SN&R’s CEO warns of predatory pricing

News professionals and California politicians understandably are concerned over big media outlets like McClatchy and MediaNews Group tucking every available newspaper under their wings. But even if all the dailies in the Bay Area are snatched up, a certain brand of newspaper, weeklies like the San Francisco Bay Guardian and the San Francisco Weekly, will continue to offer an alternative. However, media conglomeration affects alternative weeklies too, because all papers compete for advertising dollars.

SN&R is hardly a disinterested bystander when it comes to McClatchy. SN&R CEO and President Jeff vonKaenel wrote to state Deputy Attorney General Winston Chen last week, knowing that the McClatchy-Knight Ridder deal was being scrutinized. His letter complained that, “In December of 2004, the Bee instituted a rate which was a 78 percent reduction from their normal cost, targeting my major clientele” including restaurants and nightclubs.

“What I fear is that, if there aren’t safeguards in place to prevent the Bee and Singleton from using their monopolistic pricing to pick off individual competitors, they will continue to do so until they are the only ones left standing.” With his letter, vonKaenel included rate cards for the Bee’s Friday and Sunday Ticket sections, showing substantially lower rates than for the regular daily paper.

Chen could not comment, but Frank Gevurtz, professor of law at McGeorge School of Law, explained that vonKaenel was describing what was defined in the 1930s as prohibited price discrimination. However, he said, big businesses can and do legally lower their prices to compete with their direct competitors, not necessarily to put their smaller competitors out of business.

“The key to the case would be whether McClatchy is charging below their costs and actually losing money,” he said.

Steve Weiss, the Bee’s director of marketing and public affairs, wouldn’t comment on specific ad rates but said that the Ticket targeted specific advertisers who were logical for the section. “I think by nature of the Ticket project … it includes dining and restaurants and clubs,” he said.

Whether McClatchy’s new papers also will target alternative weeklies’ major advertisers remains to be seen.