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The Next Newspaper Death

The long war between the San Francisco Bay Guardian and the SF Weekly will likely kill at least one of them.



As the newspaper industry struggles to stay above water, it's becoming increasingly clear that the Bay Area will lose at least one more publication in the next year or two. The only question is whether it will be that bastion of liberalism, the San Francisco Bay Guardian, or its apolitical rival, the SF Weekly. The two alternative newsweeklies, whose owners despise each other, have been locked in a legal death-struggle for the past several years, and the loser likely will be forced to throw in the towel for good.

Andy Van De Voorde, executive associate editor of the SF Weekly's parent company, Village Voice Media, said flatly in an interview last week that if his company ultimately loses its long legal battle with the Bay Guardian, it will close the Weekly permanently. "This lawsuit, from the very beginning, was designed to destroy the SF Weekly," he said. "That was their intent from the get-go." It's also a safe bet that the chain of fourteen newspapers, including the flagship Village Voice in New York, likely will have to sell off at least two of its publications if the courts order it to pay the Guardian a jury verdict from 2008 that now stands at more than $20 million and is growing by about $5,000 a day.

For its part, the Guardian has been arguing for years that the SF Weekly's parent company had tried to drive it out of business first. And there's no doubt that Village Voice Media and its predecessor, New Times, have taken funds from their other successful papers for more than a decade to prop up the money-losing Weekly and allow it to sell ads at well below the cost to print them. (The East Bay Express was part of the same chain as the Weekly until we became independent in May 2007.) The steep price-cutting, in turn, has badly wounded the Guardian, and forced it to lower prices just to compete.

Executive Editor Tim Redmond maintained in an interview that his newspaper will struggle on if the appellate courts overturn the jury's decision. "The future of the Guardian would be threatened," he said, "but we would fight on as long as we could."

However, there are reasons to be less sanguine about the Guardian's chances. After all, the paper has been bleeding advertisers for years, and the publication — once the envy of the alt-weekly world — has shrunk in size from a robust 120 pages a week in the early part of the last decade to an average of about 48 today.

Indeed, the fate of both newspapers may come down to who can hold out the longest. On that score, the Village Voice Media empire and its stable of successful newspapers likely possess the best cards. Nonetheless, the independently owned Guardian has an ace in the hole. Any day now, a San Francisco judge could grant its request to seize half of the SF Weekly's revenues as the appellate case runs its course.

The legal battle between the two papers over the past few months has been fought on two fronts — in San Francisco County Superior Court, where the Guardian is trying to begin collecting on the 2008 jury verdict, and in the First District Court of Appeal, where the Weekly is attempting to overturn that verdict. So far, the collection case has garnered more attention, but of the two, the appellate proceedings will ultimately crown the survivor of San Francisco's fifteen-year-old alt-weekly war.

The appellate case also could have ramifications beyond the fate of the two papers. If the Weekly wins, it could effectively eviscerate a section of California's Unfair Business Practices law, and thus make it nearly impossible for small, independently owned companies to fight off well-heeled competitors who try to drive them out of business. But if the Guardian wins, it could end up hurting consumers, because corporations may be fearful of offering steep discounts on their products because they will be sued for "unfair business practices."

In fact, both sides appear to agree in court that the case boils down to a fight over whether a pivotal section of California law should protect businesses or consumers.

For the SF Weekly to win, California's appellate courts will have to adopt the company's consumers-first argument. In essence, Village Voice Media contends that state courts should view anti-trust law no differently than the US Supreme Court.

To understand why requires a brief overview of the legal fight to date. In 2008, a San Francisco jury ruled in favor of the Guardian, and found that the Weekly had sold ads for years at less than what it cost to print them. The jury also found that this practice injured the Guardian because it was forced to match the Weekly's prices or go out of business. The jury awarded the Guardian $6.4 million in lost profits from October 2001 to the end of 2007. Judge Marla Miller then tripled the award as allowed under California law, and with interest and additional attorneys fees, the judgment now exceeds $20 million.

Although the jury's award was massive, the verdict was unsurprising to close observers of the case. The reason was that the Weekly effectively admitted at trial that it had sold ads at below cost, and that doing so had hurt the Guardian's bottom line. The Weekly's excuse was that it was engaging in free-market capitalism in an effort to increase its market share, and that competitors are often harmed by competition. Unfortunately for the Weekly, once it acknowledged that it sold ads at below cost and the Guardian was hurt by it, the jury essentially had no choice but to rule against the Weekly under California's Unfair Business Practices law. (The case might have gone the Weekly's way if it could have proved that it lowered prices to match the Guardian. But that would have been impossible, because the Weekly had lowered prices first.)

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