SAN FRANCISCO -- The San Francisco Examiner filed a lawsuit Tuesday alleging that the city's dominant daily newspaper, the San Francisco Chronicle, has slashed advertising prices to stifle competition.
The suit claims Chronicle owner The Hearst Corp. and officials at the paper took advantage of its greater corporate resources to "selectively and secretly" target Examiner advertisers with "below-cost and discriminatory offers designed to injure the Examiner."
The two newspapers shared business operations and revenues from 1965 until 2000, when then-Examiner-owner Hearst acquired the Chronicle and sold the Examiner to a local family.
The suit alleges the Chronicle charged significantly higher rates for ad space as expected after selling the Examiner, but reversed course when the new Examiner owners, San Francisco Newspaper Company LLC, took over in 2011.
Attorneys said the Chronicle began using the tactic when the new group, which unlike its immediate predecessors, had significant experience operating major newspapers, took over the Examiner and brought the threat of heightened competition.
"It started happening just as new ownership came in," Examiner attorney Ralph C. Alldredge said in a telephone interview.
The suit claims that the Chronicle charged less than $1,000 for space that its public rate lists said cost between $59,000 and $92,000 per page.
The Examiner alleges the intention behind the lowered rates was clearly to harm the competition.
"In many cases," the lawsuit says, "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 seeks damages it says will be determined at trial, and an injunction keeping the Chronicle from charging below cost for advertising and from keeping prices secret.
At issue is the same state law behind a suit involving San Francisco's alternative weeklies, where a jury in 2008 found the SF Weekly engaged in predatory price-cutting on advertisements in order to thwart competition from the rival Bay Guardian. The Guardian was awarded $21 million in damages but later settled for a smaller undisclosed amount.
Alldredge was also the lead attorney for the Guardian in that lawsuit, and both weeklies now belong to the same owners as the Examiner.