In his letters to Hoisington and Kydd, Allegretti referred to a 2008 predatory-pricing court case, Bay Guardian Company vs. New Times Media, LLC. The Bay Guardian newspaper was awarded $21 million in damages after a jury found the Guardian’s rival alternative newspaper, the SF Weekly, guilty of underpricing ads with the intent to drive the Guardian out of business. In that case, the Guardian presented evidence that shortly after New Times Media acquired the SF Weekly, a corporate executive told Weekly staff that New Times “would make the Weekly ‘the only game in town’ by subsidizing aggressive advertising sales,” according to a November 24, 2010 article in the San Francisco Chronicle.
Allegretti warned Hoisington and Kydd that he has been in contact with the same legal team that represented the Guardian.
However, “It is only predatory pricing if the price reduction is implemented for the purpose of driving a competitor out of business,” says Richard Spirra, who practices media law in San Diego.
“There are legally permissible reasons for a newspaper, or any other business, to cut the price it charges customers to below the company’s cost of producing its product. For example, a company may offer a significant discount to new customers to generate new business.”
Predatory pricing cases are difficult to prove, says Spirra. “Under the applicable California law, if the defendant company’s owner or employees testify that the company had a valid reason for reducing its prices, the plaintiff must convince the jury that the company’s real reason for decreasing prices was to drive the plaintiff out of business. This is difficult because, in most cases, it is unlikely that an employee of the company will admit, or that there will be notes or memos that state, that the purpose of the price reduction was to drive a competitor out of business.”
Hoisington and Kydd say that the antitrust laws Allegretti cites are meant to protect small businesses like their own from large ones like MainStreet, not the other way around.
Jeffrey Shohet, who practices antitrust and complex business litigation in San Diego for DLA Piper, agrees.
“Predatory price litigation is typically a remedy for the smaller competitor to challenge the pricing practices of its more dominant rivals. Typically, the predatory ‘pricer’ is the larger company with resources to price below its cost and outlast its smaller rivals who cannot match such low prices for very long.”
Tracy Pendergast publishes the luxury real estate magazine San Diego Premier Properties and Lifestyles. In December 2009, MainStreet Communications acquired part of Premier. One year later, frustrated by Allegretti’s business tactics, Pendergast decided to buy Premier back. I called her office to ask about her experience with Allegretti.
“During our publisher meetings, he would make comments about sending letters to his competitors for selling ads below cost. He said that, technically, papers only needed to sell one page below cost to violate the law.”
Asked to comment, Allegretti stated by email, “This is a legal matter and I have no comment on pending legal matters.”
Steve Staloch, vice president of MainStreet, Joe Niehaus of Housatonic Partners, and Donald Hawks of Brookside Capital Partners Management also refused to comment.