Thursday, August 12, 2010
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C.A. Upholds $16 Million Predatory Competition Judgment
Panel Affirms Award for Bay Area Publisher in Battle Over Ad Pricing
By KENNETH OFGANG, Staff Writer
A plaintiff in a predatory pricing case need not prove that the defendant will be able to recoup losses once below-cost pricing ends, the First District Court of Appeal ruled yesterday.
That ruling came in a decision by Div. One, which affirmed a judgment of nearly $16 million in favor of the Bay Guardian Company against New Times Media LLC. The Bay Guardian and San Francisco Weekly, which New Times Media—which is now Village Voice Media Holdings, and also owns LA Weekly—bought in 1995, have long competed for advertising as “alternative” weekly newspapers in the San Francisco market.
In a footnote, the court explained that it was notified subsequent to the June 12 arguments in the case that a settlement had been reached, but that the parties did not object to the court’s partial publication of its opinion. Settlement terms were not disclosed, and the court said it would not dismiss the case as moot because it involved important issues that are likely to recur.
The Guardian claims that SF Weekly targeted its advertisers, offering them below-cost rates. SF Weekly challenged the Guardian’s damages calculations as “unreasonable, unsupported based upon speculation” and “completely exaggerated,” and presented expert testimony that its advertising prices were not designed to hurt competition.
A San Francisco Superior Court jury found that SF Weekly sold advertising space below cost for the purpose of harming the Guardian as a competition in violation of Business and Professions Code Sec. 17403. The statute makes it “unlawful for any person engaged in business within this State to sell any article or product at less than the cost thereof to such vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition.”
The jury found the actual damages to be nearly $6.4 million, a portion of which was trebled pursuant to the statute. Adding prejudgment interest brought the amount to nearly $16 million.
The defendants argued on appeal that Judge Marla Miller gave erroneous instructions based on her conclusion that a plaintiff need not prove that the defendant will be able to recoup its losses resulting from predatory pricing. But Justice Robert L. Dondero, writing for the Court of Appeal, said the trial judge was correct.
The justice acknowledged that such a recoupment provision exists under the federal Robinson-Patman and Sherman acts and under laws in at least some other states. But California’s law is different, he said.
“In section 17043...the very gravamen of the offense is the purpose underlying the anticompetitive act, rather than the actual or threatened harm to competition,” he wrote. “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.”
The justice went on to conclude that the trial judge was also correct in instructing the jury, based on Sec. 17071, that if the defendants sold advertising below cost and thereby damaged the plaintiff, there was a rebuttable presumption that it did so with the intent to harm competition.
The case is Bay Guardian Company v. New Times Media LLC, 10 S.O.S. 4687.
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