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Appeals court upholds $21m verdict to Guardian

A state appeals court on Wednesday upheld a $21 million verdict in favor of the Bay Guardian, saying that the chain-owned SF Weekly and its parent company illegally sold ads at below cost in an attempt to run the locally-owned Guardian out of business.

Here’s the ruling, the Chron’s story and the Guardian’s report. The SF Weekly, which until now had been continuously covering the case, hadn’t posted anything about the ruling as of 4 p.m. Friday, more than 48 hours after the ruling was handed down.

“We are very pleased with the court’s decision,” Guardian owner Bruce Brugmann (left) told the Chron. “And we are particularly pleased because it upholds and strengthens the Unfair Practices Act, a 1913 legacy of the Progressive era. We are delighted to see the act properly updated in the current era of corporate and chain concentration.”

On its Website, the Guardian called Wednesday’s ruling a “dramatic victory for small independent businesses” which often find they have to compete against chain stores that temporarily lower prices below wholesale, knowing that the local independent store can’t afford to compete. After the local independent goes out of business, the chain store raises its prices and then opens a store in another community where it does the same thing all over again. It’s often been said that Walmart grew this way, moving into a small town, selling products at a loss, running local independents out of business, then jacking up its prices once there was no competition. Essentially Brugmann’s lawyers argued that the SF Weekly was behaving like Walmart.

The ruling noted that the papers had reached a settlement, but Brugmann told the Chronicle that negotiations were still continuing. Earlier, after the verdict in 2008, the Guardian has received court permission to take two of the SF Weekly’s vans and intercept 50% of the money paid by SF Weekly advertisers.

The SF Weekly and its parent company, Village Voice Media (formerly New Times Media), had denied the Guardian’s claims and argued that they violated the First Amendment.

Some reports have characterized Wednesday’s ruling as a $16 million victory. Actually the original jury award in 2008 was for $6.2 million. Judge Marla Miller added $10 million in antitrust law penalities, raising the total to $16 million. Since then, interest had added another $5 million, bringing the total to $21 million.

The ruling cleared the East Bay Express, which had been a defendant in the case because at the time it was owned by the SF Weekly’s parent company. But the ruling said that the Express had not been acquired by the Weekly’s parent at the time when the pricing scheme was taking place.

Prior to Wednesday’s ruling, Village Voice Media was expecting a victory in the appeals court.
“We fully expect to win the case on appeal, and we are heartened by the fact that the Court of Appeal has already advised us that it has read all of the briefs, is familiar with the facts of the case, has conferenced the case, and is ready to set oral arguments,” executive associate editor Andy Van De Voorde said in a March 10 e-mail to the company’s employees.

In an interview with Westword earlier this year, Van De Voorde was quoted as saying, “The Guardian is trying to drum up headlines and damage our business by creating the entirely inaccurate perception that we’re going to start selling off papers in order to meet this judgment. And that’s not going to happen.”

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