary.

Posted by Ralph on Jun. 25, 2013 @ 3:55 pm

the judgment, mostly because otherwise Bruce could never have collected anything.

I see no problem with any business charging whatever it wants.

Posted by anon on Jun. 25, 2013 @ 6:11 pm

there has been little change in the newspaper business, like the Guardian claimed?

Posted by matlock on Jun. 25, 2013 @ 7:24 pm

ever since Vogt took over all these papers, now all they do is write about themselves. what a load of poo.

also love seeing Eskenazi's story in the GUARDIAN, an ultimate FU to Tim Unemployed Redmond.

CORPORATE RULE FOR ALL

Posted by Guest on Jun. 27, 2013 @ 9:48 am

Even Todd Vogt admits that Tim is the best in the biz. Here are his words, "Tim Redmond is the best and most knowledgeable progressive journalist. Period." So you can gloat, but it's only a matter of time before Tim gets snapped up. But I'm hoping he launches something new: a truly progressive paper that is not just another corporate rag.

Posted by Sofia on Jun. 27, 2013 @ 10:04 am

Recently he has come across as just ranting, so it's not clear he will land on his feet.

But Tim is wealthy enough for it not to matter - he'll just blog, tweet and such.

Posted by Guest on Jun. 27, 2013 @ 10:24 am

and you always claimed he was envious of the rich. Ha! You're too much.

Posted by Guest on Jun. 27, 2013 @ 10:57 am

the same as being a billionaire.

But yes, the hypocrisy here was Tim claiming to be one of the great unwashed, and hating on the rich, while he lives in a million dollar home with his high-earning lawyer wife.

Posted by Guest on Jun. 27, 2013 @ 11:10 am
Posted by Guest on Jun. 27, 2013 @ 10:25 am

Aside from the conversation going on above, the point of the article is absolutely ludicrous. I'm happy that I'm living in a regulated industry where competition isn't taken that lightly in the best interests of everybody involved. Then again, in the self storage industry, it's hardly as mobile an advertising vehicle as a magazine. In any case, I'm glad to read up about situations happening like these so we can be prepared for the signs elsewhere.

Posted by Cameron Robertson on Mar. 12, 2014 @ 12:16 am

I support you folks all the way. San Francisco needs your excellent journalism so screw the Chron if they're playing illegal games like what's described.

Posted by Guest on Mar. 12, 2014 @ 1:26 am

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