Daily Court Transcripts
May 03, 2000
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VOLUME 3
PAGES 383 - 668
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
WEDNESDAY, MAY 3, 2000
TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
ATTORNEY AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
384
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 THOMAS S. HIXSON
ATTORNEYS AT LAW
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18
19
20
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23
24
25 385
1 I N D E X
2
3 PLAINTIFF'S WITNESSES PAGE VOL.
4 COMANOR, WILLIAM S.
DIRECT EXAMINATION BY MR. SHULMAN 401 3
5 CROSS-EXAMINATION BY MR. ROSCH 468 3
CROSS-EXAMINATION BY MR. HOCKETT 523 3
6 CROSS-EXAMINATION BY MR. CONNELL 534 3
REDIRECT EXAMINATION BY MR. SHULMAN 562 3
7 RECROSS-EXAMINATION BY MR. HOCKETT 582 3
RECROSS-EXAMINATION BY MR. CONNELL 583 3
8
CLANCY, THOMAS G.
9 DIRECT EXAMINATION BY MR. SHULMAN 585 3
CROSS-EXAMINATION BY MR. HOCKETT 608 3
10 CROSS-EXAMINATION BY MR. HUSTON 618 3
CROSS-EXAMINATION BY MR. HALLING 623 3
11 REDIRECT EXAMINATION BY MR. SHULMAN 625 3
12 ROBERT E., PAGE
DIRECT EXAMINATION BY MR. SHULMAN 630 3
13 CROSS-EXAMINATION BY MR. HOCKETT 653 3
CROSS-EXAMINATION BY MR. HUSTON 660 3
14 CROSS-EXAMINATION BY MR. CONNELL 664 3
REDIRECT EXAMINATION BY MR. SHULMAN 666 3
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25 386
1 I N D E X
3 E X H I B I T S
4
PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
5
59 632 3
6 143 THROUGH 147 419 3
7 DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
8 C-352 484 3
C-353 517 3
9 C-354 419 3
H-0938 542 3
10 H-1183 390 3
H-939 546 3
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25 387
1 WEDNESDAY - MAY 3, 2000 8:38 A.M.
2
3 THE CLERK: CALLING CIVIL 2000-119, CLINTON REILLY
4 VERSUS THE HEARST CORPORATION, ET AL.
5 COUNSEL, YOUR APPEARANCES FOR THE RECORD, PLEASE.
6 MR. HALLING: GARY HALLING FOR THE HEARST
7 CORPORATION.
8 THE COURT: ONE COUNSEL PER PARTY. MR. BALABANIAN?
9 MR. HOCKETT: CHRISTOPHER HOCKETT FOR EXIN LLC.
10 MR. ROSCH: TOM ROSCH FOR CHRONICLE PUBLISHING
11 COMPANY.
12 MR. ALIOTO: JOSEPH ALIOTO FOR THE PLAINTIFF.
13 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
14 ALL: GOOD MORNING, YOUR HONOR.
15 THE COURT: WE HAVE A MOTION IN LIMINE WHICH WAS
16 FILED YESTERDAY BY MR. ROSCH CONCERNING THE TESTIMONY OF
17 DR. COMANOR. I DON'T HAVE THAT IN FRONT OF ME AT THE MOMENT.
18 IT'S A FAIRLY NARROW MOTION IN LIMINE, AND I'M INCLINED TO
19 THINK THAT WE CAN HANDLE THE MATTER DURING THE TESTIMONY OF THE
20 WITNESS.
21 LET ME ASK MR. ALIOTO WHAT RESPONSE HE HAS TO THE
22 MOTION IN LIMINE.
23 MR. ALIOTO: MR. SHULMAN WILL BE CONDUCTING THE
24 EXAMINATION.
25 THE COURT: VERY WELL. 388
1 MR. SHULMAN: MAY IT PLEASE THE COURT, GOOD MORNING,
2 YOUR HONOR.
3 MAY RESPONSE IS THAT ONE OF THE TESTS OF DR. COMANOR
4 AS AN ECONOMIST IS TO ANALYZE THE EFFECTS OF THE ACQUISITION ON
5 COMPETITION. IN ORDER TO DO THAT, MR. COMANOR HAS TO SELECT
6 BETWEEN WHAT THE CASE LAW HAS RECOGNIZED SINCE THE TRANS
7 MISSOURI FREIGHT CASE IN 1897 AS DIFFERENT MODELS OF
8 COMPETITION. ONE MODEL IS THE SO-CALLED ALLOCATIVE EFFICIENCY
9 MODEL, WHICH IS WHAT COUNSEL FOR THE DEFENDANTS PROPOUND. THE
10 OTHER MODEL IS A MODEL THAT FOCUSES ON PRESERVING THE NUMBER OF
11 COMPETITORS, AND THAT IS A -- THAT IS A MODEL OF COMPETITION
12 THAT'S RECOGNIZED IN ECONOMIC LITERATURE AS WELL AS IN SUPREME
13 COURT CASES FOR MORE THAN A CENTURY, MOST RECENTLY ASPEN
14 SKIING.
15 DR. COMANOR IN MAKING THAT ANALYSIS AND DECISION IN
16 THIS CASE DID TAKE INTO ACCOUNT THE EXISTENCE OF THE NEWSPAPER
17 PRESERVATION ACT WHICH LED HIM TO THE BELIEF THAT THE PROPER
18 MODEL OF COMPETITION FOR HIM TO USE AS AN ECONOMIST IN THIS
19 CASE IS ONE THAT TALKS ABOUT PRESERVING THE NUMBER OF
20 COMPETITORS. THAT'S MY ANSWER.
21 THE COURT: VERY WELL. MR. ROSCH?
22 MR. ROSCH: YOUR HONOR, THAT CHOICE IS FOR YOU AND
23 YOU ALONE. DR. COMANOR IS NOT AN EXPERT ON THIS SUBJECT. THE
24 SUBJECT UPON WHICH HE IS GOING TO OPINE THAT WE'RE COMPLAINING
25 ABOUT IS NOT A SUBJECT FOR EXPERT TESTIMONY IN ANY EVENT, BUT 389
1 SURELY HE IS NOT AN EXPERT; AND YOU, YOUR HONOR, ARE GOING TO
2 HAVE TO DECIDE WHAT THE PROPER STANDARD IS.
3 THE COURT: WELL, CERTAINLY THE COURT IS GOING TO
4 HAVE TO MAKE A DECISION ABOUT THE APPLICABLE LAW. TO THE
5 EXTENT THAT DIFFERENT LEGAL STANDARDS MAY INFORM THE EXPERT'S
6 TESTIMONY, I THINK IT IS APPROPRIATE FOR AN EXPERT TO TESTIFY
7 ON HIS UNDERSTANDING OF THAT STANDARD AND THEN USE THAT AS THE
8 PREDICATE FOR HIS EXPERT TESTIMONY.
9 SO I UNDERSTAND YOUR POSITION AND I AGREE ENTIRELY
10 THAT THE RESPONSIBILITY FOR DECIDING THE APPLICABLE LEGAL
11 STANDARD IS THAT OF THE COURT'S, AND THE COURT WILL ASSUME THAT
12 RESPONSIBILITY AND ATTEMPT TO DISCHARGE IT; BUT I'M RELUCTANT
13 TO PUT TOO NARROW A BOUNDARY ON THE WITNESS' TESTIMONY INASMUCH
14 AS THERE IS OBVIOUSLY AN OVERLAP THAT EXISTS BETWEEN THE
15 APPROPRIATE LEGAL STANDARD AND THE ECONOMIC CONCLUSIONS WHICH
16 AN ECONOMIC EXPERT DRAWS.
17 NONETHELESS, YOU CAN REST ASSURED THAT I'M NOT GOING
18 TO ABROGATE MY RESPONSIBILITIES TO AN EXPERT WITNESS. AND SO
19 IF YOU THINK THE TESTIMONY IS GETTING TOO FAR AFIELD, YOU FEEL
20 THAT THE EXPERT IS INSTRUCTING THE COURT ON WHAT LAW TO APPLY,
21 YOU CAN CERTAINLY MAKE AN OBJECTION; BUT I THINK I UNDERSTAND
22 THE RESPECTIVE ROLES OF THE EXPERT WITNESS AND THE COURT IN
23 THIS MATTER.
24 MR. ROSCH: THANK YOU, YOUR HONOR.
25 THE COURT: SO WITH THAT IN MIND, ARE YOU READY TO 390
1 CALL -- WELL, NOT QUITE. MR. HALLING?
2 MR. HALLING: YOUR HONOR, YOU ASKED A QUESTION AT
3 THE END OF THE DAY YESTERDAY ABOUT PLAINTIFF'S EXHIBIT 3 AND
4 THE VARIOUS NEWSPAPERS LISTED, AND YOU WANTED TO KNOW WHO WAS
5 THE OWNER OF EACH.
6 THE COURT: YES.
7 MR. HALLING: WE WANTED TO BE RESPONSIVE, AND WE
8 MADE SURE WE HAD IT RIGHT. WE CHECKED WITH THE AGENCY LAST
9 NIGHT. WE DISTRIBUTED THIS TO COUNSEL LAST EVENING. I DON'T
10 THINK THERE'S ANY OBJECTION TO IT. WE MADE IT INTO AN EXHIBIT
11 LISTING THE NEWSPAPERS ON EXHIBIT 3 AND THEN THE OWNER OF EACH.
12 THE COURT: FINE.
13 MR. HALLING: THIS IS EXHIBIT 1183.
14 MR. SHULMAN: NO OBJECTION, YOUR HONOR.
15 THE COURT: VERY WELL. 1183 WILL BE RECEIVED.
16 (DEFENDANTS' EXHIBIT H-1183
17 RECEIVED IN EVIDENCE)
18 THE COURT: 1183?
19 MR. HALLING: 1183.
20 THE COURT: THANK YOU, SIR. ALL RIGHT. THANK YOU
21 FOR RESPONDING TO THAT SO PROMPTLY.
22 MR. ALIOTO: IF IT PLEASE YOUR HONOR, I WOULD LIKE
23 TO MAKE A MOTION, IF I MIGHT. I'D LIKE TO STATE THE MOTION
24 FIRST, THEN I'D LIKE TO STATE THE GROUNDS FOR IT.
25 THE MOTION I'D LIKE TO MAKE IS FOR AN ORDER OF THE 391
1 COURT PROHIBITING HEARST FROM TAKING ANY KIND OF EMPLOYMENT,
2 ADVERSE EMPLOYMENT ACTION AGAINST ANY WITNESS IN THIS CASE
3 BECAUSE OF OR BY REASON OF THE TESTIMONY THE WITNESS GIVES IN
4 THE OPEN COURT.
5 YESTERDAY, I RESPECTFULLY INFORM THE COURT, THAT MR.
6 WHITE, WHO WAS THE PUBLISHER OF THE EXAMINER AND SUPPOSED TO BE
7 THE PUBLISHER OF THE NEW PAPER IF THE ACQUISITION EVER WENT
8 THROUGH, WAS EUPHEMISTICALLY RELIEVED, OTHERWISE KNOWN AS BEING
9 FIRED. HE WAS FIRED FOR TESTIMONY HE GAVE IN THIS CASE
10 SPECIFICALLY.
11 AND I WOULD POINT OUT TO THE COURT THAT THE POINT OF
12 THIS IS THAT HE HAD GIVEN THAT TESTIMONY, THAT VERY TESTIMONY,
13 ON DECEMBER 16, 1999, IN NEW YORK WHEN HE TESTIFIED BEFORE THE
14 JUSTICE DEPARTMENT. AND THAT'S AT PAGE 243 OF HIS DEPOSITION
15 IN THAT PROCEEDING FROM LINE 18 THROUGH TO LINE 22, WHICH I
16 WOULD LIKE TO READ INTO THE RECORD. AND AT THAT TIME HE WAS
17 ASKED THIS QUESTION AND GAVE THIS ANSWER:
18 "Q. WERE YOU INTENDING TO CONVEY TO MAYOR
19 BROWN THAT HIS SUPPORT FOR HEARST'S PROPOSED
20 ACQUISITION OF THE CHRONICLE WOULD RESULT IN
21 MORE FAVORABLE TREATMENT IN THE EXAMINER?
22 "A. YEAH."
23 SO THAT TESTIMONY WAS GIVEN, AND AT THAT TIME
24 COUNSEL FOR HEARST OBVIOUSLY WAS THERE. HEARST WAS AWARE OF
25 THIS, AND SO APPARENTLY THEY HAVE FIRED THIS MAN NOT BECAUSE OF 392
1 THE INFORMATION ITSELF BUT BECAUSE IT WAS REVEALED IN A PUBLIC
2 FORUM.
3 WE THINK THAT THIS WILL HAVE A CHILLING EFFECT ON
4 THE REMAINING EXECUTIVES OF THE HEARST CORPORATION WHO COME TO
5 TESTIFY.
6 THE PARTICULAR DOCUMENT THAT WAS USED WITH THE
7 WITNESS WHITE THAT PRECIPITATED THE TESTIMONY, WHICH WAS THE
8 SAME TESTIMONY HE GAVE IN DECEMBER, WAS EXHIBIT 78. EXHIBIT 78
9 WAS SENT TO MR. IRISH. MR. IRISH PASSED IT ON TO MR. BENNACK,
10 TO MR. GANZI, TO MR. ASHER AND TO MR. THACKERAY.
11 MR. THACKERAY -- I MEAN, MR. THACKERAY AND, OF COURSE, COUNSEL
12 FOR HEARST WERE PRESENT IN DECEMBER OF 1999.
13 WE ARE VERY CONCERNED THAT WE FEEL THAT IF ANYONE
14 FEELS, ANYONE IN THIS TRIAL FEELS THAT THEIR JOB IS IN JEOPARDY
15 IF THEY ANSWER TRUTHFULLY, THAT THAT WILL HAVE A CHILLING
16 EFFECT ON THE ASCERTAINMENT OF THE TRUTH.
17 NOW, WE WOULD THEREFORE MOVE THE COURT TO ORDER AT
18 LEAST THE DEFENDANT HEARST AND PROHIBIT THE DEFENDANT HEARST
19 FROM TAKING ANY KIND OF ADVERSE EMPLOYMENT ACTION AGAINST
20 ANYONE WHO TESTIFIES IN THIS TRIAL FOR TESTIMONY THAT THE
21 WITNESS GIVES.
22 THE COURT: THAT'S A VERY SERIOUS MATTER THAT YOU'RE
23 RAISING, MR. ALIOTO.
24 MR. ALIOTO: YES.
25 THE COURT: ESSENTIALLY WHAT YOU'RE SUGGESTING IS 393
1 THE POSSIBILITY OF WITNESS TAMPERING.
2 MR. ALIOTO: IT'S NOT IN SO MUCH -- WELL, IT'S CLOSE
3 TO IT. I BELIEVE THAT IT'S VERY CLOSE TO OBSTRUCTION OF
4 JUSTICE IN THE SENSE THAT IT INTIMIDATES WITNESSES.
5 NOW, THIS MAN WHO CAME OUT HERE FROM ALBANY, CAME IN
6 JANUARY 1999, WAS THE PUBLISHER HERE, TESTIFIED FREELY AND
7 OPENLY, GAVE THAT -- GAVE THAT VERY MEMO TO THE TOP OFFICIALS
8 IN THE HEARST ORGANIZATION, TESTIFIED FREELY IN FRONT OF THE
9 DEPARTMENT OF JUSTICE AND THEN WHEN HE CAME -- AND THAT WAS IN
10 DECEMBER. NO ACTION WAS TAKEN AGAINST HIM THEN.
11 AND THEN HE COMES HERE, HE TESTIFIES MONDAY I THINK
12 IN THIS TRIAL, AND HE WAS RELIEVED YESTERDAY FOR THE TESTIMONY
13 HE GAVE IN THIS TRIAL. AND SO WE WOULD MOVE THE COURT TO ORDER
14 HEARST, FOR THAT MATTER CHRONICLE OR ANYONE ELSE, THAT UNDER NO
15 CIRCUMSTANCES CAN ANY KIND OF RETALIATORY ACTION OR ESPECIALLY
16 EMPLOYMENT ACTION -- THIS MAN'S CAREER IS FINISHED. HE WAS
17 FIRED, AND WE WOULD MOVE THAT THE COURT PROHIBIT ANYONE FROM
18 TAKING ANY RETALIATORY ACTION FOR ANY TESTIMONY GIVEN IN THIS
19 TRIAL. THANK YOU.
20 THE COURT: MR. HALLING?
21 MR. HALLING: YOUR HONOR, I THINK THIS IS A SHABBY
22 POLITICAL STUNT THAT MR. ALIOTO IS PULLING. THERE ARE TWO
23 WITNESSES FROM THE HEARST CORPORATION THAT ARE TO TESTIFY IN
24 THIS TRIAL THAT HE'S SUGGESTING ARE GOING TO BE INTIMIDATED.
25 FIRST, SENIOR VICE PRESIDENT MR. ASHER, AND THE PRESIDENT, 394
1 MR. BENNACK. THAT'S WHO HE'S TALKING ABOUT.
2 THIS ISSUE IS IRRELEVANT TO THE CASE, AS WE POINTED
3 OUT IN THE OPENING STATEMENT. I OBJECTED TO THIS TESTIMONY
4 FROM MR. WHITE. MR. WHITE HAS NOT BEEN FIRED. HE IS ON LEAVE
5 WHILE THE MATTER IS BEING INVESTIGATED. THIS IS AN ISSUE OF
6 JOURNALISTIC ETHICS AND IT'S NOT AN ISSUE THAT'S RELEVANT TO
7 ANYTHING IN THIS CASE.
8 AND I WOULD NOTE, YOUR HONOR, IN TERMS OF HIS
9 ACCUSATIONS, WHICH ARE ENTIRELY UNFOUNDED, IF YOU LOOK AT THIS
10 E-MAIL THAT STARTED ALL THIS, IT SAYS:
11 "I ASKED WILLIE HOW I WAS GOING TO JUSTIFY
12 TO MY SUPERIORS IN NEW YORK WANTING TO SUPPORT
13 HIM AND COOPERATE WITH HIM WHEN HE WAS SEEMINGLY
14 TO GO OUT OF HIS WAY TO MAKE OUR LIVES
15 DIFFICULT."
16 THAT'S WHAT THE E-MAIL SAYS. CERTAINLY AMBIGUOUS.
17 IN HIS DEPOSITION, WHICH MR. ALIOTO TOOK --
18 THE COURT: WHAT EXHIBIT NUMBER IS THAT?
19 MR. ALIOTO: 78.
20 MR. HALLING: THAT'S 78.
21 (PAUSE IN PROCEEDINGS.)
22 MR. HALLING: IT'S THE SECOND PARAGRAPH AFTER THE
23 FIRST SENTENCE.
24 THE COURT: YES.
25 MR. HALLING: THEN IN HIS DEPOSITION, AND THIS IS AT 395
1 PAGE 224 THAT MR. ALIOTO TOOK, THIS IS THE EXTENT OF THE
2 TESTIMONY --
3 THE COURT: THIS IS THE DEPOSITION IN THIS CASE?
4 MR. HALLING: IN THIS CASE, CORRECT.
5 THE COURT: RATHER THAN THE JUSTICE DEPARTMENT.
6 MR. HALLING: CORRECT.
7 "Q. WELL, WAS HE ASKING YOU FOR YOUR
8 ENDORSEMENT?
9 "A. NO.
10 "Q. WHAT DOES IT MEAN TO JUSTIFY TO YOUR
11 SUPERIORS IN NEW YORK? WHAT DID YOU HAVE TO
12 JUSTIFY TO THEM?
13 "A. IT WAS A BROAD, VAGUE STATEMENT. I
14 DON'T NEED TO JUSTIFY ANYTHING TO THEM
15 EDITORIALLY, BUT I THOUGHT HE MIGHT BELIEVE THAT
16 I DID."
17 SO THAT'S THE E-MAIL. THAT'S THE TESTIMONY PRIOR TO
18 HIM COMING HERE.
19 NOW, IN THE CID DEPOSITION, THE PART THAT MR. ALIOTO
20 CROSS-EXAMINED HIM ON WHERE HE USED THE TERM "HORSE TRADING,"
21 IF I RECALL, REMEMBER I OBJECTED ON A COUPLE OF GROUNDS AND IT
22 WAS READ INTO THE RECORD AS IMPEACHMENT AND THE WORDS "HORSE
23 TRADING" APPEARED, THAT WAS THE CID DEPOSITION, PAGE 228, WHICH
24 WAS READ IN THE TRIAL RECORD AT PAGE 131 OF MR. WHITE'S
25 TESTIMONY. 396
1 THAT TESTIMONY ABOUT HORSE TRADING DID NOT DEAL WITH
2 THIS E-MAIL. IT DIDN'T DEAL WITH THIS ISSUE. IT HAD TO DO
3 WITH WHETHER OR NOT THE MAYOR WAS LINKING THE SETTLEMENT OF
4 ANOTHER LAWSUIT WITH PAN-ASIA, WHETHER THAT WAS BEING LINKED
5 WITH THE ACQUISITION THAT'S AT ISSUE IN THIS CASE. IT HAD
6 NOTHING TO DO WITH THIS ISSUE.
7 AND THEN HE GOT MR. WHITE TO SAY -- HE USED THAT
8 TERM "HORSE TRADING" IN VERY AGGRESSIVE CROSS-EXAMINATION THAT
9 WAS SKILLFUL, I MIGHT ADD, AND HE GOT MR. WHITE TO USE THAT
10 WORD "HORSE TRADING" IN ANOTHER CONTEXT.
11 AND IN THE TRIAL TESTIMONY MR. WHITE AT ONE POINT
12 SAID, AND THIS IS AT PAGE, YOU KNOW, 140, WERE YOU INTENDING TO
13 CONVEY -- I'M NOT READING THE TEXT OF THE QUESTION, BUT IT WAS
14 TO THE POINT OF WERE YOU INTENDING TO CONVEY THAT HIS SUPPORT
15 WOULD RESULT IN MORE FAVORABLE TREATMENT, AND THE ANSWER MR.
16 WHITE GAVE WAS, "NOT THAT SPECIFICALLY."
17 THEN LATER HE CHANGED THAT TESTIMONY AND FINALLY IN
18 OPEN COURT HE MADE SOME STATEMENTS THAT CAUSED SOME CONCERN AT
19 THE COMPANY BECAUSE IT WENT TO AN ISSUE OF JOURNALISTIC ETHICS,
20 WHICH HAS NOTHING TO DO WITH THE ANTITRUST ISSUES IN THIS CASE.
21 THIS IS A SIDESHOW. THIS IS AN ATTEMPT TO DEFAME
22 THIS -- THIS WITNESS WAS VERY AGGRESSIVELY CROSS-EXAMINED BY
23 MR. ALIOTO. THERE WAS NOTHING IN HIS CID DEPOSITION, INCLUDING
24 THE PASSAGE HE READ AND THE PASSAGE THAT HE MISUSED AT HIS
25 CROSS-EXAMINATION THAT WOULD BE ANY SORT OF JUSTIFICATION FOR 397
1 THESE KINDS OF CHARGES.
2 THE COURT: WELL --
3 MR. ALIOTO: YOUR HONOR, IF IT PLEASE THE COURT, I
4 WOULD LIKE TO STATE THAT THE ONLY REASON THAT I DID NOT USE
5 THIS PORTION OF THE JUSTICE DEPARTMENT DEPOSITION WAS BECAUSE
6 HE ADMITTED IT. BUT IF HE DIDN'T ADMIT IT, I WOULD LIKE TO
7 READ IN THE RECORD ABOUT THIS VERY MEMO IN WHICH HE WAS ASKED
8 BEGINNING ON 242:
9 "Q. WHAT DID YOU INTEND TO CONVEY TO MAYOR
10 BROWN WITH THE TERM 'SUPPORT HIM AND COOPERATE
11 WITH HIM'?
12 "A. HMM, JUST HARKING BACK TO AN EARLIER
13 CONVERSATION OF AN EARLIER LUNCH THAT I FELT SAN
14 FRANCISCO WAS A CITY WITH A LOT OF PROBLEMS AND
15 THAT WE WOULD GET THEM SOLVED BETTER WORKING
16 TOGETHER RATHER THAN WORKING AT ODDS.
17 "Q. WORKING TOGETHER MEANING THE MAYOR'S
18 OFFICE AND THE EXAMINER?
19 "A. YEAH, BUT IN A COMMUNITY CIVIC ACTION
20 KIND OF WAY.
21 "Q. WAS THE EXAMINER RUNNING ANY STORIES
22 CRITICAL OF MAYOR BROWN AT THIS TIME?
23 "A. YES.
24 "Q. WHAT WERE THOSE STORIES ABOUT?
25 "A. HMM, GOD, PICK A TOPIC. MUNI 398
1 OPERATIONS, HIS BAD HANDLING OF THE HOMELESS,
2 CONTINUING FBI INVESTIGATIONS OF CRONYISM ON
3 CITY-FUNDED PROJECTS.
4 "Q. ANYTHING ELSE?
5 "A. PROBABLY. I DON'T REMEMBER EXPLICITLY.
6 "Q. WERE YOU INTENDING TO CONVEY TO MAYOR
7 BROWN THAT HIS SUPPORT FOR HEARST'S PROPOSED
8 ACQUISITION OF THE CHRONICLE WOULD RESULT IN
9 MORE FAVORABLE TREATMENT IN THE EXAMINER?
10 "A. YEAH."
11 SO I HAD THAT EVIDENCE AND I HAD THAT TESTIMONY.
12 AND THEN WHEN I ASKED THE WITNESS THAT, IF HE DENIED IT, I WAS
13 GOING TO IMPEACH HIM AGAIN.
14 SO THE POINT IS, IS THAT THE EVIDENCE HAS ALREADY --
15 THE EVIDENCE WAS ALREADY THERE BEFORE THE EXAMINER HEARST
16 CORPORATION. THEY HAD IT IN DECEMBER. SO THE MAN WAS NOT
17 FIRED FOR GIVING THE SAME TESTIMONY THAT HE HAD GIVEN BEFORE.
18 HE WAS FIRED FOR GIVING IT IN THIS PUBLIC FORUM.
19 MR. HALLING: YOUR HONOR, HE WASN'T FIRED. HE HAS
20 NOT BEEN FIRED.
21 MR. ALIOTO: THAT'S ALL I HAVE, SIR.
22 MR. HALLING: HE'S BEING -- THERE'S AN INVESTIGATION
23 BEING DONE THAT HAS NOTHING TO DO WITH ANY OF THE ISSUES IN
24 THIS CASE. THIS IS PURELY A MATTER OF JOURNALISTIC ETHICS.
25 THE COURT: WELL, I'M NOT AT ALL SURE, MR. HALLING, 399
1 THAT THE TESTIMONY OF MR. WHITE IN THE MATTERS THAT HE
2 TESTIFIED ABOUT ARE IRRELEVANT TO THIS CASE BY ANY MEANS. THE
3 TESTIMONY WHICH HE GAVE I THINK DOES HAVE A BEARING ON THE
4 ISSUES IN THIS CASE.
5 NOW, MR. ALIOTO IS RAISING ANOTHER ISSUE, AND THAT
6 IS WHETHER THE COURT SHOULD TAKE SOME ACTION TO PRECLUDE ONE OF
7 THE PARTIES FROM TAKING ADVERSE EMPLOYMENT ACTION AGAINST A
8 WITNESS WHO APPEARS AND TESTIFIES IN THIS CASE. AS I
9 UNDERSTAND IT, THE TWO HEARST WITNESSES WHO REMAIN ARE
10 MR. BENNACK AND MR. IRISH.
11 MR. HALLING: NO, IT'S MR. BENNACK AND MR. ASHER.
12 THE COURT: MR. ASHER. BOTH OF WHOM ARE RECIPIENTS
13 OF THE WHITE --
14 MR. ALIOTO: YES, YOUR HONOR.
15 THE COURT: -- THE WHITE MEMORANDUM. LET'S SEE,
16 WHAT'S THE DATE OF IT?
17 MR. ALIOTO: THE WHITE MEMORANDUM WAS SENT
18 ORIGINALLY, THE E-MAIL --
19 THE COURT: AUGUST 31.
20 MR. ALIOTO: CORRECT. IT WAS SENT TO MR. IRISH WHO
21 IS SUPPOSED TO BE IN CHARGE OF THIS INVESTIGATION, SO-CALLED
22 INVESTIGATION. MR. IRISH IN TURN THEN SENDS IT TO MR. BENNACK,
23 TO MR. GANZI, TO MR. ASHER AND TO MR. THACKERAY.
24 THE COURT: WELL, ESSENTIALLY WHAT MR. ALIOTO IS
25 RAISING IS A POSSIBILITY OF WITNESS TAMPERING. IT'S A VERY 400
1 SERIOUS CHARGE. I'M NOT GOING TO LEAD TO ANY CONCLUSION ON A
2 SUBJECT OF THAT MAGNITUDE AND SERIOUSNESS.
3 EVIDENTLY, BASING THIS ON PRESS REPORTS, MR. WHITE
4 WAS THE SUBJECT OF SOME INTERNAL INVESTIGATION AT THE HEARST
5 CORPORATION.
6 MR. HALLING: AND I MIGHT ADD, TO CORRECT WHAT
7 MR. ALIOTO JUST SAID, MY UNDERSTANDING IS THE INVESTIGATION IS
8 GOING TO BE CONDUCTED BY AN OUTSIDER, PERHAPS A RETIRED JUDGE
9 OR PROSECUTOR. IT IS NOT GOING TO BE CONDUCTED BY MR. IRISH.
10 THE COURT: WELL, IN ANY EVENT, IT'S MY
11 UNDERSTANDING THAT THE MATTER IS PRESENTLY UNDER AN INTERNAL
12 INVESTIGATION. I THINK IT WOULD BE PRECIPITOUS TO CONCLUDE
13 THAT WHAT THAT INVESTIGATION ENTAILS IS AN ATTEMPT TO
14 INTIMIDATE A WITNESS OR TO INTIMIDATE OTHER WITNESSES, AND SO
15 I'M NOT GOING TO MAKE THAT LEAP BASED UPON THIS RECORD.
16 SO THE MOTION WILL BE DENIED, BUT OBVIOUSLY THE
17 COURT IS GRAVELY CONCERNED ABOUT ANY EFFORT ON THE PART OF ANY
18 PARTY TO MANIPULATE THE TESTIMONY OF ANY WITNESS. AND IF THERE
19 IS EVIDENCE OF THAT SORT OF CONDUCT, WHY THE COURT MAY BE
20 COMPELLED TO TAKE ACTION, BUT I DON'T THINK THAT EVIDENCE IS
21 YET BEFORE THE COURT.
22 MR. HALLING: YOUR HONOR, I CAN ASSURE YOU ON BEHALF
23 OF MY CLIENT THAT NO SUCH ACTION IS TAKEN.
24 THE COURT: VERY WELL. ALL RIGHT, MR. ALIOTO, ARE
25 YOU READY WITH YOUR NEXT -- MR. SHULMAN, ARE YOU READY WITH 401
COMANOR - DIRECT / SHULMAN
1 YOUR NEXT WITNESS?
2 MR. ALIOTO: MR. SHULMAN.
3 MR. SHULMAN: MAY IT PLEASE THE COURT, THE PLAINTIFF
4 CALLS TO THE STAND DR. WILLIAM S. COMANOR.
5 THE CLERK: PLEASE RAISE YOUR RIGHT HAND.
6 WILLIAM S. COMANOR,
7 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
8 TESTIFIED AS FOLLOWS:
9 THE CLERK: PLEASE BE SEATED.
10 STATE YOUR FULL NAME AND SPELL YOUR LAST NAME.
11 THE WITNESS: WILLIAM S. COMANOR, C-O-M-A-N-O-R.
12 DIRECT EXAMINATION
13 BY MR. SHULMAN:
14 Q. AND, DR. COMANOR, WHAT IS YOUR HOME ADDRESS?
15 A. 519 SOUTH ARDEN BOULEVARD, LOS ANGELES.
16 Q. AND WHAT IS -- WOULD YOU STATE FOR THE COURT YOUR
17 EMPLOYMENT, PLEASE.
18 A. I AM PROFESSOR OF ECONOMICS AT THE UNIVERSITY OF
19 CALIFORNIA SANTA BARBARA AND ALSO PROFESSOR OF HEALTH SERVICES
20 AT U.C.L.A.
21 Q. OKAY. I'M GOING TO DIRECT YOUR ATTENTION TO YOUR
22 CURRICULUM VITAE WHICH HAS BEEN STIPULATED INTO EVIDENCE AS
23 ACTUALLY CHRONICLE EXHIBIT 343. IT'S THE SAME AS PLAINTIFF'S
24 EXHIBIT 148.
25 MR. SHULMAN: SO IF YOU COULD PUT THE FIRST PAGE OF 402
COMANOR - DIRECT / SHULMAN
1 THAT UP.
2 MAY I APPROACH THE WITNESS, YOUR HONOR?
3 THE COURT: YES, YOU MAY.
4 THE WITNESS: I APOLOGIZE FOR MY COUGH, YOUR HONOR.
5 THE COURT: I UNDERSTAND AND EXPERIENCE THE SAME
6 THING FROM TIME TO TIME, SO DON'T WORRY ABOUT IT. WE HAVE
7 REMEDIES FOR THE PROBLEM IF IT PERSISTS.
8 THE WITNESS: THANK YOU.
9 BY MR. SHULMAN:
10 Q. NOW, DR. COMANOR, WOULD YOU JUST VERY BRIEFLY RUN OVER
11 YOUR EDUCATIONAL BACKGROUND FOR US?
12 A. YES. I GRADUATED IN 1959 FROM HAVERFORD COLLEGE IN
13 PENNSYLVANIA WITH HIGH HONORS IN ECONOMICS. AND I RECEIVED MY
14 PH.D. IN ECONOMICS FROM HARVARD UNIVERSITY IN 1964. AND I
15 SPENT ONE YEAR POST-DOCTORAL STUDY AT THE LONDON SCHOOL OF
16 ECONOMICS 1963-'64.
17 Q. OKAY. IF WE CAN GO TO THE SECOND PAGE, CAN YOU DESCRIBE
18 FOR US YOUR PROFESSIONAL CAREER?
19 A. YES. I REMAINED AT HARVARD UNIVERSITY AS AN ASSISTANT
20 PROFESSOR OF ECONOMICS AFTER RECEIVING MY PH.D.
21 NOW I'M GOING TO TALK ABOUT MY ACADEMIC POSITIONS.
22 I MOVED TO STANFORD AS AN ASSOCIATE PROFESSOR IN THE GRADUATE
23 SCHOOL OF BUSINESS FROM 1968 TO 1973. I TAUGHT FOR A YEAR IN
24 CANADA AT THE UNIVERSITY OF WESTERN ONTARIO ALSO IN ECONOMICS,
25 AND RETURNED TO HARVARD UNIVERSITY AS A VISITING PROFESSOR 403
COMANOR - DIRECT / SHULMAN
1 '64-'65.
2 AND THEN SINCE 19 -- SINCE 1975 I SHOULD HAVE SAID.
3 SINCE 1975 I HAVE BEEN PROFESSOR OF ECONOMICS AT THE UNIVERSITY
4 OF CALIFORNIA SANTA BARBARA; AND, AS YOU CAN SEE, I WAS
5 CHAIRMAN OF THE DEPARTMENT OF ECONOMICS AT U.C.S.B. IN THE
6 MID-'80'S.
7 I WAS VISITING PROFESSOR OF LAW AT U.C.L.A. FOR TWO
8 YEARS 1988 TO 1990. I BECAME A VISITING PROFESSOR OF PUBLIC
9 HEALTH FOR TWO SUCCEEDING YEARS, AND THEN I RECEIVED AN
10 APPOINTMENT IN THE DEPARTMENT OF HEALTH SERVICES AT U.C.L.A.
11 AND HAVE BEEN A PROFESSOR OF HEALTH SERVICES SINCE 1993.
12 SO THOSE ARE MY ACADEMIC POSITIONS.
13 Q. OKAY.
14 A. IN ADDITION TO THAT, I'VE HAD TWO POSITIONS IN THE FEDERAL
15 GOVERNMENT.
16 Q. OKAY. WOULD YOU STATE WHAT THOSE ARE, PLEASE, AND WHEN
17 YOU HELD THEM?
18 A. IN 1965-'66 I WAS SPECIAL ECONOMIC ASSISTANT TO DON TURNER
19 WHEN HE WAS CHIEF OF THE ANTITRUST DIVISION IN THE U.S.
20 DEPARTMENT OF JUSTICE. SO I WORKED DIRECTLY WITH THE ASSISTANT
21 ATTORNEY GENERAL FOR ANTITRUST.
22 AND THEN AGAIN IN 1978 THROUGH 1980 I WAS THE CHIEF
23 ECONOMIST AND DIRECTOR OF THE BUREAU OF ECONOMICS AT THE
24 FEDERAL TRADE COMMISSION IN WASHINGTON WHERE I WAS RESPONSIBLE
25 FOR ALL OF THE ECONOMIC ACTIVITIES AT THE FTC AT THAT TIME. 404
COMANOR - DIRECT / SHULMAN
1 THE COURT: EXCUSE ME, MR. SHULMAN, DID YOU SAY THE
2 CURRICULUM VITAE OF THIS WITNESS IS EXHIBIT 343?
3 MR. SHULMAN: THAT IS THE -- YES, IT IS CHRONICLE
4 343. WE HAD ALSO MARKED IT AS A PLAINTIFF EXHIBIT AND IT IS
5 THE SAME AS PLAINTIFF EXHIBIT 148.
6 MR. ALIOTO: 148.
7 MR. SHULMAN: 148, BUT THAT HAS NOT BEEN STIPULATED
8 INTO EVIDENCE OUR EXHIBIT, SO WE'RE USING THE CHRONICLE NUMBER.
9 THE COURT: BUT IT'S THE SAME EXHIBIT?
10 MR. SHULMAN: SAME THING, YOUR HONOR.
11 THE COURT: VERY WELL. I'M SORRY FOR THE
12 INTERRUPTION.
13 BY MR. SHULMAN:
14 Q. DR. COMANOR, CAN YOU DESCRIBE THE TYPE AND NATURE -- THE
15 TYPES OF COURSES THAT YOU HAVE TAUGHT AS AN ACADEMICIAN?
16 A. MY FIELD OF SPECIALIZATION IS INDUSTRIAL ECONOMICS,
17 INDUSTRIAL ORGANIZATION. SO I HAVE TAUGHT COURSES IN
18 INDUSTRIAL ECONOMICS NOW FOR OVER 30 YEARS IN VARIOUS
19 INSTITUTIONS.
20 I ALSO TEACH MICROECONOMICS. I TEACH THE BASIC
21 GRADUATE COURSE IN MICROECONOMICS FOR MASTER STUDENTS AT U.C.
22 SANTA BARBARA AND I'VE DONE THAT FOR OVER 25 YEARS.
23 ONE OF MY SPECIALTIES IS ANTITRUST ECONOMICS HAVING
24 WORKED IN BOTH FEDERAL ANTITRUST AGENCIES. JUST THIS FALL I
25 GAVE A COURSE ENTITLED "THE LAW IN ECONOMICS OF THE MICROSOFT 405
COMANOR - DIRECT / SHULMAN
1 ANTITRUST CASE," IN WHICH I REVIEWED ALL THE LEGAL AND ECONOMIC
2 ISSUES DEALING WITH THAT CASE.
3 SO I HAVE WORKED IN INDUSTRIAL ECONOMICS AND
4 ANTITRUST ECONOMICS FOR MANY YEARS.
5 Q. HAVE YOU TAUGHT AT BUSINESS SCHOOLS?
6 A. YES, I HAVE. WHEN I WAS -- I TAUGHT, AS YOU CAN SEE, FOR
7 A NUMBER OF YEARS AT THE GRADUATE SCHOOL OF BUSINESS AT
8 STANFORD UNIVERSITY.
9 Q. OKAY. AND HAVE YOU TAUGHT AT LAW SCHOOLS?
10 A. YES, I HAVE. AS YOU CAN SEE, I WAS A VISITING PROFESSOR
11 OF LAW AT THE U.C.L.A. LAW SCHOOL WHERE I TAUGHT A SEMINAR IN
12 ANTITRUST LAW AS WELL AS A COURSE IN ECONOMICS FOR LAWYERS.
13 Q. YOU ARE NOT A LAWYER, HOWEVER?
14 A. I AM NOT A LAWYER.
15 Q. OKAY. IF YOU LOOK AT THE THIRD PAGE OF YOUR RESUME, YOUR
16 CV, IT BEGINS "BOOKS AND MONOGRAPHS" FOLLOWED BY "ARTICLES."
17 WE'RE NOT GOING TO GO THROUGH ALL OF THAT, BUT IF YOU COULD
18 JUST DESCRIBE BRIEFLY AND GENERALLY THE EXTENT OF YOUR
19 PUBLICATIONS.
20 A. I'VE WRITTEN A GOOD NUMBER OF ARTICLES AND BOOKS, LARGELY
21 IN INDUSTRIAL ECONOMICS. THOSE ARE FOUR BOOKS THAT I'VE
22 WRITTEN. THE FIRST IS A BOOK ON ADVERTISING AND MARKET POWER,
23 WHICH IS ON THE COMPETITIVE IMPLICATIONS OF HEAVY ADVERTISING
24 EXPENDITURES. SO THE FIRST BOOK THERE DEALS WITH THE
25 COMPETITIVE IMPLICATIONS OF HEAVY ADVERTISING EXPENDITURES. 406
COMANOR - DIRECT / SHULMAN
1 THE SECOND BOOK DEALS WITH ECONOMICS OF NATIONAL
2 HEALTH INSURANCE IN CANADA, ACTUALLY IN THE PROVINCE OF
3 ONTARIO.
4 THE THIRD AND FOURTH BOOKS THERE IN WHICH I WAS THE
5 EDITOR AND WROTE CHAPTERS IN EACH OF THESE BOOKS DEAL WITH
6 COMPETITION POLICY BOTH IN EUROPE AND THE UNITED STATES.
7 IN THE THIRD BOOK, "COMPETITION POLICY IN EUROPE AND
8 NORTH AMERICA," I WROTE THE CHAPTER ON U.S. COMPETITION POLICY,
9 U.S. ANTITRUST POLICY FROM AN ECONOMIC PERSPECTIVE.
10 Q. AND IN ADDITION TO THE BOOKS, YOU'VE WRITTEN A NUMBER OF
11 ARTICLES?
12 A. YES. I STARTED WRITING ARTICLES IN 1964 AND I GUESS I
13 STILL CONTINUE THAT, AND THEY ARE LISTED HERE.
14 Q. OKAY. APPROXIMATELY HOW MANY?
15 A. WELL, I DON'T KNOW. I HAVEN'T COUNTED THEM, BUT SOMETHING
16 APPROACHING A HUNDRED OR SOMETHING IN THAT NEIGHBORHOOD.
17 Q. OKAY. HAVE YOU TESTIFIED PREVIOUSLY AS AN EXPERT
18 ECONOMIST BEFORE CONGRESSIONAL COMMITTEES?
19 A. YES, I HAVE, ON A NUMBER OF OCCASIONS. I THINK THEY ARE
20 LISTED HERE AT THE END OF MY CV.
21 Q. THAT WOULD BE THE, LET'S SEE... BEGINNING -- YEAH, WE
22 WON'T -- THAT IS THE THIRD PAGE FROM THE END?
23 A. THAT IS CORRECT.
24 MR. SHULMAN: THE THIRD PAGE FROM THE END. IS IT
25 POSSIBLE TO FIND THAT? 407
COMANOR - DIRECT / SHULMAN
1 (PAUSE IN PROCEEDINGS.)
2 BY MR. SHULMAN:
3 Q. WHILE THEY'RE LOOKING FOR THAT, LET ME ASK YOU THIS: HAVE
4 YOU TESTIFIED AS AN EXPERT WITNESS IN ANTITRUST CASES IN
5 FEDERAL COURT?
6 A. YES, I HAVE, ON A NUMBER OF OCCASIONS.
7 Q. OKAY. CAN YOU TELL US A LITTLE BIT ABOUT THAT?
8 A. DIFFERENT CASES INVOLVE DIFFERENT SETS OF ISSUES. I GUESS
9 I'VE TESTIFIED IN MOST ISSUES DEALING WITH ANTITRUST POLICY,
10 LARGELY IN REGARD TO EXCLUSIONARY CONDUCT AND VERTICAL
11 RESTRAINTS AND FREQUENT ISSUES THAT I DEAL WITH.
12 Q. OKAY. NOW, WERE YOU RETAINED BY THE PLAINTIFF,
13 MR. REILLY, IN THIS CASE?
14 A. YES, I WAS.
15 Q. AND WERE YOU ASKED TO DO SOME WORK IN CONNECTION WITH THIS
16 CASE FOR MR. REILLY?
17 A. YES, I WAS.
18 Q. OKAY. WAS ONE OF THE AREAS IN WHICH YOU WERE ASKED TO DO
19 WORK AS AN EXPERT ECONOMIST THE QUESTION OF MARKET DEFINITION?
20 A. YES, IT WAS.
21 Q. OKAY. CAN YOU -- AND DID YOU IN FACT PERFORM WORK IN
22 CONNECTION WITH MARKET DEFINITION?
23 A. YES, I DID.
24 Q. AND IN CONNECTION WITH THAT WORK, DID YOU REACH AN
25 OPINION? 408
COMANOR - DIRECT / SHULMAN
1 A. YES, I -- YES, I HAVE.
2 Q. OKAY. BEFORE WE GET TO THAT OPINION, I WANT TO ASK YOU
3 SOME QUESTIONS ABOUT THE WORK YOU DID IN CONNECTION WITH THE
4 RELEVANT MARKET.
5 WHAT WERE THE -- IN TRYING TO REACH AN OPINION AS TO
6 WHAT THE RELEVANT MARKET IS IN THIS CASE, WHAT WERE THE....
7 (PAUSE IN PROCEEDINGS.)
8 BY MR. SHULMAN:
9 Q. .... WHAT WERE THE CRITERIA THAT YOU USED IN TRYING TO
10 ARRIVE AT AN OPINION CONCERNING WHAT THE RELEVANT MARKET IS IN
11 THIS CASE?
12 A. WELL, THERE ARE TWO SETS OF CRITERIA THAT ARE WIDELY
13 DISCUSSED. THE FIRST IS THE CLASSIC CRITERIA FOR DEFINING A
14 MARKET IN ECONOMICS WHICH TURNS ON SUBSTITUTABILITY IN USE AND
15 IN PRODUCTION WHICH IS REFLECTED IN CROSS ELASTICITIES OF
16 SUPPLY AND DEMAND, WHICH ARE REALLY THE CLASSIC CRITERIA. AND
17 I TRY TO APPLY THOSE CRITERIA TO THE FACTS OF THIS CASE.
18 Q. WHAT DOES THAT MEAN, CROSS ELASTICITY OF SUPPLY AND
19 DEMAND?
20 A. THE CROSS ELASTICITY OF DEMAND IS A PARAMETER WHICH
21 REFLECTS THAT IF THE PRICE OF PRODUCT "A" INCREASES, WHAT WILL
22 THE EFFECT OF THAT PRICE INCREASE BE ON THE DEMAND FOR PRODUCT
23 "B"; IF THE PRICE OF ONE PRODUCT GOES UP, HOW WILL THAT AFFECT
24 THE DEMAND FOR PRODUCT "B."
25 IF TWO PRODUCTS ARE HIGHLY SUBSTITUTABLE, THEN IF 409
COMANOR - DIRECT / SHULMAN
1 THE PRICE OF ONE PRODUCT GOES UP, PEOPLE WILL SHIFT AWAY FROM
2 THE PRODUCT WHICH HAD A HIGHER PRICE AND TOWARDS THE PRODUCT
3 WHICH DID NOT CHANGE ITS PRICE. SO YOU'LL SEE A HIGH VALUE FOR
4 THE CROSS ELASTICITY OF DEMAND WHICH FOLLOWS -- WHICH RESULTS
5 FROM PRODUCTS BEING HIGHLY SUBSTITUTABLE ONE FOR ANOTHER; WHERE
6 IF THE PRICE OF ONE PRODUCT GOES UP AND NOTHING HAPPENS TO THE
7 DEMAND FOR THE SECOND PRODUCT, THEN THE CROSS ELASTICITY OF
8 DEMAND IS LOW OR ZERO.
9 AND THESE PARAMETERS ARE USED BY ECONOMISTS TO
10 DEFINE A RELEVANT MARKET. WHERE CROSS ELASTICITIES OF DEMAND
11 ARE HIGH, TWO PRODUCTS ARE SAID TO BE IN THE SAME RELEVANT
12 MARKET; AND WHERE CROSS ELASTICITIES OF DEMAND ARE LOW, TWO
13 PRODUCTS ARE SAID TO BE IN DIFFERENT RELEVANT MARKETS.
14 AND YOU CAN DO THE SAME THING ON THE SUPPLY SIDE AS
15 WELL AS THE DEMAND SIDE.
16 Q. OKAY. NOW, YOU SAID THAT YOU ALSO USED A SECOND SET OF
17 CRITERIA BESIDES WHAT YOU CALLED THE CROSS ELASTICITIES OF
18 SUPPLY AND DEMAND. WHAT WAS THE SECOND CRITERIA YOU USED?
19 A. WHEN THE JUSTICE DEPARTMENT INTRODUCED THE REVISED MERGER
20 GUIDELINES IN 1982 I THINK IT WAS, THEY PROPOSED A SECOND SET
21 OF CRITERIA, AND I VIEW THEM AS PRETTY COMPARABLE BUT THEY HAVE
22 DIFFERENT TERMINOLOGY. THE JUSTICE DEPARTMENT CRITERIA, AS
23 REFLECTED IN THE MERGER GUIDELINES, IS THE FOLLOWING:
24 IF A HYPOTHETICAL MONOPOLIST WHICH REPRESENTS ALL OF
25 THE FIRMS IN A POSSIBLE MARKET COULD RAISE ITS PRICE BY 5 OR 410
COMANOR - DIRECT / SHULMAN
1 10 PERCENT AND NOT ATTRACT SUFFICIENT COMPETITION TO MAKE THAT
2 PRICE UNTENABLE, THEN THE GROUP OF FIRMS ACTING AS A
3 HYPOTHETICAL MONOPOLIST WOULD CONSTITUTE A RELEVANT MARKET.
4 BUT, AS YOU CAN SEE, THAT TURNS ON SUBSTITUTABILITY
5 AS WELL. THESE ARE TWO WAYS OF LOOKING AT WHAT I THINK ARE THE
6 SAME THING.
7 Q. OKAY. NOW -- AND IN CONNECTION WITH THE DETERMINATION OF
8 A RELEVANT MARKET, ARE THERE PRODUCT MARKET AND GEOGRAPHIC
9 MARKET DIMENSIONS TO THAT?
10 A. YES, INDEED. THESE ISSUES CAN APPLY -- ARE TYPICALLY
11 APPLIED IN TWO CONTEXTS. ONE IS WHETHER TWO PRODUCTS ARE IN
12 THE SAME PRODUCT MARKET, ONE FROM ANOTHER, OR NOT; AND THE
13 SECOND ISSUE IS WHETHER TWO PRODUCTS, PRODUCTS IN DIFFERENT
14 LOCATIONS, LIE IN THE SAME OR SEPARATE GEOGRAPHIC MARKETS. SO
15 THESE ARE TWO DIMENSIONS BY WHICH YOU CAN DEAL WITH THESE SAME
16 CRITERIA.
17 Q. AND DID YOU ATTEMPT TO REACH AN OPINION AS TO BOTH THE
18 RELEVANT PRODUCT MARKET AND THE RELEVANT GEOGRAPHIC MARKET IN
19 THIS CASE?
20 A. YES, I DID.
21 Q. OKAY. LET'S TAKE THE RELEVANT PRODUCT MARKET. WHAT WAS
22 THE NATURE OF THE INQUIRY YOU MADE TO DETERMINE THE RELEVANT
23 PRODUCT MARKET?
24 A. I SET OUT TO CONSIDER WHETHER DAILY NEWSPAPERS REPRESENT A
25 SEPARATE RELEVANT PRODUCT MARKET FROM -- AS COMPARED WITH OTHER 411
COMANOR - DIRECT / SHULMAN
1 TYPES OF MEDIA OR WHETHER THEY LIE IN A BROADER MARKET WHICH
2 INCLUDES OTHER MEDIUM.
3 Q. AND DID YOU FORM AN OPINION ON THAT?
4 A. YES, I DID.
5 Q. WHAT WAS YOUR OPINION?
6 A. MY OPINION IS THAT DAILY NEWSPAPERS REPRESENT A SEPARATE
7 RELEVANT PRODUCT MARKET.
8 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 412
COMANOR - DIRECT / SHULMAN
1 BY MR. SHULMAN:
2 Q. CAN YOU DESCRIBE, PLEASE, THE BASIS FOR THAT OPINION?
3 A. YES.
4 THE FIRST THING I LOOKED AT WAS A SURVEY -- A STUDY
5 CONDUCTED BY THE NEWSPAPER ASSOCIATION OF AMERICA, WHICH IS
6 CALLED CONSUMER MEDIA USAGE, WHICH SEEKS TO UNDERSTAND OR
7 DESCRIBE THE DIFFERENT ROLES PLAYED BY NEWSPAPERS FROM OTHER
8 ASSOCIATED MEDIA. AND IT REALLY EMPHASIZES THE ROLE THAT
9 NEWSPAPERS PLAY IN THE RELEVANT -- IN THESE MARKETS.
10 AND I PRODUCED SOME QUOTES FROM THAT STUDY, BUT I
11 HAVE THE -- THE LARGER STUDY HERE. AND IT SEEMS TO ME THAT THE
12 EVIDENCE PRESENTED IN THAT STUDY INDICATED THAT NEWSPAPERS PLAY
13 A RATHER DISTINCT AND SEPARATE ROLE, PROVIDING A WHOLE SET OF
14 A -- A BUNDLE OF DIFFERENT SERVICES THAN ANY OTHER MEDIA DOES.
15 AS THE STUDY SAYS, THAT IT PROVES THAT NEWSPAPERS --
16 AND I AM QUOTING -- "HAVE A DEFINITE FRANCHISE IN THE
17 ADVERTISING ARENA. AGAINST BROADCAST MEDIA, DIRECT MAIL
18 MAGAZINES AND THE INTERNET, NEWSPAPERS ARE CONSISTENTLY SHOWN
19 TO BE SUPERIOR."
20 I DON'T KNOW THAT THEY ARE SUPERIOR BUT THEY ARE
21 JUST DIFFERENT. AND IT HAS A -- IT HAS A DIFFERENT ROLE TO
22 PLAY, AND THAT SEEMED TO SUGGEST TO ME THAT SUBSTITUTABILITY
23 BETWEEN NEWSPAPERS AND OTHER RELEVANT PRODUCTS COULD BE
24 SUFFICIENTLY LOW THAT ONE SHOULD CONCLUDE THAT THIS IS A
25 SEPARATE RELEVANT PRODUCT MARKET. 413
COMANOR - DIRECT / SHULMAN
1 Q. AND --
2 THE COURT: IS IT FAIR TO SAY THAT NEWSPAPERS PLAY A
3 UNIQUE ROLE?
4 THE WITNESS: I THINK THAT'S RIGHT. THEY HAVE A --
5 A DIFFERENT BUNDLE OF SERVICES THAN ANY OTHER PRODUCT.
6 BY MR. SHULMAN:
7 Q. WHEN YOU SAY "DIFFERENT BUNDLE OF SERVICES," CAN YOU GIVE
8 US AN EXAMPLE OF THAT?
9 A. YES, I CAN.
10 IF YOU -- ON PAGE 5 OF THIS NEWSPAPER ASSOCIATION
11 GUIDE, IT EMPHASIZES THAT THE EDITORIAL CONTENT OF NEWSPAPERS
12 IN WHICH CONSUMERS HAVE A PRIMARY INTEREST IN, IS -- IS WRITTEN
13 DOWN. AND I WILL READ IT:
14 "WHETHER LOCAL COMMUNITY AND NEIGHBORHOOD
15 NEWS, NEWS AND INFORMATION, IT HELPS YOUR
16 COMMUNITY DEAL WITH PROBLEMS, INVESTIGATION OF
17 IMPORTANT ISSUES, WORLD AND NATIONAL NEWS, STATE
18 NEWS, CRIME NEWS AND SO FORTH."
19 NOW, THERE ARE OTHER PRODUCTS WHICH HAVE SOME OF
20 THESE ISSUES BUT NOT ALL OF THEM. AND THE CONCLUSION OF THE
21 NEWSPAPER ASSOCIATION OF AMERICA IS THAT IN THE LOCAL ARENA
22 NEWSPAPERS SURPASS THE COMPETITION. IT SEEMED APPROPRIATE TO
23 ME
24 Q. OKAY. DOES THE LOCAL NATURE OF NEWSPAPERS -- DID THAT
25 HAVE ANY ROLE IN THE OPINION YOU FORMED? 414
COMANOR - DIRECT / SHULMAN
1 A. YES. THIS GUIDE SUGGESTS THAT NEWSPAPER READERS ARE
2 PRIMARILY CONCERNED WITH WHAT GOES ON IN THEIR LOCAL COMMUNITY.
3 AND NEWSPAPERS HAVE A WAY OF DEALING WITH LOCAL ISSUES
4 DIFFERENT THAN OTHER MEDIA.
5 Q. ALL RIGHT. NOW, DID YOU ALSO MAKE A -- REACH AN OPINION
6 CONCERNING THE QUESTION OF WHAT IS THE APPROPRIATE GEOGRAPHIC
7 MARKET?
8 A. YES, I DID.
9 Q. WHAT WERE THE CRITERIA THAT YOU APPLIED IN ANALYZING THE
10 QUESTION OF WHAT IS THE APPROPRIATE GEOGRAPHIC MARKET?
11 A. WELL, I USED THE SAME CRITERIA, BUT THE QUESTION HERE IS
12 WHAT ARE THE APPROPRIATE BOUNDARIES BY WHICH YOU SHOULD DEFINE
13 THE MARKET. IS A MARKET THE RELEVANT COUNTY OR A BROADER
14 METROPOLITAN AREA OR SOMETHING ELSE?
15 SO HERE WE ARE DEALING WITH WHAT IS THE GEOGRAPHIC
16 LIMITS OF A RELEVANT MARKET.
17 Q. AND WHAT ECONOMIC -- WHAT ECONOMIC CRITERIA DO YOU LOOK AT
18 TO SEE WHAT ARE THE -- WHAT ARE THE APPROPRIATE BOUNDARIES OF
19 THE GEOGRAPHIC MARKET?
20 A. ONE LOOKS AT VARIOUS FACTS THAT ONE CAN GATHER TO HELP YOU
21 GAIN A CONCLUSION -- TO HELP YOU DRAW A CONCLUSION -- REGARDING
22 CROSS-ELASTICITIES OF SUPPLY AND DEMAND ON THE ONE HAND OR THE
23 MERGER GUIDELINES TEST OF A PRICE INCREASE ON THE OTHER HAND TO
24 SEE WHAT FACTORS YOU CAN BRING TO BEAR TO LEAD YOU TO DRAW A
25 CONCLUSION FROM THESE CRITERIA. 415
COMANOR - DIRECT / SHULMAN
1 AND I -- MY COLLEAGUES AND I PRODUCED A NUMBER OF
2 CHARTS AND DATA WHICH IS QUITE RELEVANT FOR ALL OF THESE
3 MATTERS.
4 Q. OKAY. WE WILL GET TO THOSE IN A SECOND.
5 DID YOU -- AND DID YOU REACH AN OPINION AS TO THE
6 RELEVANT GEOGRAPHIC MARKET IN THIS CASE?
7 A. YES, I DID.
8 Q. WHAT IS YOUR OPINION AS TO THE RELEVANT GEOGRAPHIC MARKET?
9 A. THE RELEVANT MARKET IN GEOGRAPHIC TERMS IS THE CITY AND
10 COUNTY OF SAN FRANCISCO.
11 Q. NOW, I AM GOING TO GO THROUGH WITH YOU THE BASIS FOR THAT
12 OPINION. AND I THINK YOU MENTIONED THAT YOU HAD DONE A NUMBER
13 OF CHARTS.
14 (PAUSE IN THE PROCEEDINGS.)
15 MR. SHULMAN: YOUR HONOR, CAN WE TAKE JUST A SECOND
16 TO FIX THE TECH HERE SO THAT WE CAN SHOW THE EXHIBITS?
17 THE COURT: THAT WILL BE FINE. WHY DON'T WE TAKE,
18 WHAT, FIVE MINUTES?
19 MR. SHULMAN: THAT WOULD BE FINE.
20 THE COURT: WELL, LET'S MAKE IT TEN MINUTES. AND WE
21 WILL CORRECT SOME OTHER TECHNICAL PROBLEMS, AS WELL. TEN
22 MINUTES.
23 (RECESS TAKEN FROM 9:25 TO 9:40 A.M.)
24 THE COURT: VERY WELL, MR. SHULMAN. DO WE HAVE ALL
25 OF THE MECHANICS STRAIGHTENED OUT NOW? 416
COMANOR - DIRECT / SHULMAN
1 MR. SHULMAN: I BELIEVE SO, YOUR HONOR, AND I AM
2 STAYING AWAY FROM ALL BUTTONS ON THIS THING.
3 THE COURT: VERY WELL. YOU MAY PROCEED.
4 MR. SHULMAN: THANK YOU. MAY IT PLEASE THE COURT.
5 BY MR. SHULMAN:
6 Q. DR. COMANOR, YOU REMINDED ME WHILE WE WERE IN RECESS THAT
7 I HAD NOT -- OR YOU HAD NOT -- I HAD CUT YOU OFF BEFORE YOU HAD
8 MENTIONED ALL OF THE GROUNDS ON WHICH YOU DETERMINED THE
9 RELEVANT PRODUCT MARKET TO BE DAILY NEWSPAPERS.
10 SO I WOULD ASK YOU FOR THOSE -- TO STATE FOR THE
11 COURT, PLEASE, THOSE GROUNDS -- THOSE ADDITIONAL GROUNDS.
12 A. I ALSO REVIEWED THE ACADEMIC LITERATURE, AND I ENCOUNTERED
13 AN ARTICLE, WHICH IS REALLY RIGHT ON POINT, WHICH IS ENTITLED
14 "THE CROSS-ELASTICITY OF DEMAND FOR NATIONAL NEWSPAPER.
15 ADVERTISING." AND IT WAS AN EMPIRICAL STUDY. AND, IF IT'S
16 OKAY, I WOULD LIKE TO READ FOR YOU JUST THREE CONCLUSIONS WHICH
17 COME OUT OF THAT STATISTICAL ANALYSIS. AND THESE ARE QUOTES:
18 "FROM THESE DATA IT IS APPARENT THAT
19 CROSS-ELASTICITIES OF DEMAND BETWEEN NEWSPAPERS
20 AND OTHER NATIONAL MEDIA IS CONSISTENTLY NIL
21 ACROSS ALL MEDIA."
22 Q. WHAT DOES THAT MEAN?
23 A. IT MEANS THAT CROSS-ELASTICITIES OF DEMAND ARE ZERO, ARE
24 SUFFICIENTLY LOW, THAT ONE WOULD CONCLUDE THAT NEWSPAPERS
25 REPRESENT -- DAILY NEWSPAPERS REPRESENT A SEPARATE RELEVANT 417
COMANOR - DIRECT / SHULMAN
1 PRODUCT MARKET.
2 THE SECOND QUOTATION IS THAT NATIONAL ADVERTISERS
3 GENERALLY USE NEWSPAPERS FOR VERY DIFFERENT PURPOSES THAN OTHER
4 MEDIA.
5 AND THE THIRD QUOTATION IS:
6 "NEWSPAPERS NOT REALLY IN DIRECT COMPETITION
7 WITH OTHER MEDIA FOR NATIONAL ADVERTISING."
8 SO HERE WE HAVE AN ACADEMIC STUDY WHICH IS SURELY
9 CONSISTENT WITH ALL OF THE OTHER INFORMATION THAT I HAVE SEEN.
10 Q. WHAT WAS THE SECOND FINDING THAT YOU READ?
11 A. I WILL READ IT AGAIN, QUOTE:
12 "NATIONAL ADVERTISERS GENERALLY USE
13 NEWSPAPERS FOR VERY DIFFERENT PURPOSES THAN
14 OTHER MEDIA."
15 Q. AND WHAT DOES THAT SAY TO YOU AS AN ECONOMIST IN TERMS OF
16 WHETHER NEWSPAPERS ARE A RELEVANT PRODUCT MARKET?
17 A. IT SUGGESTS TO ME THAT IN TERMS OF ADVERTISING THAT
18 NEWSPAPERS ARE NOT -- DAILY NEWSPAPERS ARE NOT HIGHLY
19 SUBSTITUTABLE WITH OTHER MEDIA, OR OTHER MEDIA ARE NOT HIGHLY
20 SUBSTITUTABLE WITH DAILY NEWSPAPERS.
21 THAT INDICATES THAT THEY WOULD REPRESENT THAT THEY
22 WOULD LIE IN SEPARATE RELEVANT PRODUCT MARKETS.
23 Q. OKAY. HAVE YOU CONCLUDED THE LIST OF FACTORS THAT LED YOU
24 TO REACH THE OPINION THAT DAILY NEWSPAPERS ARE A RELEVANT
25 PRODUCT MARKET? 418
COMANOR - DIRECT / SHULMAN
1 A. YES, I HAVE.
2 Q. OKAY.
3 THE COURT: LET ME ASK ABOUT THAT ANALYSIS.
4 YOU SAID IT WAS AN ACADEMIC STUDY?
5 THE WITNESS: YES. I HAVE IT HERE.
6 THE COURT: CAN YOU TELL ME A LITTLE MORE ABOUT THE
7 STUDY?
8 THE WITNESS: YES.
9 THE COURT: WHO PERFORMED IT?
10 THE WITNESS: IT'S --
11 THE COURT: WHEN IT WAS PERFORMED?
12 THE WITNESS: IT WAS WRITTEN BY JOHN C. BUSTERNA.
13 THE COURT: JOHN C.?
14 THE WITNESS: B-U-S-T-E-R-N-A. AND IT WAS ENTITLED
15 "THE CROSS-ELASTICITY OF DEMAND FOR NATIONAL NEWSPAPER
16 ADVERTISING." HE IS A -- AN ASSISTANT PROFESSOR AT THE
17 UNIVERSITY OF MINNESOTA. AND THIS WAS PUBLISHED IN THE
18 JOURNALISM QUARTERLY FOR SEPTEMBER -- SUMMER/AUTUMN 1987. AND
19 I HAVE IT HERE (INDICATING).
20 THE COURT: ALL RIGHT. I ASSUME THAT'S GOING TO BE
21 MADE A PART OF THE WITNESS' TESTIMONY?
22 MR. SHULMAN: YES. WE COULD OFFER THAT, YOUR HONOR.
23 THE COURT: DID YOU SAY "'87"?
24 THE WITNESS: YES, I DID.
25 MR. SHULMAN: IT WOULD NEED TO BE MARKED, YOUR 419
COMANOR - DIRECT / SHULMAN
1 HONOR.
2 MR. ROSCH: YOUR HONOR, WE HAVE MARKED IT AS AN
3 EXHIBIT. WE WILL BE OFFERING IT IN DUE COURSE.
4 THE COURT: VERY WELL.
5 MR. SHULMAN: WHICH -- WHAT NUMBER?
6 (PAUSE IN THE PROCEEDINGS.)
7 MR. HUSTON: C-354.
8 MR. SHULMAN: WE WOULD LIKE TO BY STIPULATION ADMIT
9 THIS INTO EVIDENCE, THEN.
10 THE COURT: C-354. VERY WELL. ADMITTED BY
11 STIPULATION.
12 (DEFENDANT'S EXHIBIT C-354
13 RECEIVED IN EVIDENCE)
14 MR. SHULMAN: YOUR HONOR, THE RECORD SHOULD ALSO
15 REFLECT THAT WE HAVE NOW STIPULATED THAT PLAINTIFF EXHIBITS 143
16 THROUGH 147 MAY BE ADMITTED.
17 THE COURT: BY STIPULATION?
18 MR. ROSCH: THAT'S CORRECT, YOUR HONOR.
19 THE COURT: VERY WELL.
20 (PLAINTIFF'S EXHIBITS 143 THROUGH 147
21 RECEIVED IN EVIDENCE)
22 MR. SHULMAN: MAY I APPROACH THE WITNESS?
23 THE COURT: YES, YOU MAY.
24 ////
25 BY MR. SHULMAN: 420
COMANOR - DIRECT / SHULMAN
1 Q. DR. COMANOR, I HAVE HANDED YOU WHAT IS IN EVIDENCE AS
2 PLAINTIFF'S EXHIBIT 143. AND THIS IS A CHART ENTITLED
3 "NEWSPAPER CIRCULATION IN SAN FRANCISCO COUNTY."
4 CAN YOU EXPLAIN TO US WHAT THIS IS AND YOUR ROLE IN
5 CONNECTION WITH ITS PREPARATION?
6 A. YES. THIS CHART WAS PREPARED BY ONE OF MY ASSOCIATES AND
7 USED AVAILABLE DATA. AND IT SAYS AT THE BOTTOM WHERE IT COMES
8 FROM, "DATA ON NEWSPAPER CIRCULATION IN SAN FRANCISCO COUNTY."
9 AND WHAT IT EMPHASIZES IS THAT THE CHRONICLE AND
10 EXAMINER TOGETHER REPRESENT MORE THAN 97 PERCENT OF NEWSPAPER
11 CIRCULATION IN SAN FRANCISCO COUNTY, THAT THE OTHER NEWSPAPERS
12 IN AGGREGATE REPRESENT LESS THAN THREE PERCENT.
13 SO HERE WE HAVE A SITUATION WHERE THESE TWO
14 NEWSPAPERS LINKED TOGETHER HAVE NEARLY THE ENTIRE MARKET.
15 Q. IF WE COULD -- IF WE COULD GO DOWN TO THE BOTTOM OF THE
16 PAGE, THERE IS A NOTE THERE ON THE SOURCE AT THE BOTTOM LEFT.
17 STILL DOWN FARTHER.
18 A. YES, I SEE IT.
19 Q. RIGHT AT THE -- FARTHER DOWN. THE VERY BOTTOM.
20 HERE WE HAVE IT. BRING IT IN.
21 ALL RIGHT. AND THAT -- IT'S A LITTLE HARD TO READ.
22 THAT SAYS:
23 "SOURCE BASED ON 1998 DAILY CIRCULATION DATA
24 REPORTED BY SAN FRANCISCO NEWSPAPER AGENCY
25 MARKET RESEARCH DEPARTMENT." 421
COMANOR - DIRECT / SHULMAN
1 DO YOU SEE THAT?
2 A. YES, I DO.
3 Q. AND IS THAT WHERE THE DATA CAME FROM THAT YOU USED TO
4 COMPILE THE CHART?
5 A. THAT'S MY UNDERSTANDING WHERE MY ASSOCIATE OBTAINED THE
6 DATA.
7 Q. OKAY. NOW, LET'S GO BACK TO THE LINE THAT SHOWS -- TO THE
8 UPPER PART WHICH SHOWS LOCAL MARKET SHARE.
9 AND I NOTICED YOU HAVE A FINDING HERE THAT SAYS:
10 "97 PERCENT OF TOTAL NEWSPAPER CIRCULATION
11 IN SAN FRANCISCO COUNTY IS ACCOUNTED FOR BY THE
12 SAN FRANCISCO CHRONICLE AND EXAMINER."
13 A. YES, SIR.
14 Q. OKAY. WHAT -- AS AN ECONOMIST, WHAT IS THE SIGNIFICANCE
15 TO YOU OF THIS DATA AND THAT FINDING?
16 A. SUPPOSE I WAS AN ADVERTISER IN SAN FRANCISCO AND I WANTED
17 TO REACH CUSTOMERS IN SAN FRANCISCO THROUGH NEWSPAPERS.
18 CLEARLY, I'D HAVE TO USE EITHER THE CHRONICLE OR THE EXAMINER
19 BECAUSE IF I USED ANY OTHER NEWSPAPER, ALMOST NOBODY WOULD SEE
20 MY AD. SO THAT SUGGESTS TO ME THAT THE CROSS-ELASTICITY OF
21 DEMAND BY ADVERTISERS BETWEEN THE CHRONICLE/EXAMINER ON THE ONE
22 HAND AND ANY OF THESE OTHER NEWSPAPERS IS VERY LOW, EFFECTIVELY
23 ZERO. THE PRICE COULD RISE FOR ADVERTISING IN THE
24 CHRONICLE/EXAMINER AND I WOULD NOT SWITCH BECAUSE NONE OF THESE
25 OTHER NEWSPAPERS ACTUALLY REACH SAN FRANCISCO READERS. SO THIS 422
COMANOR - DIRECT / SHULMAN
1 PIECE OF INFORMATION IS INDICATIVE OF VERY LOW
2 CROSS-ELASTICITIES OF DEMAND.
3 Q. AND DOES THAT TELL YOU THAT THE CITY AND COUNTY OF SAN
4 FRANCISCO IS A RELEVANT GEOGRAPHIC MARKET FOR DAILY NEWSPAPERS?
5 A. YES, IT DOES. IT'S CERTAINLY ONE INSTANCE OF THAT RESULT.
6 MR. ROSCH: ALL RIGHT. LET ME TURN NEXT TO
7 EXHIBIT 144 IN EVIDENCE, IF I MAY APPROACH THE WITNESS, YOUR
8 HONOR?
9 THE COURT: YOU MAY.
10 (PAUSE IN THE PROCEEDINGS.)
11 BY MR. SHULMAN:
12 Q. ALL RIGHT. EXHIBIT 144 IS ENTITLED "NATIONAL AND LOCAL
13 ADVERTISING RATES BY COUNTY."
14 CAN YOU EXPLAIN TO US WHAT THIS CHART IS, WHAT IT
15 SHOWS?
16 A. YES.
17 I SHOULD SAY THAT I HAVE TWO CHARTS WITH THE SAME
18 TITLE, AND I NEED TO DEAL WITH THEM IN CONJUNCTION WITH ONE
19 ANOTHER.
20 Q. OKAY. THE SECOND ONE, I BELIEVE, IS EXHIBIT 147 IN
21 EVIDENCE.
22 MAY I APPROACH THE WITNESS, YOUR HONOR?
23 THE COURT: YES.
24 ARE THESE THE SAME?
25 THE WITNESS: NO. THERE ARE A COUPLE OF NUMBERS 423
COMANOR - DIRECT / SHULMAN
1 WHICH ARE DIFFERENT AND I WILL GO THROUGH THE DIFFERENCES.
2 THE COURT: ALL RIGHT.
3 THE WITNESS: IF THAT'S OKAY.
4 THE COURT: BY ALL MEANS.
5 BY MR. SHULMAN:
6 Q. ALL RIGHT. WOULD YOU DO THAT, PLEASE?
7 A. THE FIRST CHART USES THE RATE -- THE ADVERTISING RATES PER
8 THOUSAND CIRCULATION FOR ALL -- FOR THE INDICATED NEWSPAPERS
9 AND THE INDICATED COUNTIES.
10 BUT THE CHRONICLE/EXAMINER RATES REFER TO THE RATES
11 APPLICABLE FOR ALL OF ITS EDITIONS, WHILE THE SECOND CHART IS
12 THE SAME EXCEPT THAT THE CHRONICLE/EXAMINER RATES FOR RETAIL
13 ADVERTISING ONLY REFER TO THE RATES FOR THE PARTICULAR EDITION.
14 THIS NEWSPAPER HAS DIFFERENT RATES FOR DIFFERENT
15 EDITIONS. THEY HAVE DIFFERENT RATE CARDS FOR DIFFERENT
16 EDITIONS.
17 Q. WHEN YOU SAY "DIFFERENT EDITIONS," WHAT DO YOU -- WHAT DO
18 YOU MEAN BY A "DIFFERENT EDITION"?
19 A. THEY HAVE A RATE CARD FOR THE CITY OF SAN FRANCISCO; THEY
20 HAVE A RATE CARD FOR THE SOUTH BAY; THEY HAVE A RATE CARD FOR
21 THE EAST BAY; THEY HAVE A RATE CARD FOR CONTRA COSTA COUNTY.
22 AND THEY ARE PUT IN TERMS OF ZONES SO THAT YOU CAN -- YOU CAN
23 HAVE AN AD JUST IN THE RELEVANT EDITION.
24 AND IN THE SECOND TABLE FOR RETAIL ADS WE TOOK THOSE
25 SEPARATE RATES INTO ACCOUNT BUT NOT IN THE FIRST TABLE. 424
COMANOR - DIRECT / SHULMAN
1 Q. OKAY. LET ME ASK YOU --
2 THE COURT: YOU BETTER GO OVER THAT AGAIN.
3 MR. SHULMAN: I WILL.
4 BY MR. SHULMAN:
5 Q. IN THE -- THE FIRST -- THE FIRST TABLE YOU USED JUST ONE
6 ADVERTISING RATE FOR THE EXAMINER AND THE CHRONICLE?
7 A. YES. WELL, WE ALWAYS DID THAT FOR NATIONAL ADS.
8 Q. OKAY.
9 A. BECAUSE THEY ONLY HAVE ONE RATE.
10 BUT FOR LOCAL RETAIL ADS, THEY HAVE A RATE FOR ALL
11 OF THE EDITIONS, AND THEN THEY HAVE A SEPARATE RATE FOR
12 INDIVIDUAL EDITIONS, ZONE RATES, IF YOU WILL.
13 Q. OKAY. SO THEY HAVE A BLANKET RATE IF AN ADVERTISER WANTS
14 TO USE -- WANTS TO BE IN ALL EDITIONS?
15 A. THAT IS CORRECT.
16 THE COURT: WOULD THAT BE ALL ZONES?
17 THE WITNESS: YES. THAT'S MY UNDERSTANDING.
18 THE COURT: ALL RIGHT. SO THIS IS -- 144 IS THE
19 RETAIL RATE FOR ALL ZONES?
20 THE WITNESS: THAT'S CORRECT.
21 THE COURT: AND IS THAT TRUE OF ALL OF THE
22 PUBLICATIONS OR ONLY THE CHRONICLE/EXAMINER?
23 THE WITNESS: THAT'S TRUE OF ALL OF THEM. I DON'T
24 KNOW THAT THE OTHER ONES HAVE DIFFERENT ZONES.
25 THE COURT: I SEE. 425
COMANOR - DIRECT / SHULMAN
1 THE WITNESS: BUT IN THE SECOND TABLE ALL THE DATA
2 IS THE SAME EXCEPT FOR THE CHRONICLE/EXAMINER RETAIL RATES BY
3 ZONE.
4 AND IF YOU LOOK THROUGH IT, YOU WILL SEE THOSE ARE
5 THE ONLY NUMBERS WHICH ARE DIFFERENT. FOR EXAMPLE, THE $1.58
6 NUMBER FOR SAN FRANCISCO, THE CHRONICLE/EXAMINER IN SAN
7 FRANCISCO, IS DIFFERENT THAN THE 54 CENT NUMBER IN THE SECOND
8 COLUMN, IN THE SECOND TABLE. OKAY?
9 SIMILARLY, IN ALAMEDA COUNTY $2.66 IS DIFFERENT THAN
10 46 CENTS. AND THAT'S WHERE THE DIFFERENCES COME FROM.
11 THE COURT: DO THE DESIGNATIONS IN THE -- THAT ARE
12 ON THE VARIOUS COLUMNS REPRESENT EACH ZONE?
13 THE WITNESS: YES.
14 THE COURT: SAN FRANCISCO --
15 THE WITNESS: THE ZONES ARE COUNTY SPECIFIC.
16 THE COURT: THEY ARE COUNTY SPECIFIC?
17 THE WITNESS: YES.
18 THE COURT: AND THAT'S TRUE OF ALL OF THESE FOUR
19 NEWSPAPERS?
20 THE WITNESS: NO. WE ONLY -- WE ONLY DID THAT FOR
21 THE CHRONICLE/EXAMINER.
22 BY MR. SHULMAN:
23 Q. WHY DID YOU DO IT TWO WAYS, THE FIRST TIME USING THE
24 OVERALL RATE OF THE CHRONICLE/EXAMINER AND THE SECOND TIME
25 USING THE SPECIFIC ZONE RATES? 426
COMANOR - DIRECT / SHULMAN
1 A. WELL, TO BE HONEST, I ASKED MY ASSOCIATE IF THEY HAD -- IF
2 THE CHRONICLE/EXAMINER HAD DIFFERENT ZONAL RATES. AND
3 ORIGINALLY HE SAID "NO" AND SO HE DID IT THE FIRST WAY.
4 AND THEN AFTER I PREPARED THAT CHART, HE SAID,
5 "WELL, I DUG A LITTLE DEEPER AND THEY DID HAVE DIFFERENT RATES
6 FOR DIFFERENT EDITIONS."
7 AND SO THEN WE DID A SECOND GRAPH OF -- WE DID IT
8 BECAUSE WHEN I PREPARED THE FIRST CHART, I DIDN'T KNOW THEY HAD
9 ZONAL RATES.
10 Q. NOW, IS IT AT ALL SIGNIFICANT TO YOU AS AN ECONOMIST THAT
11 THE CHRONICLE AND EXAMINER HAVE SEPARATE ZONE RATES, THEY HAVE
12 SEPARATE RATES FOR SEPARATE EDITIONS PUBLISHED IN SEPARATE
13 LOCALITIES?
14 A. YES.
15 Q. WHY IS THAT -- WOULD YOU EXPLAIN THE SIGNIFICANCE OF THAT?
16 A. AN IMPORTANT ATTRIBUTE OF AN ECONOMIC MARKET IS THE
17 FACT -- IS THE RULE OF ONE PRICE, THAT THE SINGLE PRICE EXISTS
18 THROUGHOUT THE MARKETPLACE.
19 AND IF A FIRM IS SELLING THE SAME PRODUCT AT -- IN
20 DIFFERENT LOCATIONS AT DIFFERENT PRICES, THAT IS AN IMPORTANT
21 INDICATION THAT THE FIRM IS SELLING INTO DIFFERENT GEOGRAPHIC
22 MARKETS BECAUSE IF IT WERE THE SAME MARKET, THEN WHY WOULD
23 ANYONE BUY AT THE HIGHER PRICE WHEN THEY COULD BUY AT THE LOWER
24 PRICE? THEY WOULD GO AND BUY AT THE LOWER PRICE.
25 AND SO THE TWO PRICES COULD NOT PERSIST. THE FACT 427
COMANOR - DIRECT / SHULMAN
1 THAT TWO PRICES PERSIST IS AN IMPORTANT ECONOMIC INDICATION
2 THAT THERE ARE SEPARATE RELEVANT GEOGRAPHIC MARKETS.
3 THE IMPORTANT THING ABOUT THESE TABLES --
4 BY MR. SHULMAN:
5 Q. WELL, WHY DON'T YOU EXPLAIN NOW WHAT -- WHAT
6 CONCLUSIONS -- WHAT THESE TABLES SHOW AND THE CONCLUSIONS THAT
7 OUGHT TO BE DRAWN FROM THEM.
8 A. I THINK IT'S IMPORTANT TO LOOK AT THE RATES WITHIN EACH
9 COUNTY AND SEE WHETHER OR NOT THERE IS REAL COMPETITION AMONG
10 THE DIFFERENT NEWSPAPERS IN EACH INDIVIDUAL COUNTY.
11 LET'S TAKE SAN FRANCISCO AND LET'S TAKE NATIONAL ADS
12 WHERE THERE IS NO -- NO ZONAL RATES, TO MY UNDERSTANDING. YOU
13 CAN SEE THAT THE PRICE PER THOUSAND IN SAN FRANCISCO OF THE
14 CHRONICLE/EXAMINER IS $2.71. AND THIS IS PER COLUMN INCH PER
15 THOUSAND CIRCULATION. THE PRICES -- THE COMPARABLE PRICES FOR
16 THE OTHER THREE NEWSPAPERS WE HAVE HERE ARE VASTLY HIGHER,
17 ORDERS OF MAGNITUDE HIGHER -- $226, $82, $607. THEY ARE
18 CLEARLY NOT COMPETITIVE. THERE IS NO WAY THAT ONE WOULD PAY
19 VASTLY HIGHER RATES FOR THE SAME AS WHEN THEY COULD GET THE
20 PRODUCT FOR $27.71 PER THOUSAND CIRCULATION.
21 THAT TELLS ME THAT THE CHRONICLE/EXAMINER DOES NOT
22 FACE EFFECTIVE COMPETITION FROM THESE OTHER NEWSPAPERS FOR
23 NATIONAL ADS IN THE CITY AND COUNTY OF SAN FRANCISCO.
24 IF YOU DO THE SAME ANALYSIS FOR RETAIL ADS, WHETHER
25 YOU DO IT ON AN OVERALL BASIS, AS IN THE FIRST CHART, OR ON A 428
COMANOR - DIRECT / SHULMAN
1 ZONAL BASIS IN THE SECOND CHART, YOUR CONCLUSIONS ARE THE
2 SAME -- 54 CENTS PER THOUSAND IS A DIFFERENT ORDER OF MAGNITUDE
3 THAN THE PRICES CHARGED PER THOUSAND IN -- BY THE OAKLAND
4 TRIBUNE, THE SAN JOSE MERCURY OR THE CONTRA COSTA TIMES.
5 THERE IS NO WAY THAT AT THESE PRICES -- RELATIVE
6 PRICES THAT THE OTHER THREE NEWSPAPERS REPRESENT EFFECTIVE
7 COMPETITION IN THE MARKET FOR RETAIL ADVERTISING, WHICH IS A
8 CRITICALLY IMPORTANT MARKET, IN COMPETITION TO THE SAN
9 FRANCISCO CHRONICLE/EXAMINER. THE CHRONICLE/EXAMINER
10 REPRESENTS A SEPARATE RELEVANT MARKET IN ITSELF. THESE --
11 THESE PAPERS DO NOT PROVIDE EFFECTIVE COMPETITION.
12 NOW, LET'S TURN TO ALAMEDA COUNTY. AND, AS YOU CAN
13 SEE, THAT'S THE HOME TERRITORY, OF COURSE, OF THE OAKLAND
14 TRIBUNE, AND THAT -- THE NATIONAL RATES ARE LOWEST FOR THE
15 OAKLAND TRIBUNE AS COMPARED WITH ANY OF THE OTHER THREE
16 NEWSPAPERS, ALTHOUGH $3.24 IS NOT WILDLY DIFFERENT THAN $4.54.
17 SO THERE IS SOME FORM OF COMPETITION THAT THE
18 CHRONICLE/EXAMINER IMPOSES ON THE TRIBUNE IN ALAMEDA COUNTY.
19 SO THERE IS A DIFFERENT FOCUS OF COMPETITION IN ALAMEDA THAN
20 THERE IS IN SAN FRANCISCO.
21 NOW, IF YOU TURN TO RETAIL ADS, YOU FIND SOMETHING
22 COMPARABLE AND CERTAINLY IF YOU -- IF YOU DO IT ON A ZONAL
23 RATE, YOU FIND SOMETHING RATHER INTERESTING, THAT THE SAN
24 FRANCISCO CHRONICLE/EXAMINER HAS LOWER RETAIL RATES EVEN IN A
25 SECOND COUNTY THAN THE OAKLAND TRIBUNE. AND THAT'S -- THAT 429
COMANOR - DIRECT / SHULMAN
1 TELLS ME THAT THE CHRONICLE/EXAMINER IS SURELY AN EFFECTIVE
2 COMPETITOR IN ALAMEDA COUNTY, BUT THE FACT THAT THE
3 CHRONICLE/EXAMINER IS AN EFFECTIVE COMPETITOR IN ALAMEDA COUNTY
4 DOES NOT INDICATE THAT THE TRIBUNE IS NECESSARILY AN EFFECTIVE
5 COMPETITOR IN SAN FRANCISCO COUNTY. THOSE ARE DIFFERENT
6 THINGS. SO THAT THE CHRONICLE CAN COMPETE IN ALAMEDA COUNTY
7 DOES NOT IMPLY THAT THE OAKLAND TRIBUNE COMPETES IN SAN
8 FRANCISCO COUNTY.
9 AND THEN I CARRIED OUT THE SAME ANALYSIS FOR SANTA
10 CLARA AND CONTRA COSTA, AND WE CAN GO THROUGH THE SAME ANALYSIS
11 AND YOU CAN SEE THE HOME NEWSPAPER IS LARGELY HIGHLY
12 COMPETITIVE, BUT THE CHRONICLE/EXAMINER DOES PROVIDE EFFECTIVE
13 COMPETITION IN -- IN SOME OF THESE OTHER COUNTY.
14 INDEED, IN CONTRA COSTA COUNTY FOR RETAIL ADS USING
15 A ZONAL RATE, YOU CAN SEE THE PRICE PER COLUMN INCH PER
16 THOUSAND CIRCULATION IS 44 CENTS BY THE CHRONICLE/EXAMINER
17 WHILE IT IS 83 CENTS FOR THE CONTRA COSTA TIMES.
18 SO THAT THE -- THE CHRONICLE/EXAMINER IS CLEARLY AN
19 EFFECTIVE COMPETITOR IN CONTRA COSTA COUNTY. THE OTHER TWO
20 PAPERS, THE SAN JOSE MERCURY AND THE OAKLAND TRIBUNE, DO NOT
21 APPEAR TO BE.
22 GENERALLY, THE MOST EFFECTIVE COMPETITOR IS THE FIRM
23 IN ITS OWN COUNTY. BUT THAT'S NOT ALWAYS THE CASE.
24 IT'S IMPORTANT TO EMPHASIZE THAT NEWSPAPERS HAVE A
25 LARGELY LOCAL COMPONENT. THE MOST IMPORTANT FEATURE ABOUT A 430
COMANOR - DIRECT / SHULMAN
1 NEWSPAPER IS ITS LOCATION. AND THAT FACTOR PERVADES THE
2 MARKETPLACE. THE SAN FRANCISCO CHRONICLE/EXAMINER IS CLEARLY
3 FROM THIS INFORMATION THE DOMINANT COMPETITOR IN THE COUNTY OF
4 SAN FRANCISCO.
5 Q. WE HAD SOME TESTIMONY IN THIS TRIAL YESTERDAY FROM
6 MR. SIAS ABOUT NEWSSTAND PRICES, SINGLE COPY PRICES, THAT --
7 WHERE HE SAID THAT IN THE CITY OF SAN FRANCISCO THE CHRONICLE
8 HAD A SINGLE COPY PRICE OF 50 CENTS AND IN SAN JOSE IT WAS 25
9 CENTS. IN THE EAST BAY IT WAS 25 CENTS.
10 DOES THAT TELL YOU ANYTHING ABOUT RELEVANT
11 GEOGRAPHIC MARKET?
12 A. IF CONSUMERS WENT BACK AND FORTH BETWEEN THESE COUNTIES
13 SUFFICIENTLY FREQUENTLY SO THAT YOU COULD REALLY VIEW THEM AS
14 THE SAME RELEVANT GEOGRAPHIC MARKET, THEN WHY WOULD ANYONE
15 SPEND 50 CENTS WHEN THEY CAN GET THE SAME PAPER FOR 25 CENTS?
16 THEY WOULDN'T.
17 AND, THEREFORE, THAT TYPE OF PRICE DIFFERENTIAL
18 COULD NOT PERSIST. THAT PRICE DIFFERENTIAL INDICATES TO ME
19 THAT THERE ARE SEPARATE GEOGRAPHIC MARKETS FOR THE CIRCULATION
20 SEGMENT OF THIS BUSINESS BETWEEN THESE DIFFERENT LOCATIONS.
21 OTHERWISE, YOU WOULDN'T SEE PRICE DIFFERENCES LIKE THIS.
22 Q. LET ME TURN NEXT TO EXHIBIT 145 IN EVIDENCE, ANOTHER CHART
23 THAT YOU PREPARED.
24 MAY I APPROACH THE WITNESS, YOUR HONOR?
25 THE COURT: YOU MAY. 431
COMANOR - DIRECT / SHULMAN
1 BY MR. SHULMAN:
2 Q. DR. COMANOR, CAN YOU IDENTIFY FOR US EXHIBIT 145 AND
3 EXPLAIN WHAT THIS IS?
4 A. THE THIRD LEADING SEGMENT OF NEWSPAPER ADVERTISING IS
5 CLASSIFIED ADVERTISING. SO WE LOOKED ALSO AT THIS -- AT RATES
6 FOR THESE TYPES OF ADS. AND WE CARRIED OUT PRETTY MUCH A
7 SIMILAR ANALYSIS FOR CLASSIFIED ADS THAT WE HAD CARRIED OUT FOR
8 NATIONAL AND LOCAL ADS PREVIOUSLY. AND HERE WE HAVE THE SAME
9 FOUR NEWSPAPERS AND THE SAME FOUR COUNTIES AND THE RELEVANT
10 PRICE IS THE RATE PER LINE PER THOUSAND CIRCULATION.
11 AND YOU CAN SEE THAT -- AND WE DIVIDED BY AUTO ADS
12 AND REAL ESTATE ADS. AND YOU CAN SEE THAT IN THE CITY AND
13 COUNTY OF SAN FRANCISCO THE CLASSIFIED ADVERTISING RATE IS
14 VASTLY LOWER FOR BOTH AUTOS AND REAL ESTATE THAN THE COMPARABLE
15 RATES FOR THE OAKLAND TRIBUNE, THE SAN JOSE MERCURY AND THE
16 CONTRA COSTA TIMES.
17 FOR REAL ESTATE IT'S 11.06 CENTS. THE COMPARABLE
18 RATES FOR THE TRIBUNE, MERCURY AND CONTRA COSTA TIMES ARE $13,
19 $5 AND $68. THOSE SORTS OF PRICE DIFFERENCES INDICATE TO ME
20 THAT THE CHRONICLE/EXAMINER COMPETES IN A SEPARATE GEOGRAPHIC
21 MARKET FROM THESE OTHER NEWSPAPERS.
22 AFTER ALL, THE PURPOSE OF DEFINING MARKET IS TO SEE
23 WHETHER OR NOT OTHER SELLERS IMPOSE EFFECTIVE COMPETITION ON
24 THE SELLER AT ISSUE. WITH THESE RATES, DIFFERENCES, CLEARLY
25 FOR CLASSIFIED ADS THESE OTHER NEWSPAPERS DO NOT IMPOSE 432
COMANOR - DIRECT / SHULMAN
1 EFFECTIVE COMPETITION ON THE CHRONICLE/EXAMINER. AND,
2 THEREFORE, ONE CAN DRAW TO THE CONCLUSION OF SEPARATE
3 GEOGRAPHIC MARKETS.
4 TURNING TO ALAMEDA, HOWEVER, YOU CAN SEE THAT THERE
5 IS MUCH MORE COMPETITION BETWEEN THE CHRONICLE/EXAMINER ON THE
6 ONE HAND AND THE OAKLAND TRIBUNE ON THE OTHER IN ALAMEDA
7 COUNTY. FOR REAL ESTATE ONE PRICE IS 19.4 CENTS; THE OTHER IS
8 19.0 CENTS. AND SO, THEREFORE, I VIEW THOSE TWO NEWSPAPERS AS
9 EFFECTIVE COMPETITORS, BOTH CO-EXISTING IN THE SAME RELEVANT
10 GEOGRAPHIC MARKET, THE ALAMEDA RELEVANT MARKET.
11 AND YOU CAN SEE ALSO THAT THE MERCURY AND THE CONTRA
12 COSTA TIMES ARE NOT EFFECTIVE COMPETITORS IN ALAMEDA COUNTY.
13 IN SANTA CLARA COUNTY THE SANTA CLARA -- THE SAN
14 JOSE MERCURY IS -- IS CLEARLY A DOMINANT AND THE OTHER
15 NEWSPAPERS DO NOT REALLY POSE EFFECTIVE COMPETITION. THE
16 CHRONICLE/EXAMINER, OAKLAND TRIBUNE AND CONTRA COSTA TIMES HAVE
17 MUCH HIGHER RATES.
18 IN CONTRA COSTA COUNTY YOU CAN SEE THAT THE CONTRA
19 COSTA TIMES HAS THE -- WELL, IT DOESN'T ALWAYS HAVE THE LOWEST
20 RATE ON AUTOS. AS YOU CAN SEE, THE RATE BY THE
21 CHRONICLE/EXAMINER AND THE OAKLAND TRIBUNE ARE EVEN LOWER FOR
22 AUTO CLASSIFIED ADS THAN THE RATE FOR THE CONTRA COSTA TIMES.
23 IN OUTLYING COUNTIES THERE APPEARS TO BE MUCH MORE
24 COMPETITION THAN THERE IS IN THE HOME COUNTY OF THE DOMINANT
25 NEWSPAPER. THE COMPETITIVE FACTORS SEEM TO BE VERY DIFFERENT 433
COMANOR - DIRECT / SHULMAN
1 ACROSS THE DIFFERENT COUNTIES THAT WE HAVE LOOKED HERE, LOOKED
2 AT, SUGGESTING TO ME THAT THE RELEVANT GEOGRAPHIC MARKET IS THE
3 PARTICULAR COUNTY. AND THAT'S THE CONCLUSION I DREW.
4 Q. OKAY. LET ME SHOW YOU THE LAST CHART.
5 MAY I APPROACH THE WITNESS, YOUR HONOR?
6 THE COURT: YES, YOU MAY.
7 BY MR. SHULMAN:
8 Q. THIS IS EXHIBIT 146 IN EVIDENCE, AND IT IS A CHART
9 ENTITLED "ADVERTISEMENTS PLACED BY SAN FRANCISCO SELLERS IN THE
10 CHRONICLE, EXAMINER AND ADJACENT COUNTY NEWSPAPERS."
11 CAN YOU EXPLAIN WHAT THIS IS?
12 A. YES. WE LOOKED AT THE NEWSPAPERS FOR APRIL 17 AND WE
13 CARRIED OUT AN ANALYSIS WHICH IS PRETTY SIMILAR TO THE ONE WE
14 TALKED ABOUT BEFORE.
15 THE QUESTION IS WOULD A SAN FRANCISCO SELLER, EITHER
16 RETAIL OR CLASSIFIED AUTOS, AUTO AND CLASSIFIED ADS, ADVERTISE
17 ANYPLACE ELSE BETWEEN THE CHRONICLE AND THE EXAMINER. AND WE
18 CARRY THE -- WE SIMPLY COUNTED UP THE ADS, TOTAL AD SPACE,
19 TOTAL NUMBER OF ADS, IN THESE RELEVANT NEWSPAPERS.
20 AND, AS YOU CAN SEE, VERY FEW ADS BY SAN FRANCISCO
21 SELLERS ARE PLACED ANYWHERE BUT THE CHRONICLE AND EXAMINER -- A
22 FEW IN THE TRIBUNE, ONE IN THE MERCURY, A FEW IN THE CONTRA
23 COSTA TIMES. BUT THEY ARE OVERWHELMINGLY IN THE
24 CHRONICLE/EXAMINER. THESE RESULTS ARE AGAIN CONSISTENT WITH
25 THE FACT THAT CROSS-ELASTICITIES OF DEMAND BY SAN FRANCISCO 434
COMANOR - DIRECT / SHULMAN
1 ADVERTISERS -- BY SAN FRANCISCO SELLERS WHO WISH TO PLACE
2 ADVERTISING -- IS VERY LOW BETWEEN THE CHRONICLE AND EXAMINER
3 ON THE ONE HAND AND THESE OTHER NEWSPAPERS ON THE OTHER.
4 AGAIN, THIS LEADS ME TO THE CONCLUSION THAT SAN
5 FRANCISCO IS A SEPARATE RELEVANT GEOGRAPHIC MARKET.
6 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 435
COMANOR - DIRECT / SHULMAN
1 Q. I WANT TO DIRECT YOUR ATTENTION TO SOME TESTIMONY THAT WAS
2 GIVEN BY MR. TED FANG TO THE UNITED STATES DEPARTMENT OF
3 JUSTICE ON NOVEMBER 8, 1999. AND THIS APPEARS AT PAGE 112,
4 LINE 19, OF MR. FANG'S TESTIMONY.
5 MR. HOCKETT: CAN YOU GIVE US A MINUTE TO LOCATE
6 THAT, PLEASE?
7 MR. SHULMAN: SURE.
8 (PAUSE IN PROCEEDINGS.)
9 BY MR. SHULMAN:
10 Q. IN THAT TESTIMONY BEGINNING AT LINE 19 -- ONE -- AT LINE
11 19 ON PAGE 112, MR. FANG WAS ASKED --
12 THE COURT: DO YOU HAVE A COPY FOR THE COURT OR IS
13 IT ONE OF THESE THAT WE DON'T HAVE AN EXTRA COPY OF?
14 MR. SHULMAN: I'M USING THE ONLY COPY WE HAVE.
15 MR. CONNELL: HERE YOU GO.
16 (PAUSE IN PROCEEDINGS.)
17 THE COURT: THANK YOU, MR. SHULMAN.
18 BY MR. SHULMAN:
19 Q. DR. COMANOR, BEGINNING AT PAGE 112, LINE 19, MR. FANG WAS
20 ASKED THIS QUESTION, THIS SERIES OF QUESTIONS. I'M GOING
21 THROUGH TO LINE 5 ON PAGE 113. HE GAVE THESE ANSWERS:
22 "Q. IF THE PRICE AT THE NEWSSTAND OF THE
23 EXAMINER AND CHRONICLE WERE TO GO UP BY
24 10 PERCENT, WOULD THAT CAUSE A SIGNIFICANT
25 NUMBER OF PEOPLE IN SAN FRANCISCO TO START 436
COMANOR - DIRECT / SHULMAN
1 READING THE OAKLAND TRIBUNE?
2 "A. I DON'T THINK THAT PEOPLE WOULD READ
3 THE OAKLAND TRIBUNE IF THE CHRONICLE/EXAMINER
4 EVEN DOUBLED THEIR PRICE JUST BECAUSE IT'S TWO
5 DIFFERENT NEWSPAPERS, TWO DIFFERENT CITIES.
6 "Q. WOULD YOUR ANSWER BE THE SAME FOR THE
7 SAN JOSE MERCURY NEWS?
8 "A. YES, IT WOULD."
9 OKAY. ARE YOU FAMILIAR WITH THAT TESTIMONY?
10 A. YES, I AM.
11 Q. DOES THAT -- TELL ME WHETHER THAT -- WHAT CONCLUSIONS OR
12 OPINIONS YOU DRAW FROM THAT TESTIMONY.
13 A. THE QUESTIONS, WHICH I GATHER WERE PROPOSED BY THE
14 DEPARTMENT OF JUSTICE ATTORNEYS, ESSENTIALLY RAISE THE
15 CRITERIA, USE THE -- EMPLOY THE CRITERIA IMPOSED IN THE MERGER
16 GUIDELINES THAT I MENTIONED BEFORE, IF THE PRICE INCREASED BY
17 10 PERCENT, WOULD THERE BE A SUFFICIENT SWITCHING IN DEMAND.
18 THAT'S THE TEST WHICH THE JUSTICE DEPARTMENT USES.
19 AND THE ANSWER IS, NO, CONSUMERS WOULD NOT SWITCH.
20 THIS TESTIMONY IS CONSISTENT WITH THE CONCLUSION THAT SAN
21 FRANCISCO COUNTY REPRESENTS A SEPARATE GEOGRAPHIC MARKET
22 BECAUSE PEOPLE WOULD NOT SWITCH TO THESE OTHER NEWSPAPERS,
23 WHICH ARE -- WHOSE HOME BASE IS ELSEWHERE.
24 Q. OKAY. NOW I WANT TO ASK YOU ABOUT SOME TESTIMONY THAT WAS
25 GIVEN BY THE DEFENDANTS' EXPERT IN THIS CASE, DR. JAMES ROSSE. 437
COMANOR - DIRECT / SHULMAN
1 ARE YOU FAMILIAR WITH DR. ROSSE?
2 A. YES, I AM.
3 Q. AND IS HE A RESPECTED ECONOMIST?
4 A. YES, HE IS.
5 Q. THE TESTIMONY I WANT TO ASK YOU ABOUT OCCURS IN HIS
6 DEPOSITION AT PAGE 31, LINES 5 TO -- I'M SORRY, IT'S PAGE 59,
7 EXCUSE ME, PAGE 59, LINES 5 THROUGH 16.
8 (PAUSE IN PROCEEDINGS.)
9 BY MR. SHULMAN:
10 Q. IN THAT TESTIMONY I ASKED MR. ROSSE THESE QUESTIONS AND HE
11 GAVE THESE ANSWERS:
12 "Q. OKAY. WOULD YOU SAY THAT DAILY
13 NEWSPAPERS IN THE CITY AND COUNTY OF SAN
14 FRANCISCO IS A MARKET?
15 "A. NO.
16 "Q. WHY NOT?
17 "A. BECAUSE THE NEWSPAPERS THAT ARE
18 PUBLISHED HERE, THE CHRONICLE AND THE EXAMINER,
19 DRAW A LOT OF THEIR BUSINESS FROM OUTSIDE OF
20 THIS -- THE CITY AND COUNTY OF SAN FRANCISCO.
21 THEY SELL A LOT OF NEWSPAPERS AND THEY SELL A
22 LOT OF ADVERTISING RELATED TO THOSE CIRCULATION
23 ELSEWHERE IN THIS REGION, ESPECIALLY THE
24 CHRONICLE. THE CHRONICLE HAS A MUCH
25 WIDER-RANGING CIRCULATION THAN THE EXAMINER 438
COMANOR - DIRECT / SHULMAN
1 DOES."
2 DOES THIS CHANGE YOUR OPINION AT ALL?
3 A. NO. I THINK THIS IS WRONG.
4 Q. AND WOULD YOU EXPLAIN WHY?
5 A. YES. IT'S QUITE COMMON FOR FIRMS TO SELL INTO MANY
6 DIFFERENT GEOGRAPHIC MARKETS. TO TAKE A VERY DIFFERENT
7 INDUSTRY, THE PHARMACEUTICAL INDUSTRY PRODUCES DRUGS HERE IN
8 THE UNITED STATES BUT SELLS IN THE UNITED STATES, SELLS IN
9 EUROPE, SELLS IN JAPAN, SELLS IN OTHER COUNTRIES. IN THESE
10 OTHER COUNTRIES THERE ARE VERY DIFFERENT SUPPLY AND DEMAND
11 CONDITIONS, DIFFERENT GOVERNMENT REGIMES, CLEARLY DIFFERENT
12 RELEVANT GEOGRAPHIC MARKETS.
13 THE FACT THAT THE U.S. EXPORTS DRUGS ABROAD DOES NOT
14 MEAN THAT THERE IS A SEPARATE -- THAT THERE IS A WORLDWIDE
15 MARKET. IT DOESN'T INDICATE ONE THING OR THE OTHER. IT MIGHT
16 BE A WORLDWIDE MARKET. IT MIGHT BE SEPARATE NATIONAL MARKETS.
17 WHAT DR. ROSSE IS SAYING IS THE FACT THAT THE
18 EXAMINER/CHRONICLE SELLS IN OTHER COUNTIES NECESSARILY MEANS
19 THAT THERE'S A COMPOSITE, BROAD LOCAL MARKET, AND THAT'S JUST
20 WRONG BECAUSE IT'S CERTAINLY CONSISTENT WITH THE IDEA THAT THE
21 CHRONICLE SELLS IN DIFFERENT COUNTIES AT DIFFERENT RATES IN
22 DIFFERENT COMPETITIVE CONDITIONS AS WELL AS SELLING IN ITS OWN
23 MARKET.
24 THIS PIECE OF INFORMATION BY ITSELF IS NOT
25 SUFFICIENT TO DRAW A CONCLUSION THAT THERE IS A REGION-WIDE 439
COMANOR - DIRECT / SHULMAN
1 GEOGRAPHIC MARKET.
2 Q. WHAT ELSE WOULD YOU NEED TO SEE IN ORDER TO REACH THE
3 CONCLUSION THAT THE MARKET IS REGIONAL RATHER THAN CONFINED TO
4 THE CITY AND COUNTY OF SAN FRANCISCO?
5 A. YOU'D LIKE TO SEE SUBSTITUTABILITY BY READERS IN VARIOUS
6 REGIONS: DO THE READERS IN CONTRA COSTA OR ALAMEDA BUY THE
7 CHRONICLE AND DO READERS IN SAN FRANCISCO BUY THESE OTHER
8 NEWSPAPERS? AND THE EVIDENCE, AS WE SAW, IS THAT THEY DO NOT.
9 SAN FRANCISCO READERS BUY THE SAN FRANCISCO CHRONICLE/EXAMINER
10 ALMOST EXCLUSIVELY, CLEARLY NOT INDICATING -- NOT INDICATIVE OF
11 A BROADER MARKET.
12 Q. AND WHAT WOULD YOU EXPECT TO SEE IN PRICING IF THERE WERE
13 A BROADER MARKET RATHER THAN THE CITY AND COUNTY OF SAN
14 FRANCISCO?
15 A. I WOULD EXPECT TO SEE COMPARABLE PRICING, COMPETITIVE
16 PRICING, WITHIN A RELEVANT -- WITHIN THE REGION. WE DON'T SEE
17 THAT. THAT'S WHY WE LOOKED AT THESE CHARTS. WE DO NOT SEE
18 COMPETITIVE PRICING THROUGHOUT THE REGION.
19 IF WE LOOK AT THE PRICING COUNTY BY COUNTY, YOU SEE
20 IN SOME CASES THERE IS COMPETITION, IN ALAMEDA COUNTY OFTEN
21 BETWEEN THE CHRONICLE/EXAMINER AND THE OAKLAND TRIBUNE, BUT
22 THAT DOES NOT CARRY OVER TO THE CITY AND COUNTY OF SAN
23 FRANCISCO.
24 Q. OKAY. NOW, WERE YOU ALSO ASKED, IN CONNECTION WITH YOUR
25 WORK IN THIS CASE, TO CONSIDER WHETHER THE SAN FRANCISCO 440
COMANOR - DIRECT / SHULMAN
1 EXAMINER IS A FAILING NEWSPAPER?
2 A. YES, I WAS.
3 Q. AND IN CONNECTION WITH DOING THAT WORK, DID YOU CONSIDER
4 THE APPROPRIATE MEANS TO, OR STANDARD, TO USE IN DETERMINING
5 WHETHER THE EXAMINER IS A FAILING NEWSPAPER?
6 A. I'M NOT QUITE SURE. SURELY A FAILING NEWSPAPER WOULD BE
7 ONE THAT WOULD BE MAKING LOSSES.
8 Q. OKAY. LET ME --
9 THE COURT: I THINK YOU'RE GETTING AHEAD OF THE
10 QUESTION.
11 BY MR. SHULMAN:
12 Q. LET ME BACK UP A LITTLE BIT AND SEE IF I CAN MAKE MY
13 QUESTION A LITTLE CLEARER.
14 YOU'RE AWARE THAT THERE IS A JOINT OPERATING
15 AGREEMENT IN EFFECT BETWEEN THE HEARST CORPORATION AND
16 CHRONICLE PUBLISHING COMPANY?
17 A. YES, I AM.
18 Q. OKAY. DID YOU, IN CONSIDERING WHETHER THE EXAMINER IS A
19 FAILING COMPANY, DID YOU ENDEAVOR TO LOOK AT HOW THE EXAMINER
20 WOULD DO OUTSIDE OF OR IN THE ABSENCE OF THE JOINT OPERATING
21 AGREEMENT?
22 A. NO. IT SEEMED TO ME --
23 Q. IS THERE -- THE ANSWER TO THAT IS NO?
24 A. (WITNESS NODS HEAD.)
25 Q. DID YOU CONSIDER WHETHER THAT WAS APPROPRIATE? 441
COMANOR - DIRECT / SHULMAN
1 A. YES.
2 Q. AND WHAT CONCLUSION DID YOU DRAW?
3 A. I CONSIDERED THAT NOT TO BE APPROPRIATE.
4 Q. WHY DID YOU CONSIDER THAT NOT TO BE APPROPRIATE? WOULD
5 YOU STATE THE REASONS, PLEASE.
6 A. YES. WHEN THE JOA WAS CREATED, THERE WERE VARIOUS
7 ELEMENTS OF THAT AGREEMENT. ONE IS THAT THE EXAMINER WOULD
8 SHIFT FROM A MORNING NEWSPAPER TO AN AFTERNOON NEWSPAPER.
9 ANOTHER IS THAT THEY WOULD COMBINE THEIR PUBLISHING AND
10 PRINTING AND OTHER BUSINESS ASSETS, OTHER DISTRIBUTION ASSETS,
11 TOGETHER. AND THREE IS THAT THEY WOULD DIVIDE THE NET REVENUES
12 EVENLY BETWEEN THE TWO.
13 IT SEEMS TO ME THAT THE FORTUNES OF THE EXAMINER
14 DEPEND ON ALL OF THEM. YOU CAN'T LOOK AT JUST ONE PART WITHOUT
15 THE OTHER PART.
16 THE EXAMINER HAS LOWER CIRCULATION THAN THE
17 CHRONICLE; BUT, ACCORDING TO ITS AGREEMENT, IT RECEIVES HALF OF
18 THE NET REVENUES. ONE OF THE REASONS IT HAS LOWER CIRCULATION
19 PERHAPS IS THAT IT'S AN AFTERNOON NEWSPAPER.
20 SO IT SEEMED TO ME THAT IF YOU'RE GOING TO LOOK AT
21 THE FORTUNES OF THE EXAMINER AS A BUSINESS, YOU HAVE TO LOOK AT
22 IT IN THE CONTEXT -- IN THE ECONOMIC AND BUSINESS CONTEXT IN
23 WHICH IT HAS OPERATED FOR MANY YEARS; AND WHEN YOU DO THAT, YOU
24 SEE, ACCORDING TO THE EXAMINER'S OWN NUMBERS, THAT IT IS HARDLY
25 A FAILING COMPANY. 442
COMANOR - DIRECT / SHULMAN
1 Q. NOW, YOU SAID THAT THE ECONOMIC FORTUNES OF THE EXAMINER
2 HAVE BEEN DETERMINED BY OR BOUND UP WITH THE JOINT OPERATING
3 AGREEMENT; CORRECT?
4 A. YES.
5 Q. IS THAT ALSO TRUE FOR THE CHRONICLE?
6 A. YES.
7 Q. CAN YOU EXPLAIN THAT?
8 A. THE CHRONICLE AND EXAMINER CAME TOGETHER TO HAVE AN
9 AGREEMENT, THE JOINT OPERATING ARRANGEMENT. THE CHRONICLE
10 BENEFITED BY BEING THE ONLY MORNING NEWSPAPER. IT ALSO AGREED
11 THAT THE NET REVENUES WOULD BE DIVIDED EVENLY.
12 THE EXAMINER GAINED FROM AN EQUAL DIVISION OF THE
13 REVENUES, BUT IT HAD TO DEAL WITH THE FACT THAT IT'S AN
14 AFTERNOON NEWSPAPER, WHICH HAS OTHER IMPLICATIONS.
15 I DON'T THINK YOU CAN DEAL WITH THE FORTUNES OF
16 EITHER NEWSPAPER SEPARATE FROM THE JOA, WHICH HAS RULED THEIR
17 RELATIONSHIPS, RULED THEIR ECONOMIC ARRANGEMENTS FOR A
18 SUBSTANTIAL PERIOD OF TIME.
19 Q. ALL RIGHT. LOOKING AT THE EXAMINER WITHIN THE CONTEXT OF
20 THE JOA, IS IT YOUR OPINION THAT THE EXAMINER IS OR IS NOT A
21 FAILING COMPANY?
22 A. IT IS NOT A FAILING BUSINESS.
23 Q. AND WOULD YOU EXPLAIN THE GROUNDS FOR YOUR OPINION THAT
24 THE EXAMINER IS NOT A FAILING BUSINESS?
25 A. YES. I LOOKED AT SOME DATA, WHICH WAS PROVIDED ME FROM 443
COMANOR - DIRECT / SHULMAN
1 THE EXAMINER, AND I DEALT WITH THE PERIOD OF 1990'S, MOST OF
2 1990'S, FROM JANUARY 1, 1990, THROUGH DECEMBER 31, 1998.
3 CUMULATIVE NET INCOME WAS $35.7 MILLION, CUMULATIVE FUNDS FROM
4 OPERATIONS WERE $99 MILLION, CUMULATIVE HEARST CAPITAL
5 INVESTMENT IN THIS BUSINESS WAS $53.6 MILLION.
6 NOTE THAT THE DIFFERENCE BETWEEN NET INCOME AND
7 FUNDS FROM OPERATION IS LARGELY DEPRECIATION WHICH HERE AMOUNTS
8 TO OVER $63 MILLION OF WHICH MOST OF THAT SUM WAS REINVESTED IN
9 THE BUSINESS. THAT IS HARDLY A PICTURE OF A FIRM EXPECTING TO
10 GO OUT OF BUSINESS. THIS IS A FIRM THAT'S REINVESTING, THAT'S
11 OPERATING AS THOUGH IT EXPECTS TO BE IN THIS MARKET, AND SEEMS
12 TO ME NOT A PICTURE OF A FAILING BUSINESS.
13 I NOTE, OF COURSE, THAT THESE NUMBERS DO NOT --
14 IGNORE DISCOUNTING PRICE CHANGES, SO THESE ARE SIMPLY
15 APPROXIMATE VALUES BUT THEY ARE CERTAINLY NOT INDICATIVE OF A
16 FAILING COMPANY.
17 Q. NOW, YOU UNDERSTAND THAT THE JOINT OPERATING AGREEMENT
18 WILL RUN INTO AND THROUGH MOST OF THE YEAR 2005?
19 A. YES, I DO.
20 Q. DID YOU FORM AN OPINION AS TO WHETHER FOR THE PERIOD FROM
21 NOW UNTIL THE END OF THE JOA THE SAN FRANCISCO EXAMINER IS A
22 FAILING NEWSPAPER?
23 A. YES, I HAVE AN OPINION.
24 Q. AND WHAT IS YOUR OPINION?
25 A. CLEARLY FROM NOW THROUGH 2005, UNDER THE JOA, THE EXAMINER 444
COMANOR - DIRECT / SHULMAN
1 IS NOT A FAILING BUSINESS.
2 Q. AND WHAT IS THE BASIS FOR THAT OPINION?
3 A. THE PROFITABILITY OF THE ENTERPRISE THROUGH THE 1990'S AND
4 THE EXPECTATION THAT THIS WILL CONTINUE THROUGH THE PERIOD OF
5 THE JOA.
6 Q. SO YOU EXPECT THOSE PROFITS TO CONTINUE UNTIL THE END OF
7 THE JOA?
8 A. CERTAINLY.
9 Q. NOW, WHAT ABOUT 2005 WHEN THE JOA ENDS? ARE YOU ABLE --
10 DO YOU HAVE AN OPINION AS TO WHETHER THE EXAMINER IS LIKELY OR
11 IS GOING TO BE A FAILING COMPANY FIVE YEARS FROM NOW?
12 A. NO.
13 Q. OKAY. DID YOU CONSIDER WHETHER --
14 THE COURT: NO, YOU DO NOT HAVE AN OPINION?
15 THE WITNESS: I DO NOT HAVE AN OPINION.
16 BY MR. SHULMAN:
17 Q. DID YOU CONSIDER WHETHER IT WAS APPROPRIATE TO FORM AN
18 OPINION?
19 A. I THINK IT'S VERY DIFFICULT TO PREDICT WHAT THE WORLD WILL
20 BE LIKE FIVE YEARS FROM NOW FOR TWO MAJOR REASONS. ONE IS, THE
21 INCREASING IMPORTANCE OF THE INTERNET AS A MEANS OF
22 DISTRIBUTING NEWSPAPERS, NEWS CONTENT. I DON'T KNOW THAT I CAN
23 PREDICT WHAT THE WORLD WILL BE LIKE WITH THE INCREASING
24 IMPORTANCE OF THE INTERNET.
25 SECOND, I NOTE THE HEARST'S CORPORATION STATED 445
COMANOR - DIRECT / SHULMAN
1 INTENTION NO MATTER WHAT TO REMAIN IN THE SAN FRANCISCO
2 NEWSPAPER MARKET. IT'S A LARGE COMPANY WITH SUBSTANTIAL
3 RESOURCES. THEY STATED THEIR INTENTION IS TO REMAIN IN THIS
4 MARKET. I DON'T KNOW WHAT -- WHETHER THAT WILL BE SUFFICIENT
5 TO HAVE THEM REMAIN IN THE MARKET EVEN THOUGH THEY ARE THE
6 SMALLER NEWSPAPER FOLLOWING 2005.
7 I DON'T KNOW THAT ANYONE CAN REALLY PREDICT WHAT THE
8 WORLD WILL BE LIKE FIVE YEARS FROM NOW WHEN THE JOA ENDS.
9 Q. NOW, WHAT DOES THE -- WHAT EFFECT -- WHAT ARE THE
10 POTENTIAL EFFECTS OF THE INTERNET AS A MEANS OF NEWSPAPER
11 DELIVERY?
12 A. IT MAY MAKE IT MORE LIKELY THAT YOU CAN SEE RIVAL
13 NEWSPAPERS BOTH BE SUCCESSFUL. I DON'T KNOW. I DON'T THINK
14 ANYONE KNOWS HOW THE INTERNET WILL CHANGE THE WORLD IN TERMS OF
15 NEWSPAPERS. IT'S A VERY DIFFICULT FORECASTING ISSUE, AND I
16 DON'T HAVE AN OPINION.
17 Q. WELL, HOW COULD THE INTERNET AFFECT NEWSPAPER DELIVERY?
18 A. IT COULD MAKE IT MUCH MORE ECONOMICAL TO DISTRIBUTE
19 NEWSPAPERS. IT COULD CHANGE THE NATURE OF READERSHIP. IT'S
20 DIFFICULT TO FORECAST THESE SORTS OF ISSUES.
21 MR. SHULMAN: I'M ABOUT TO MOVE TO ANOTHER TOPIC. I
22 DON'T KNOW WHAT THE COURT'S SCHEDULE IS.
23 THE COURT: I'M FINE, BUT IF YOU --
24 MR. SHULMAN: NO, NO, I'M FINE.
25 THE COURT: -- WANT A BREAK -- 446
COMANOR - DIRECT / SHULMAN
1 MR. SHULMAN: NO, I WILL CONTINUE. THAT'S FINE.
2 THE COURT: HOW IS THE WITNESS?
3 THE WITNESS: I WOULDN'T MIND A BREAK NOW IF IT'S
4 OKAY.
5 THE COURT: WHY DON'T WE TAKE 10 MINUTES AND WE'LL
6 RESUME AT A QUARTER OF.
7 THE WITNESS: THANK YOU, YOUR HONOR.
8 (RECESS TAKEN AT 10:35 A.M.)
9 (PROCEEDINGS RESUMED AT 10:45 A.M.)
10 THE COURT: VERY WELL, MR. SHULMAN, YOU MAY CONTINUE
11 YOUR EXAMINATION OF THIS WITNESS.
12 MR. SHULMAN: THANK YOU. MAY IT PLEASE THE COURT.
13 Q. DR. COMANOR, IN CONNECTION WITH YOUR WORK, DID YOU EXAMINE
14 AT ALL THE AGREEMENT THAT WAS MADE BETWEEN THE HEARST
15 CORPORATION AND INTERVENOR EXIN, THE FANG FAMILY?
16 A. YES, I DID.
17 Q. AND CAN YOU, WITHOUT GETTING INTO YOUR OPINIONS AND
18 CONCLUSIONS, CAN YOU BRIEFLY EXPLAIN WHAT YOU DID?
19 A. I REVIEWED VARIOUS DOCUMENTS DESCRIBING THE CONTRACT, AND
20 I READ -- I REVIEWED THE CONTRACT NOT IN EVERY WORD, BUT IN
21 PERTINENT PART, AND I THINK I UNDERSTOOD THE CRITICAL
22 FACTORS -- CRITICAL FEATURES ABOUT THE CONTRACT.
23 Q. DID YOU, IN ANALYZING THE CONTRACT, DID YOU DETERMINE THAT
24 THE CONTRACT INVOLVES WHAT IS KNOWN AS A NEGATIVE PRICE?
25 A. YES. I NOTE THAT THERE ARE VARIOUS DOCUMENTS PRODUCED BY 447
COMANOR - DIRECT / SHULMAN
1 THE DEFENDANTS IN THIS MATTER WHERE THEY ACKNOWLEDGE THAT THE
2 SALE OF THE EXAMINER TO THE FANGS REPRESENTS A NEGATIVE PRICE
3 IN THAT YOU'RE PAYING SOMEONE TO TAKE THE PRODUCT.
4 Q. THAT'S WHAT A NEGATIVE PRICE IS?
5 A. YES.
6 Q. NOW, DID YOU ALSO CONSIDER WHETHER THE AGREEMENT CONTAINED
7 ANY INCENTIVES, FROM AN ECONOMIC STANDPOINT, THAT WOULD LIMIT
8 THE AMOUNT OF MONEY SPENT IN THE PRODUCTION OF THE PAPER?
9 A. YES, I DID.
10 Q. AND DID YOU FIND THAT THERE WERE SUCH INCENTIVES TO LIMIT
11 THE AMOUNT OF MONEY TO BE SPENT IN CONNECTION WITH THE
12 PRODUCTION OF THE PAPER?
13 A. YES, I DID.
14 Q. ALL RIGHT. WOULD YOU EXPLAIN, PLEASE, WHAT THEY ARE.
15 A. OKAY. I THINK IT'S EASIEST TO LOOK AT YEARS TWO AND
16 THREE BECAUSE IT'S -- THEY'RE FULL YEARS. SO LET ME FOCUS ON
17 THAT, ALTHOUGH THE PROVISIONS CARRY OVER INTO THE FIRST YEAR AS
18 WELL.
19 THE COURT: SHOULD I HAVE THE CONTRACT BEFORE ME?
20 MR. SHULMAN: WE CAN DO THAT, YOUR HONOR. IT'S
21 EXHIBIT 35. IT IS IN EVIDENCE.
22 THE COURT: AS EXHIBIT 35?
23 MR. SHULMAN: YES.
24 THE COURT: THANK YOU, SIR.
25 THE WITNESS: I DON'T HAVE A COPY OF IT. 448
COMANOR - DIRECT / SHULMAN
1 MR. SHULMAN: WE'LL GET THAT FOR YOU.
2 (PAUSE IN PROCEEDINGS.)
3 MR. SHULMAN: MAY I APPROACH THE WITNESS, YOUR
4 HONOR?
5 THE COURT: YES, YOU MAY.
6 MR. SHULMAN: AND MAY I USE THE EASEL AS WELL?
7 THE COURT: THAT WOULD BE FINE.
8 MR. SHULMAN: THANK YOU.
9 (PAUSE IN PROCEEDINGS.)
10 BY MR. SHULMAN:
11 Q. ALL RIGHT. DR. COMANOR, YOU WERE SAYING THAT YOU SUGGEST
12 THAT WE TAKE THE SECOND AND THIRD -- SECOND OR THE THIRD YEAR
13 OF THE CONTRACT AND YOU WERE GOING TO EXPLAIN ABOUT THE
14 DISINCENTIVES.
15 A. YES, SIR.
16 Q. OKAY. WOULD YOU DO THAT, PLEASE.
17 A. IT SAYS -- THE PROVISION SAYS THAT HEARST WILL REIMBURSE
18 EXAMINER COSTS UP TO A MAXIMUM OF $25 MILLION A YEAR.
19 Q. OKAY. I'M GOING TO WRITE ON THE EASEL 25 MILLION PER
20 YEAR. THAT IS WHAT -- THE MAXIMUM THAT HEARST WILL REIMBURSE?
21 A. YES.
22 Q. OKAY. EXPLAIN HOW THE DISINCENTIVE WORKS.
23 A. THERE'S ANOTHER PROVISION SAYS THAT HEARST WILL PAY THE
24 FANGS ONE HALF OF THE DIFFERENCE BETWEEN 25 MILLION AND
25 REIMBURSABLE COSTS UP TO A MAXIMUM OF $5 MILLION PER YEAR. 449
COMANOR - DIRECT / SHULMAN
1 Q. 5 OR 15? OH, OH, I SEE WHAT YOU'RE SAYING, YES.
2 THE COURT: WELL, I DON'T. WHAT PAGE ARE YOU
3 READING FROM?
4 THE WITNESS: WELL, IF YOU LOOK AT PAGES 5 AND 6.
5 BY MR. SHULMAN:
6 Q. THIS IS OF THE CONTRACT?
7 A. OF THE CONTRACT.
8 THE COURT: THAT'S PROVISION 1.4(B)?
9 THE WITNESS: (B).
10 THE COURT: VERY WELL.
11 THE WITNESS: IT'S IN THERE. I'LL HAVE TO FIND IT.
12 IT'S NOT EASILY FOUND IN THERE.
13 THE COURT: WELL, I THINK I'VE LOCATED IT ABOUT THE,
14 WHAT'S THAT, THE SIXTH LINE DOWN, THEREABOUTS?
15 THE WITNESS: (WITNESS EXAMINES DOCUMENT.)
16 THE COURT: SUBSECTION (B).
17 THE WITNESS: IT SAYS -- IT SAYS 25-MILLION-DOLLAR
18 FIGURE IS THERE, THAT IS CORRECT.
19 THE COURT: YES.
20 THE WITNESS: BUT IT'S THE SECOND POINT THAT I
21 JUST....
22 (WITNESS EXAMINES DOCUMENT.) OH, HERE IT IS, ON THE
23 TOP OF PAGE 6, YOUR HONOR.
24 BY MR. SHULMAN:
25 Q. IF YOU START AT THE BOTTOM -- WOULD YOU START AT THE 450
COMANOR - DIRECT / SHULMAN
1 BOTTOM OF PAGE 5 FIRST, DR. COMANOR?
2 A. YES.
3 THE COURT: "IF AT THE END OF A REIMBURSEMENT YEAR"?
4 MR. ALIOTO: YES.
5 THE WITNESS: DO YOU WANT ME TO READ THAT?
6 MR. SHULMAN: PLEASE.
7 THE COURT: YES.
8 THE WITNESS: "IF AT THE END OF A REIMBURSEMENT YEAR
9 THE BUYER'S AGGREGATE REIMBURSABLE COSTS FOR
10 SUCH YEAR, AS SET FORTH IN THE COST STATEMENT AS
11 DEFINED BELOW, ARE $15 MILLION OR MORE BUT LESS
12 THAN THE CAP AMOUNT," WHICH IS HERE $25 MILLION,
13 "THE COMPANY SHALL PAY TO BUYER, IN ADDITION TO
14 THE REIMBURSABLE COSTS FOR SUCH YEAR, ONE HALF
15 OF THE AMOUNT BY WHICH THE CAP AMOUNT EXCEEDS
16 BUYER'S REIMBURSABLE COSTS FOR SUCH YEAR BUT NOT
17 MORE THAN $5 MILLION."
18 THE COURT: THAT'S NOT CRYSTAL CLEAR ON FIRST
19 READING.
20 THE WITNESS: I AGREE WITH THAT.
21 BY MR. SHULMAN:
22 Q. LET US SUPPOSE THAT THE -- WELL, WHAT ARE REIMBURSABLE
23 COSTS?
24 A. COSTS TO PRODUCE THE EXAMINER. WE COULD GO THROUGH THEM,
25 BUT THEY'RE LISTED. 451
COMANOR - DIRECT / SHULMAN
1 Q. OKAY. LET US SUPPOSE THAT THE REIMBURSABLE COSTS ARE
2 $15 MILLION, ALL RIGHT?
3 A. YES.
4 Q. OKAY. I'M GOING TO WRITE 15 MILLION ON THE EASEL.
5 THE COURT: REIMBURSABLE COSTS, I GATHER, IS A
6 DEFINED TERM IN THE CONTRACT; IS THAT RIGHT?
7 THE WITNESS: YES.
8 THE COURT: WHERE IS IT DEFINED?
9 THE WITNESS: (WITNESS EXAMINES DOCUMENT.)
10 MR. SHULMAN: I THINK IT'S ON PAGE 5, YOUR HONOR.
11 MR. HOCKETT: PAGE 6.
12 MR. SHULMAN: PAGE 6, SORRY.
13 THE COURT: YES, I SEE, PAGE 6.
14 (PAUSE IN PROCEEDINGS.)
15 THE COURT: ONE MIGHT THINK THIS CONTRACT WAS
16 DRAFTED IN PHILADELPHIA.
17 (LAUGHTER)
18 THE COURT: ALL RIGHT.
19 BY MR. SHULMAN:
20 Q. OKAY. NOW, LET US SUPPOSE THAT THE REIMBURSABLE COSTS ARE
21 $15 MILLION. AND "REIMBURSABLE" MEANS REIMBURSED BY WHOM?
22 A. BY HEARST.
23 Q. OKAY. LET US ASSUME, THEN, THAT HEARST -- THE COSTS FOR
24 WHICH THE EXIN SEEKS REIMBURSEMENT ARE $15 MILLION, SO THE
25 DIFFERENCE BETWEEN 25 AND $15 MILLION, THIS IS A TOUGH QUESTION 452
COMANOR - DIRECT / SHULMAN
1 FOR AN ECONOMIST, IS HOW MUCH?
2 A. $10 MILLION.
3 Q. THAT IS A $10 MILLION DIFFERENCE. AND SO THESE ARE COSTS
4 OR THIS IS THE DIFFERENCE BETWEEN THE MAXIMUM THAT HEARST WILL
5 PAY AND, SAY, THE ACTUAL COSTS PAID OF $15 MILLION.
6 NOW, MY QUESTION IS: WHAT HAPPENS WITH REGARD TO
7 THIS 10-MILLION-DOLLAR DIFFERENCE BETWEEN THE AMOUNT THAT
8 HEARST HAS ACTUALLY PAID AND THE MAXIMUM AMOUNT THAT THEY WOULD
9 PAY, 25 MILLION?
10 A. WELL, THE CONTRACT PROVIDES THAT HEARST WILL ALSO PAY ONE
11 HALF OF THAT DIFFERENCE OR ONE HALF OF 10 OR $5 MILLION, SO
12 THAT THE TOTAL PAYMENT WOULD BE 15 PLUS 5 OR $20 MILLION.
13 Q. SO ONE HALF OF THE 10-MILLION-DOLLAR DIFFERENCE IS
14 5 MILLION?
15 A. YES.
16 Q. AND THE $5 MILLION IS ALSO PAID TO EXIN?
17 A. YES. THAT'S IN ADDITION TO THE $15 MILLION.
18 Q. OKAY. NOW, HOW IS THAT A DISINCENTIVE TO INVEST IN THE
19 PAPER?
20 A. I THINK THE EASIEST WAY IS TO DO THE SAME NUMBERS. LET'S
21 ASSUME IT'S $16 MILLION IN COSTS. WE NOW KNOW THE TOTAL IN
22 THIS SCENARIO, THE TOTAL RECEIPTS BY THE FANGS IS $20 MILLION.
23 DO YOU WANT TO PUT THAT DOWN? TOTAL PAYMENT
24 RECEIVED IS $20 MILLION.
25 Q. 20 MILLION TOTAL. 453
COMANOR - DIRECT / SHULMAN
1 A. RIGHT. NOW LET'S DO THE SAME THING WITH INSTEAD OF 15 DO
2 16, AND YOU'LL SEE.
3 Q. OKAY. THE MAXIMUM, AGAIN, IS 25. SAY THE ACTUAL COSTS
4 ARE 16. AND THAT'S YOUR HYPOTHETICAL?
5 A. YES.
6 Q. YOU SUBTRACT THAT AND WE GET $9 MILLION; RIGHT?
7 A. $9 MILLION DIFFERENCE.
8 Q. OKAY.
9 A. ACCORDING TO THE CONTRACT, THE BUYER ALSO RECEIVES HALF OF
10 9 OR 4.5.
11 Q. ALL RIGHT.
12 A. ALL RIGHT.
13 Q. YEAH.
14 A. AND THEN LET'S ADD 4.5 AND 16.
15 Q. THAT'S 20 AND A HALF.
16 A. THAT'S 20.5.
17 Q. WOULD BE THE TOTAL AMOUNT --
18 A. TOTAL AMOUNT RECEIVED BY THE BUYER.
19 NOTE THAT THE BUYER SPENDS AN EXTRA $1 MILLION ON
20 EXPENDITURES BUT RECEIVES ONLY AN ADDITIONAL HALF MILLION
21 DOLLARS OF PAYMENT FROM THE HEARSTS, WHICH LEADS ME TO THE
22 CONCLUSION THAT FOR EVERY DOLLAR SPENT ON COSTS BEYOND
23 $15 MILLION, FANG LOSES 50 CENTS OF THE ADDITIONAL PAYMENT. IN
24 EFFECT, BEYOND $15 MILLION HE'S REIMBURSED FOR ONLY 50 CENTS ON
25 THE DOLLAR FOR ALL COSTS. 454
COMANOR - DIRECT / SHULMAN
1 SO THERE'S A CLEAR INCENTIVE TO SPEND MORE THAN 15
2 UNLESS, OF COURSE, THERE'S ADDITIONAL REVENUES ASSOCIATED WITH
3 IT. BUT ASSUMING THAT THERE'S NO DIFFERENCE IN REVENUES, WHY
4 WOULD YOU SPEND A DOLLAR AND ONLY GET 50 CENTS BACK? YOU
5 WOULDN'T DO IT.
6 Q. NOW, HAVE YOU REVIEWED THE HEARST'S HART-SCOTT-RODINO
7 FILINGS IN CONNECTION WITH THIS ACQUISITION?
8 A. YES, I HAVE.
9 Q. AND WHAT DO THE HEARST FILINGS WITH THE UNITED STATES
10 GOVERNMENT DEPARTMENT OF JUSTICE TELL YOU, IF ANYTHING, ABOUT
11 WHETHER EXIN IS LIKELY TO INVEST IN THIS PAPER?
12 A. THE SUBSTANCE OF THE REPORT SUBMITTED, THE ECONOMIC
13 REPORT, SUBMITTED BY HEARST IN ITS HSR FILING, IS THAT THERE IS
14 NO CHANCE OR LITTLE CHANCE THAT THE EXAMINER WOULD BE AN
15 EFFECTIVE BUSINESS ABSENT THE JOA.
16 Q. ALL RIGHT. LET ME --
17 MR. SHULMAN: COULD I HAVE EXHIBITS 16 AND 94,
18 PLEASE.
19 (PAUSE IN PROCEEDINGS.)
20 MR. SHULMAN: MAY I APPROACH THE WITNESS, YOUR
21 HONOR?
22 THE COURT: YOU MAY.
23 MR. SHULMAN: EXCUSE ME.
24 (PAUSE IN PROCEEDINGS.)
25 455
COMANOR - DIRECT / SHULMAN
1 BY MR. SHULMAN:
2 Q. YOU HAVE 94; RIGHT? DID I ALSO GIVE YOU 16?
3 A. NO, I ONLY HAVE 94.
4 Q. ALL RIGHT. SORRY. I HAVE IT. MY FAULT. LET ME --
5 MR. SHULMAN: MAY I APPROACH THE WITNESS?
6 THE COURT: YOU MAY.
7 BY MR. SHULMAN:
8 Q. I'M GOING TO HAND YOU EXHIBIT 16 AS WELL. EXHIBIT 16 IN
9 EVIDENCE -- WELL, LET'S START WITH 94.
10 94 IS AN ANALYSIS OF THE PROPOSED HEARST ACQUISITION
11 OF THE CHRONICLE PREPARED FOR SUBMISSION TO THE UNITED
12 STATES -- TO THE ANTITRUST DIVISION OF THE U.S. DEPARTMENT OF
13 JUSTICE BY DR. JOSEPH W. MC ANNENY, ECONOMIST, INCORPORATED,
14 WASHINGTON, D.C., OCTOBER 5, 1999. ARE YOU FAMILIAR WITH THIS?
15 A. YES.
16 Q. OKAY. IF YOU LOOK AT THE THIRD PAGE, AND IS THIS WHAT
17 YOU'RE REFERRING TO AS PART OF THE HART-SCOTT-RODINO SUBMISSION
18 BY HEARST?
19 A. YES. AND I NOTE THAT --
20 THE COURT: LET'S SEE, THIS IS EXHIBIT --
21 MR. SHULMAN: YOUR HONOR, THIS IS EXHIBIT 94.
22 (PAUSE IN PROCEEDINGS.)
23 THE COURT: ALL RIGHT.
24 BY MR. SHULMAN:
25 Q. ALL RIGHT. I WANT TO DIRECT YOUR ATTENTION TO THE THIRD 456
COMANOR - DIRECT / SHULMAN
1 PAGE OF THE DOCUMENT, FIRST PARAGRAPH.
2 A. IT'S ENTITLED "PAGE 2" EVEN THOUGH IT'S THE THIRD PAGE.
3 Q. RIGHT. IT'S -- AT THE TOP IT SAYS PAGE 2. THAT'S IT.
4 AND I WANT TO DIRECT YOUR ATTENTION TO THE FIRST
5 PARAGRAPH AT THE TOP OF THE PAGE, THE SENTENCE THAT BEGINS:
6 "THE PAPER," MEANING THIS PAPER, "CONCLUDES
7 THAT AN INDEPENDENT POST-JOA EXAMINER, AS THE
8 JUNIOR PAPER, COULD NOT ESCAPE THE ECONOMICS OF
9 THE DOWNWARD SPIRAL NORMALLY ASSOCIATED WITH THE
10 JUNIOR PAPER WHEN TWO NEWSPAPERS COMPETE HEAD TO
11 HEAD IN THE SAME CITY AND THAT THERE ARE NO
12 COMMERCIALLY VIABLE OPTIONS AVAILABLE TO
13 MAINTAIN THE EXAMINER AS A SECOND COMPETITIVE
14 DAILY NEWSPAPER IN SAN FRANCISCO."
15 DO YOU SEE THAT STATEMENT?
16 A. YES, I DO.
17 Q. AND ARE YOU AWARE THAT THIS IS WHAT HEARST COMMUNICATED TO
18 THE DEPARTMENT OF JUSTICE IN OCTOBER OF 1959 (SIC) AFTER THEY
19 HAD AGREED TO BUY THE CHRONICLE?
20 A. 1999.
21 Q. 1999.
22 A. YES, SIR.
23 Q. OKAY. WHAT, IF ANYTHING, DOES THAT TELL YOU ABOUT THE
24 CHANCES OF EXIN IN LIGHT OF THE OTHER TESTIMONY YOU'VE GIVEN
25 ABOUT THE AGREEMENT? 457
COMANOR - DIRECT / SHULMAN
1 A. THIS ANALYSIS IS DEDICATED TO THE PROPOSITION THAT THE
2 EXAMINER CANNOT -- IS NOT A VIABLE ENTERPRISE AFTER THE JOA IS
3 CONCLUDED. THAT'S THE ESSENCE OF THIS ANALYSIS. THAT'S WHAT
4 THIS PAPER SAYS.
5 Q. AND WHAT DOES THAT TELL YOU ABOUT THE CHANCES OF THE
6 FANGS?
7 A. THAT THEIR CHANCES ARE MINIMAL IF THEY WANT TO ENGAGE IN
8 HEAD-TO-HEAD COMPETITION.
9 Q. OKAY. NOW I WANT TO DIRECT YOUR ATTENTION TO EXHIBIT 16
10 IN EVIDENCE, WHICH IS ENTITLED "RESPONSE TO INTERROGATORY
11 SPECIFICATIONS CONTAINED IN REQUEST FOR ADDITIONAL INFORMATION
12 AND DOCUMENTARY MATERIAL ISSUED TO THE HEARST CORPORATION ON
13 OCTOBER 15, 1999." DO YOU SEE THIS?
14 A. YES, I DO.
15 Q. OKAY. AND IS THIS PART OF HEARST'S SUBMISSION TO THE
16 DEPARTMENT OF JUSTICE?
17 A. YES, IT IS.
18 Q. ALL RIGHT. WOULD YOU LOOK, PLEASE, AT PAGE 19 OF THESE
19 RESPONSES BY HEARST CORPORATION?
20 A. YES, SIR.
21 Q. AND I WANT TO DIRECT YOUR ATTENTION TO WHAT BEGINS ON LINE
22 18, THE RESPONSE TO SPECIFICATION NUMBER 13.
23 A. YES, SIR.
24 Q. THAT SAYS, QUOTE:
25 "HEARST DOES NOT BELIEVE THAT ENTRY INTO THE 458
COMANOR - DIRECT / SHULMAN
1 METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE
2 RELEVANT AREA IN DIRECT COMPETITION WITH THE
3 COMBINED SAN FRANCISCO CHRONICLE AND EXAMINER
4 NEWSPAPERS (OR THE CHRONICLE ALONE) IS EITHER
5 ECONOMICALLY FEASIBLE OR RATIONAL BUSINESS
6 BEHAVIOR."
7 DO YOU SEE THAT?
8 A. YES, I DO.
9 Q. WHAT DOES THAT TELL YOU ABOUT THE CHANCES OF THE FANGS
10 WITH THE EXAMINER UNDER THEIR ARRANGEMENT WITH HEARST?
11 A. IT SUGGESTS TO ME THAT HEARST DOES NOT BELIEVE THAT THE
12 BUYERS OF THE EXAMINER HAVE MUCH CHANCE TO MAKE A GO OF IT.
13 Q. DOES IT SUGGEST THEY HAVE ANY CHANCE?
14 A. IT SUGGESTS THEY HAVE LITTLE OR NO CHANCE.
15 Q. ALL RIGHT. NOW I WANT TO DIRECT YOUR ATTENTION AGAIN TO
16 SOME TESTIMONY THAT WAS GIVEN BY DR. ROSSE, THE DEFENDANTS'
17 EXPERT, AND I AM SPECIFICALLY REFERRING TO PAGE 31, LINE --
18 WE'LL START WITH LINE 6.
19 A. YES, SIR.
20 Q. I'M GOING TO GO TO LINE 21.
21 MR. SHULMAN: DOES YOUR HONOR HAVE IT?
22 THE COURT: I DO.
23 BY MR. SHULMAN:
24 Q. OKAY. HE WAS ASKED A QUESTION -- I ASKED HIM THIS
25 QUESTION, THIS IS CONCERNING THE FANGS: 459
COMANOR - DIRECT / SHULMAN
1 "Q. NOW, AND I THINK YOU SAID IF HE CAN
2 IDENTIFY A MARKET OR FIND A NICHE, YOU THINK HE
3 HAS A CHANCE.
4 "A. UH-HUH.
5 "Q. WHAT DO YOU MEAN 'IDENTIFY A MARKET OR
6 FIND A NICHE'?
7 "A. I DON'T THINK HE'S GOT A CHANCE. IF HE
8 TRIES TO PRODUCE A NEWSPAPER WHICH ATTEMPTS TO
9 DUPLICATE THE ADVERTISING AND CIRCULATION
10 CHARACTERISTICS OF THE CHRONICLE, I DON'T THINK
11 THERE'S ANY CHANCE IN THE WORLD. HE SIMPLY WILL
12 NOT HAVE A LARGE ENOUGH NEWSPAPER AND THE
13 ECONOMIES OF SCALE AND THE OTHER THINGS WE JUST
14 FINISHED TALKING ABOUT WILL MAKE IT VERY, VERY
15 DIFFICULT FOR HIM TO SURVIVE WITH THAT KIND OF A
16 PAPER."
17 DO YOU SEE THAT TESTIMONY?
18 A. YES, I DO.
19 Q. OKAY. WHAT EFFECT, IF ANY, DOES THAT TESTIMONY HAVE ON
20 YOUR OPINION ABOUT THE CHANCES OF THE FANGS?
21 A. THAT'S CERTAINLY CONSISTENT WITH THE OTHER EVIDENCE THAT
22 WE'VE MENTIONED, THAT THE EFFORT -- ANY EFFORT OF THE FANGS TO
23 PRODUCE A CHRONICLE, WHICH IS IN DIRECT COMPETITION -- PARDON
24 ME, TO PRODUCE AN EXAMINER WHICH IS IN DIRECT COMPETITION WITH
25 THE CHRONICLE IS DOOMED TO FAIL. DR. ROSSE SAYS THAT. I 460
COMANOR - DIRECT / SHULMAN
1 AGREE.
2 Q. WAS ONE OF THE -- I'M GOING TO MOVE TO ANOTHER SUBJECT.
3 WAS ONE OF THE SUBJECTS ON WHICH YOUR EXPERTISE WAS
4 REQUESTED THE EFFECT ON COMPETITION IN THE RELEVANT MARKET OF
5 HEARST'S ACQUISITION OF THE CHRONICLE?
6 A. YES, SIR.
7 Q. OKAY. NOW, YOU HAVE ALREADY TESTIFIED CONCERNING YOUR
8 DEPOSITION OF THE RELEVANT MARKET; RIGHT?
9 A. YES, SIR.
10 Q. WHEN YOU CONSIDERED THE EFFECT ON COMPETITION OF HEARST'S
11 ACQUISITION OF THE CHRONICLE IN THAT RELEVANT MARKET, DID YOU
12 CONSIDER THE APPLICABLE STANDARD OR DEFINITION OF COMPETITION
13 THAT YOU WERE GOING TO USE?
14 A. YES, I DID.
15 Q. OKAY. AS AN ECONOMIST IN THE ECONOMIC LITERATURE IN YOUR
16 PROFESSION, IS THERE MORE THAN ONE STANDARD OR MODEL FOR
17 DEFINING COMPETITION?
18 A. YES, THERE ARE.
19 Q. HOW MANY ARE THERE?
20 A. A NUMBER OF STANDARDS WHICH HAVE BEEN PROPOSED BY WHICH
21 THE ANTITRUST LAWS SHOULD BE ADMINISTERED.
22 Q. AND THESE ARE STANDARDS THAT ECONOMISTS CONSIDER?
23 A. YES.
24 Q. OKAY. WHAT ARE THE STANDARDS, THE MODELS?
25 A. ONE IS A STANDARD OF ALLOCATIVE EFFICIENCY OR MARKET 461
COMANOR - DIRECT / SHULMAN
1 POWER. ANOTHER IS A STANDARD BASED ON THE NUMBER OF
2 COMPETITORS IN A MARKET. THOSE ARE TWO TYPES OF STANDARDS
3 WHICH HAVE BEEN USED.
4 Q. OKAY. DESCRIBE FOR US THE CHARACTERISTICS OF THE
5 ALLOCATIVE EFFICIENCY MODEL.
6 A. THE ALLOCATIVE EFFICIENCY MODEL --
7 Q. CAN I INTERRUPT YOU FOR A SECOND?
8 MR. SHULMAN: MAY I GO TO THE EASEL, YOUR HONOR?
9 THE COURT: YES, SIR.
10 MR. SHULMAN: THANK YOU.
11 Q. I AM GOING TO WRITE ON THE EASEL YOU IDENTIFIED ALLOCATIVE
12 EFFICIENCY AND THE SECOND IS NUMBER OF COMPETITORS; RIGHT?
13 A. YES, SIR. THE ANTITRUST LAWS DEAL WITH PROMOTING
14 COMPETITION, BUT THERE ARE VARIOUS WAYS IN WHICH COMPETITION
15 HAS BEEN DEFINED.
16 Q. OKAY. LET ME ASK YOU TO EXPLAIN THE CHARACTERISTICS OF
17 THE ALLOCATIVE EFFICIENCY MODEL.
18 A. THIS RESTS ON THE CLASSIC ECONOMIC MODEL WHICH CONCERNS
19 THE OPTIMUM ALLOCATION OF ECONOMIC RESOURCES AND IDENTIFIES
20 COMPETITION WITH ACTIONS TAKEN TO PROMOTE THE OPTIMUM
21 ALLOCATION OF ECONOMIC RESOURCES.
22 Q. AND HOW DOES ONE DETERMINE THAT?
23 A. ONE FOCUSES ON THE PRICES THAT ARE CHARGED IN THE
24 MARKETPLACE AND THE QUANTITIES THAT ARE PRODUCED BECAUSE THE
25 CLASSIC EFFECT OF MONOPOLY IS TO RAISE PRICE BY RESTRICTING 462
COMANOR - DIRECT / SHULMAN
1 OUTPUT, AND RESTRICTIONS ON OUTPUT HAVE UNFORTUNATE
2 IMPLICATIONS FOR ALLOCATIVE EFFICIENCY.
3 Q. AND IN THE ECONOMIC LITERATURE IS ALLOCATIVE EFFICIENCY
4 SOMETHING RELATIVELY NEW, SOMETHING RELATIVELY OLD, OR
5 SOMETHING ELSE?
6 A. THAT IS THE CLASSIC ECONOMIC MODEL WHICH HAS BEEN AROUND
7 FOR A LONG TIME.
8 Q. OKAY. IN TERMS OF THE USE OF ALLOCATIVE EFFICIENCY IN
9 ANTITRUST, IS THAT SOMETHING THAT IS A RELATIVELY RECENT
10 DEVELOPMENT?
11 A. THAT'S A DIFFICULT QUESTION. CERTAINLY IT'S BEEN USED FOR
12 A LONG TIME, BUT IT CERTAINLY BECAME -- CAME TO DOMINATE
13 ANTITRUST ENFORCEMENT WITH WHAT I CALL THE ANTITRUST REVOLUTION
14 OF THE 1980'S.
15 Q. WHAT DO YOU MEAN THE "ANTITRUST REVOLUTION OF THE 1980'S"?
16 A. WELL, STANDARDS FOR ANTITRUST ENFORCEMENT CHANGED WITH THE
17 NEW ADMINISTRATION IN 1981, AND YOU SAW MUCH GREATER FOCUS ON
18 VERY STRICT STANDARDS OF ALLOCATIVE EFFICIENCY.
19 Q. OKAY. NOW LET'S TAKE THE SECOND MODEL YOU'VE DESCRIBED,
20 WHICH IS -- SECOND ECONOMIC MODEL YOU'VE DESCRIBED FOR
21 COMPETITION, WHICH IS NUMBER OF COMPETITORS. CAN YOU DESCRIBE
22 THE CHARACTERISTICS OF THAT MODEL?
23 A. THIS IS A MORE SIMPLE ISSUE WHICH SAYS THAT COMPETITION IS
24 PROMOTED WHEN THERE ARE A LARGER NUMBER OF COMPETITORS SO THAT
25 CONSUMERS HAVE A GREATER CHOICE AMONG THE PRODUCTS OF DIFFERENT 463
COMANOR - DIRECT / SHULMAN
1 SELLERS. IT FOCUSES NOT SO MUCH ON PRICING OR ON QUANTITIES
2 BUT, RATHER, ON THE AVAILABILITY OF ALTERNATIVES IN THE
3 MARKETPLACE, WHICH IS THIS IS, I VIEW, AN ALTERNATIVE STANDARD
4 FOR COMPETITION.
5 Q. AND HOW LONG HAS THAT BEEN AROUND?
6 A. THAT'S BEEN AROUND FOR A VERY LONG PERIOD OF TIME AS WELL.
7 Q. NOW, IN CONSIDERING WHETHER THE CHRONICLE'S -- WHETHER
8 HEARST'S ACQUISITION OF THE CHRONICLE WOULD HAVE AN EFFECT ON
9 COMPETITION IN THE RELEVANT MARKET, DID YOU MAKE A CHOICE AS
10 BETWEEN WHICH OF THESE TWO STANDARDS YOU BELIEVED TO BE
11 APPROPRIATE?
12 A. YES, I DID.
13 Q. WHICH STANDARD DID YOU CHOOSE?
14 A. THE SECOND STANDARD, THE NUMBER OF COMPETITORS.
15 Q. AND WHAT WOULD -- WOULD YOU EXPLAIN THE FACTORS THAT LED
16 YOU TO CONCLUDE THAT IT WAS APPROPRIATE TO USE THE MODEL OF
17 COMPETITION INVOLVING THE NUMBER OF COMPETITORS IN ORDER TO
18 DETERMINE WHETHER THERE HAS BEEN A RESTRAINT OF TRADE IN THE
19 RELEVANT MARKET?
20 A. YES. THE ANTITRUST LAWS, AS APPLIED TO NEWSPAPERS, I
21 BELIEVE HAVE BEEN MODIFIED BY THE NEWSPAPER PRESERVATION ACT,
22 WHICH SUGGESTS THAT WE HAVE DIFFERENT STANDARDS TO APPLY HERE
23 THAN WE DO ELSEWHERE, THAT THERE IS A FREQUENT DICTUM IN
24 ANTITRUST ENFORCEMENT, THAT THE LAWS ARE DESIGNED TO PROMOTE
25 COMPETITION NOT PROTECT COMPETITORS. 464
COMANOR - DIRECT / SHULMAN
1 AND WHILE THAT MAY BE TRUE, ELSEWHERE IN OUR ECONOMY
2 I THINK THAT SPECIFIC DICTUM IS ALTERED AS IT APPLIES TO
3 NEWSPAPERS BECAUSE OF THIS PARTICULAR LEGISLATIVE MANDATE, THE
4 NEWSPAPER PRESERVATION ACT.
5 Q. WHAT IS THAT MANDATE?
6 A. THE MANDATE SAYS THAT THE POLICY OF THE ACT IS TO MAINTAIN
7 EDITORIAL AND REPORTORIAL INDEPENDENCE AMONG NEWSPAPERS SO THAT
8 CONSUMERS HAVE A CHOICE OF DIFFERENT VIEWPOINTS. IT'S NOT AN
9 ECONOMIC ARGUMENT. IT'S A MORE JEFFERSONIAN DEMOCRACY ARGUMENT
10 THAT NEWSPAPERS PLAY A DIFFERENT ROLE IN OUR SOCIETY THAN OTHER
11 PRODUCTS, AND THAT THE CONGRESS HAS MADE A JUDGMENT THAT
12 DIFFERENT STANDARDS SHOULD BE APPLIED.
13 THAT'S MY UNDERSTANDING AND THAT'S WHY I BELIEVE
14 THAT THE SECOND STANDARD IS WHAT'S APPROPRIATE FOR THIS
15 INDUSTRY.
16 Q. NOW, APPLYING THAT STANDARD, DID YOU FORM AN OPINION AS TO
17 WHETHER HEARST'S ACQUISITION OF THE SAN FRANCISCO CHRONICLE
18 WILL TEND TO CREATE A MONOPOLY OR RESTRAIN COMPETITION IN THE
19 RELEVANT MARKET DAILY NEWSPAPERS IN THE CITY OF SAN FRANCISCO?
20 A. YES, I HAVE.
21 Q. AND WHAT IS YOUR OPINION?
22 A. IT WILL RESTRAIN COMPETITION CERTAINLY THROUGH THE YEAR
23 2005 BECAUSE WE WILL HAVE ONLY ONE PRIMARY NEWSPAPER AND MAYBE
24 A LITTLE TAG-ALONG, THE EXAMINER, WITH THESE UNUSUAL
25 CONTRACTUAL PROVISIONS WHICH WON'T LAST VERY LONG. BUT WE'LL 465
COMANOR - DIRECT / SHULMAN
1 REALLY ONLY HAVE ONE MAJOR NEWSPAPER AT THE TIME.
2 ALTERNATIVELY, IN THE ABSENCE OF THE ACQUISITION, WE
3 HAVE NO REASON TO BELIEVE THAT WE WILL NOT SEE TWO EFFECTIVE
4 NEWSPAPERS GOING HEAD TO HEAD AT LEAST IN TERMS OF EDITORIAL
5 AND REPORTING PROVISIONS AS THEY ARE TODAY. THE PRESENCE OF
6 THE JOA MEANS THAT WE WILL SEE TWO EFFECTIVE RIVALS AT LEAST
7 THROUGH 2005.
8 Q. NOW, I THINK YOU MENTIONED THAT HEARST AGREED TO PAY --
9 HAS AGREED TO PAY A NEGATIVE PRICE TO DIVEST THE EXAMINER TO
10 THE FANG FAMILY.
11 A. YES.
12 Q. WHAT DOES THAT TELL YOU ABOUT THE APPROPRIATENESS OF
13 APPLYING YOUR SECOND STANDARD, THE MODEL OF THE NUMBER OF
14 COMPETITORS?
15 A. THAT TELLS ME THAT DEEP DOWN HEARST ACKNOWLEDGES THAT THIS
16 SECOND STANDARD IS THE APPROPRIATE ONE BECAUSE IF IT WERE NOT,
17 WHY WOULD THEY PAY A NEGATIVE PRICE? WHY WOULDN'T THEY SIMPLY
18 CLOSE THE NEWSPAPER? WHY PAY AN EXTRA 50 OR $60 MILLION TO
19 HAVE SOMEONE TAKE THE PAPER OFF ITS HANDS? WHY NOT JUST CLOSE
20 IT?
21 THEY DIDN'T CLOSE IT BECAUSE THEY BELIEVED THAT
22 THERE IS AN ANTITRUST PROBLEM IN CLOSING IT, AND THAT ANTITRUST
23 PROBLEM ONLY CAN EXIST IN THE PRESENT WHERE THE SECOND STANDARD
24 IS THE APPROPRIATE ONE. IF WE'RE DEALING WITH ALLOCATIVE
25 EFFICIENCY, THEN JUST CLOSE THE NEWSPAPER. WHY SHOULD THEY PAY 466
COMANOR - DIRECT / SHULMAN
1 A NEGATIVE PRICE?
2 IT'S RARE TO FIND NEGATIVE PRICES IN OUR ECONOMY;
3 AND IF WE FIND THEM, WE HAVE TO UNDERSTAND AND LOOK AT WHY THEY
4 ARE PAID.
5 Q. SUPPOSE THAT HEARST WAS TOLD BY THE JUSTICE DEPARTMENT
6 THAT IT HAD TO DO THAT? WHAT WOULD THAT TELL YOU ABOUT THE
7 APPROPRIATENESS OF USING THE SECOND STANDARD?
8 A. EVEN THE JUSTICE DEPARTMENT ACKNOWLEDGES THAT THIS IS AN
9 INDUSTRY THAT NEEDS TO BE TREATED DIFFERENTLY THAN OTHER
10 INDUSTRIES BECAUSE OF THE NEWSPAPER PRESERVATION ACT; AND,
11 THEREFORE, KEEPING ALIVE A SECOND NEWSPAPER IS AN IMPORTANT
12 FACTOR UNDER THE ANTITRUST LAWS. SO THIS SEEMS TO BE FURTHER
13 CONFIRMATION THAT THE SECOND STANDARD IS THE ONE THAT'S
14 APPLICABLE TO THIS INDUSTRY.
15 MR. SHULMAN: I HAVE NO FURTHER QUESTIONS, YOUR
16 HONOR.
17 THE COURT: VERY WELL. THANK YOU, MR. SHULMAN.
18 WHO'S GOING TO LEAD OFF CROSS-EXAMINATION?
19 MR. ROSCH?
20 MR. ROSCH: I WILL, YOUR HONOR.
21 THE COURT: ALL RIGHT. DO YOU WANT TO LEAD RIGHT
22 OFF OR DO YOU WANT TO A BREAK BEFORE YOU BEGIN?
23 MR. ROSCH: I'M READY TO GO.
24 THE COURT: ALL RIGHT.
25 MR. ROSCH: YOUR HONOR, MAY MY COLLEAGUE, 467
COMANOR - DIRECT / SHULMAN
1 MR. HUSTON, APPROACH THE WITNESS TO LEAVE SOME MATERIALS UP
2 THERE?
3 THE COURT: VERY WELL.
4 (PAUSE IN PROCEEDINGS.)
5 THE COURT: ARE WE GOING TO HAVE A SWITCH OF
6 REPORTERS?
7 THE REPORTER: YES, YOUR HONOR.
8 THE COURT: ALL RIGHT. WHY DON'T YOU HOLD OFF A
9 MOMENT, MR. ROSCH.
10 MR. ROSCH: SURELY.
11 (PAUSE IN PROCEEDINGS.)
12 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
13
14
15
16
17
18
19
20
21
22
23
24
25 468
COMANOR - DIRECT / SHULMAN
1 THE COURT: YOU MAY PROCEED, MR. ROSCH.
2 MR. ROSCH: MAY IT PLEASE THE COURT.
3 CROSS-EXAMINATION
4 BY MR. ROSCH:
5 Q. GOOD MORNING, MR. COMANOR.
6 A. GOOD MORNING.
7 Q. DOCTOR -- I AM KIND OF SMALL HERE. STAY WITH ME.
8 A. I WANT TO MAKE SURE I CAN SEE YOU.
9 Q. THE REASON FOR DEFINING THE RELEVANT MARKET IS TO TEST THE
10 ECONOMIC EFFECT OF THE SALE OF THE CHRONICLE TO HEARST AFTER
11 THE TRANSACTION; IS THAT NOT CORRECT?
12 A. YES.
13 Q. AND YOU ARE OF THE OPINION, ARE YOU NOT, THAT THE
14 CHRONICLE AND THE EXAMINER ARE NOT NOW ENGAGING IN ANY PRICE
15 COMPETITION WITH RESPECT TO ADVERTISING OR CIRCULATION; IS THAT
16 NOT CORRECT?
17 A. YES.
18 Q. AND YOU ARE OF THE OPINION THAT THE FURTHER COMBINATION OF
19 THE CHRONICLE AND THE EXAMINER, UNDER THE SAME OWNERSHIP,
20 WOULDN'T HAVE ANY IMPACT ON COMPETITION WITH RESPECT TO
21 ADVERTISING AND CIRCULATION; THAT'S CORRECT, IS IT NOT, ALSO?
22 A. IT WOULD NOT HAVE ANY EFFECT ON PRICE COMPETITION, YES.
23 Q. OKAY. AND YOU WOULD AGREE THAT FOR THE PROPOSED
24 ACQUISITION TO RESTRAIN COMPETITION, THERE MUST BE COMPETITIVE
25 HARM FROM FACTORS ABOVE AND BEYOND COMPETITION WITH RESPECT TO 469
COMANOR - CROSS / ROSCH
1 ADVERTISING AND CIRCULATION; ISN'T THAT CORRECT?
2 A. YES, SIR.
3 Q. NOW, YOU HAVE DEFINED THE RELEVANT MARKET, HAVE YOU NOT?
4 A. YES, SIR.
5 Q. I WOULD LIKE YOU TO TAKE A LOOK AT THE PLAINTIFF'S BRIEF
6 SUPPORTING THEIR MOTION FOR PRELIMINARY INJUNCTION AT PAGE 6.
7 I BELIEVE YOU WILL FIND IT --
8 A. IS THAT THE FIRST DOCUMENT HERE (INDICATING)?
9 Q. THAT'S THE FIRST DOCUMENT, IF I COULD JUST HAND A COPY UP
10 TO THE COURT (INDICATING).
11 WHEN YOU HAVE PAGE 6 THERE, COULD YOU TELL ME,
12 PLEASE?
13 A. YES, SIR.
14 Q. THERE THE PLAINTIFF IS QUOTING A NINTH CIRCUIT CASE AND
15 SAYS THAT "DEFINING THE RELEVANT MARKET REQUIRES IDENTIFYING
16 THOSE COMPETITORS WHO HAVE THE ACTUAL OR POTENTIAL ABILITY TO
17 DEPRIVE EACH OTHER OF SIGNIFICANT LEVELS OF BUSINESS."
18 DO YOU SEE THAT?
19 A. YES, I DO.
20 Q. DO YOU AGREE WITH THAT?
21 A. YES, I DO.
22 Q. NOW, AS I UNDERSTAND IT, YOUR OPINION IS THAT THE RELEVANT
23 MARKET IN THIS CASE IS LIMITED TO DAILY NEWSPAPERS IN SAN
24 FRANCISCO; IS THAT CORRECT?
25 A. YES, SIR. 470
COMANOR - CROSS / ROSCH
1 Q. SO THAT THE RELEVANT PRODUCT MARKET IS LIMITED TO DAILY
2 NEWSPAPERS, IS THAT CORRECT? THAT'S YOUR OPINION?
3 A. YES, SIR.
4 Q. AND THE RELEVANT GEOGRAPHIC MARKET IS LIMITED TO SAN
5 FRANCISCO; IS THAT CORRECT?
6 A. YES, SIR.
7 Q. NOW, YOU HAD REACHED THAT CONCLUSION BEFORE YOU PREPARED
8 YOUR JANUARY 21, 2000 AFFIDAVIT IN SUPPORT OF THE PRELIMINARY
9 INJUNCTION MOTION IN THIS CASE, HAD YOU NOT?
10 A. JUST A MOMENT, PLEASE.
11 Q. DO YOU HAVE THAT AFFIDAVIT BEFORE YOU?
12 A. YES, I DO.
13 Q. THE QUESTION, AGAIN, IS: YOU HAD REACHED YOUR CONCLUSION
14 AS TO WHAT THE RELEVANT MARKET WAS BEFORE YOU PREPARED THAT
15 AFFIDAVIT; IS THAT NOT CORRECT?
16 A. WELL, THAT'S NOT QUITE WHAT I SAID. SHALL I READ WHAT I
17 SAID?
18 Q. SURELY. PLEASE. I WOULD LIKE YOU TO READ IT INTO THE
19 RECORD FROM PARAGRAPH 6.
20 A. "ALTHOUGH I HAVE NOT CARRIED OUT AN ANALYSIS
21 OF THE RELEVANT PRODUCT -- OF THE RELEVANT
22 MARKET IN THIS MATTER, I FIND ON A PRELIMINARY
23 BASIS THAT IT IS THE MARKET FOR DAILY NEWSPAPERS
24 IN SAN FRANCISCO. THE JUDICIAL CONCLUSIONS ON
25 THIS ISSUE CITED IN THE PLAINTIFF'S MEMORANDUM 471
COMANOR - CROSS / ROSCH
1 IN SUPPORT OF A MOTION FOR PRELIMINARY
2 INJUNCTION ARE CONSISTENT WITH THIS RESULT. IN
3 THE ABSENCE OF FURTHER INFORMATION TO THE
4 CONTRARY, I SUPPORT THIS POSITION."
5 I UNDERSTAND MY -- WHAT I SAID THERE TO MEAN THAT ON
6 A PRELIMINARY BASIS, REALIZING THAT I HADN'T DONE ANY ANALYSIS
7 AT THAT POINT, I ACCEPTED THE RELEVANT -- THIS AS THE RELEVANT
8 PRODUCT MARKET AS A -- AS A -- HOW SHALL I SAY IT? ACCEPT IT
9 AS WHERE I STOOD TEMPORALLY OR AT THIS POINT, REALIZING THAT I
10 WOULD DO FURTHER WORK IF CALLED UPON TO DO SO.
11 Q. YES, BUT, DOCTOR, YOU TOLD THE COURT AT THAT TIME THAT YOU
12 FOUND, AT LEAST ON A PRELIMINARY BASIS, THAT THE MARKET WAS
13 EXACTLY THE MARKET THAT YOU ARE NOW TESTIFYING TO; IS THAT NOT
14 CORRECT?
15 A. THAT IS CORRECT, ON A PRELIMINARY BASIS.
16 Q. AND AS OF THAT TIME, YOU HAD SPENT LESS THAN TEN HOURS ON
17 THIS CASE; IS THAT NOT CORRECT?
18 A. OH, ABSOLUTELY. THAT'S WHY IT'S PRELIMINARY. I DIDN'T
19 HAVE A SERIOUS -- HAVE A STRONG OPINION. "PRELIMINARY" MEANS
20 THAT I HAD -- HAD SOME TENTATIVE NOTION THAT THIS IS WHAT IT
21 WOULD BE. THAT'S WHAT "PRELIMINARY" MEANS.
22 Q. AND YOU HADN'T DONE ANY OF THE STUDIES OR ANALYSES THAT
23 YOU PRESENTED TO THE COURT TODAY AND UPON WHICH YOU NOW RELY
24 WHEN YOU REACHED THAT -- THAT CONCLUSION; IS THAT NOT CORRECT?
25 A. THAT IS CORRECT, I HAD NOT DONE THOSE STUDIES, THAT IS 472
COMANOR - CROSS / ROSCH
1 CORRECT.
2 Q. IN FACT, YOU HAD COMPLETED NO STUDIES AT ALL AT THAT
3 JUNCTURE; ISN'T THAT RIGHT?
4 A. I HAD REVIEWED SOME LITERATURE AND SOME LEGAL OPINIONS AT
5 THAT POINT, BUT I HAD NOT CARRIED OUT ANY STUDIES, THAT IS
6 RIGHT.
7 Q. NOW, I JUST WANT TO MAKE SURE ABOUT A COUPLE OF THINGS.
8 YOU HAVE NEVER RUN A NEWSPAPER, HAVE YOU, SIR?
9 A. NO, SIR.
10 Q. HAVE YOU EVER WORKED FOR A NEWSPAPER?
11 A. NO, SIR.
12 Q. AND YOU HAVE NEVER AUTHORED ANY PUBLICATION THAT HAS
13 TREATED SPECIFICALLY WITH NEWSPAPERS, HAVE YOU, SIR?
14 A. NO, SIR.
15 Q. AND YOU HAVE NEVER GIVEN AN EXPERT OPINION INVOLVING A
16 NEWSPAPER, HAVE YOU?
17 A. NO, SIR.
18 Q. NOW, THE STUDIES AND ANALYSES UPON WHICH YOU NOW RELY FOR
19 YOUR OPINION WITH RESPECT TO THE RELEVANT MARKET, I BELIEVE,
20 ARE EXHIBITS 143 THROUGH 147; IS THAT CORRECT?
21 A. I DON'T KNOW THE EXHIBIT NUMBERS, BUT I KNOW WHAT THE
22 DOCUMENTS ARE.
23 Q. OKAY. WELL, I WILL TELL YOU, I AM WORKING FROM SOME
24 DIFFERENT NUMBERS, AND SO I DON'T WANT TO -- I DON'T KNOW WHICH
25 THE COURT'S PLEASURE IS. I AM WORKING FROM THE EXHIBITS THAT 473
COMANOR - CROSS / ROSCH
1 YOU GAVE TO ME AT YOUR DEPOSITION LAST WEEK, WHICH ARE IN
2 EXHIBIT 347.
3 IF THAT -- IF YOUR HONOR WOULD PREFER THAT I WORK
4 WITH THE ONES THIS MORNING, I WILL TRY TO DO THAT?
5 THE COURT: IF YOU CAN TRY, THAT WOULD BE HELPFUL
6 BECAUSE THAT'S WHAT I HAVE. IF IT'S A PROBLEM, WE WILL JUST
7 WORK THROUGH IT TOGETHER.
8 MR. ROSCH: OKAY. GREAT. THANK YOU, YOUR HONOR.
9 THE COURT: 143 WAS THE NEWSPAPER CIRCULATION --
10 MR. ROSCH: IN SAN FRANCISCO, YES.
11 THE COURT: RIGHT.
12 MR. ROSCH: AND I WOULD LIKE TO TURN FIRST TO THAT
13 ONE, IF WE MAY.
14 THE WITNESS: PARDON ME. LET ME SEE IF I CAN FIND
15 ALL OF THOSE DOCUMENTS.
16 BY MR. ROSCH:
17 Q. YOU KNOW SOMETHING? YOU ARE NOT GOING TO -- YES, YOU HAVE
18 IT FROM DIRECT EXAMINATION.
19 A. I HAVE IT HERE, BUT I WANT TO MAKE SURE I HAVE IT IN FRONT
20 OF ME.
21 I THINK I HAVE THEM HERE.
22 Q. IT SEEMS TO BE FLOATING ACROSS HERE.
23 THE COURT: YES, THERE IS A TECHNIQUE FOR USING
24 THAT.
25 MR. ROSCH: LET ME SEE. I DID IT. 474
COMANOR - CROSS / ROSCH
1 THANK YOU, YOUR HONOR.
2 BY MR. ROSCH:
3 Q. I WOULD LIKE YOU TO TURN FIRST TO THE EXHIBIT THAT IS
4 ENTITLED "NEWSPAPER CIRCULATION IN SAN FRANCISCO." THE FIGURE
5 THAT YOU HAVE DOWN THERE SHOWS THAT THE SAN FRANCISCO CHRONICLE
6 AND THE SAN FRANCISCO EXAMINER TOGETHER ACCOUNT FOR 97 PERCENT;
7 IS THAT CORRECT?
8 A. YES, SIR.
9 Q. AND THE NUMERATOR, I TAKE IT, THAT YOU USED IN CALCULATING
10 THE MARKET SHARE PERCENTAGE ON THAT EXHIBIT CONSTITUTES THE
11 CURRENT CIRCULATION OF THE CHRONICLE AND THE EXAMINER IN SAN
12 FRANCISCO; IS THAT RIGHT?
13 A. I THINK THIS REFERS TO 1998.
14 Q. OKAY.
15 A. I THINK THAT'S RIGHT. IN FACT, IT SAYS IT IN THE NOTE AT
16 THE BOTTOM OF THE PAGE.
17 Q. ALL RIGHT. BUT IT IS THE -- THE NUMERATOR IS THE
18 CHRONICLE AND THE EXAMINER CIRCULATION?
19 A. YES, SIR.
20 Q. NOW, DENOMINATOR DOESN'T INCLUDE THE CIRCULATION OF ALL OF
21 THE NEWSPAPERS IN SAN FRANCISCO, DOES IT?
22 A. THE DATA THAT WE USED, UNFORTUNATELY, DIDN'T HAVE FIGURES
23 FOR THE NEW YORK TIMES, THE WALL STREET JOURNAL AND MAYBE ONE
24 OTHER. BUT EVERYTHING THAT WE COULD FIND.
25 Q. WELL, THIS IS ENTITLED "NEWSPAPER CIRCULATION IN SAN 475
COMANOR - CROSS / ROSCH
1 FRANCISCO COUNTY," ISN'T THAT CORRECT?
2 A. YES, SIR.
3 Q. DID DENOMINATOR INCLUDED THE CIRCULATION OF ANY NON-DAILY
4 NEWSPAPER IN SAN FRANCISCO?
5 A. MY UNDERSTANDING IS THAT THIS -- THIS WAS DESIGNED TO DEAL
6 WITH ONLY DAILY NEWSPAPERS.
7 Q. SO IF --
8 A. SUBJECT TO FURTHER CORRECTION.
9 Q. SO IT DID NOT INCLUDE THE CIRCULATION OF ANY NON-DAILY
10 NEWSPAPER; IS THAT CORRECT?
11 A. THAT'S MY UNDERSTANDING.
12 Q. NOW, YOU WILL AGREE, WILL YOU NOT, THAT PRODUCTS MAY BE IN
13 THE SAME MARKET EVEN THOUGH THEY HAVE VERY DIFFERENT PHYSICAL
14 CHARACTERISTICS? THAT'S THE LESSON OF THE CELLOPHANE CASE,
15 ISN'T IT, DOCTOR?
16 A. IT DEPENDS ON CONSUMER BEHAVIOR, NOT PHYSICAL
17 CHARACTERISTICS. YES, I WOULD AGREE WITH THAT.
18 Q. "CROSS-ELASTICITY OF DEMAND," AS YOU PUT IT, CORRECT?
19 A. YES, SIR.
20 Q. OKAY. NOW, HOW MANY NON-DAILY NEWSPAPERS ARE THERE IN SAN
21 FRANCISCO?
22 A. I DON'T KNOW.
23 Q. CAN YOU IDENTIFY FOR ME THE NAMES OF ANY OF THEM?
24 A. NO.
25 Q. NOW, THEY ARE ALL SOURCES OF NEWS AND EDITORIAL CONTENT, 476
COMANOR - CROSS / ROSCH
1 AS WELL AS ADVERTISING, AREN'T THEY, SIR?
2 A. THEY MAY. THEY MAY BE.
3 Q. DID YOU CONDUCT ANY ANALYSIS TO DETERMINE THE
4 CROSS-ELASTICITY OF DEMAND WITH RESPECT TO THE CHRONICLE AND
5 THE EXAMINER ON THE ONE HAND AND THESE NON-DAILY NEWSPAPERS ON
6 THE OTHER IN SAN FRANCISCO?
7 A. NOT IN SAN FRANCISCO. I REVIEWED THE NEWSPAPER
8 ASSOCIATION REPORT --
9 Q. AND WE WILL GET TO THAT, SIR.
10 CAN YOU TELL ME, WHAT PERCENTAGE OF SAN FRANCISCO
11 RESIDENTS READ ONE OR MORE OF THE NON-DAILY NEWSPAPERS THAT ARE
12 CIRCULATED HERE INSTEAD OF THE CHRONICLE OR THE EXAMINER? DID
13 YOU DO ANY STUDY OR ANALYSIS ON THAT?
14 A. NO, I DID NOT.
15 Q. WOULD YOU BE SURPRISED IF I TOLD YOU THAT THERE ARE AT
16 LEAST A DOZEN NON-DAILY NEWSPAPERS IN SAN FRANCISCO?
17 A. NO.
18 Q. NOW, I THINK YOU STARTED TO TELL ME ALSO THAT DENOMINATOR
19 IN THIS EXHIBIT DOESN'T EVEN INCLUDE THE CIRCULATION OF ALL
20 DAILY NEWSPAPERS THAT ARE SOLD IN SAN FRANCISCO; IS THAT NOT
21 CORRECT?
22 A. WE USED ALL THE DATA THAT WE COULD FIND, YES, SIR.
23 Q. OKAY. AND THOSE -- THE ONES THAT ARE INCLUDED ARE SET
24 FORTH IN YOUR FOOTNOTE, CORRECT?
25 A. YES, SIR. 477
COMANOR - CROSS / ROSCH
1 Q. NOW, HOW MANY OTHER DAILY NEWSPAPERS ARE DISTRIBUTED IN
2 SAN FRANCISCO EITHER ON A SUBSCRIPTION OR A SINGLE-COPY BASIS?
3 A. I DON'T KNOW THE NUMBER.
4 Q. CAN YOU TELL ME WHAT SOME OF THEM ARE?
5 A. NEW YORK TIMES, THE WALL STREET JOURNAL AND THERE MAY BE
6 OTHERS.
7 Q. HOW ABOUT USA TODAY?
8 A. THAT WOULD BE ONE.
9 Q. HOW ABOUT THE L.A. TIMES?
10 A. NO. THE L.A. TIMES IS INCLUDED, AS YOU CAN SEE IN THE
11 FOOTNOTE (INDICATING).
12 Q. OKAY. I WITHDRAW THAT. THANK YOU.
13 LET ME ASK YOU, DID YOU CONDUCT ANY ANALYSIS OF
14 CROSS-ELASTICITY OF DEMAND WITH RESPECT TO ANY OF THE DAILY
15 NEWSPAPERS THAT YOU'VE JUST MENTIONED?
16 A. I DON'T UNDERSTAND THAT QUESTION.
17 Q. DID YOU CONDUCT ANY STUDY OF -- OR ANALYSIS OF THE
18 CROSS-ELASTICITY OF DEMAND AS RESPECTS THE CHRONICLE AND THE
19 EXAMINER ON ONE HAND AND THE NEW YORK TIMES, USA TODAY OR THE
20 WALL STREET JOURNAL ON THE OTHER?
21 A. JUST A MINUTE. I REVIEWED SOME LITERATURE WHICH FOCUSED
22 ON THE LAYERS OF NEWSPAPERS, THAT THERE ARE NATIONAL
23 NEWSPAPERS, THAT THERE ARE MAJOR LOCAL NEWSPAPERS AND THERE ARE
24 NON-DAILY NEWSPAPERS AND WHICH FOCUSED ON THE PROPOSITION THAT
25 THESE LAYERS OF NEWSPAPERS ARE MORE COMPLEMENTARY THAN THEY ARE 478
COMANOR - CROSS / ROSCH
1 COMPETITIVE, THAT IT'S POSSIBLE AND FREQUENT THAT SOMEONE MIGHT
2 SUBSCRIBE TO A NATIONAL NEWSPAPER, SAY, THE WALL STREET
3 JOURNAL, IN ADDITION TO THE CHRONICLE/EXAMINER. THE WALL
4 STREET JOURNAL HAS A VERY DIFFERENT SET OF INFORMATION THAN YOU
5 WOULD GET FROM THE CHRONICLE/EXAMINER.
6 SIMILARLY, WHAT YOU MIGHT GET FROM A VERY LOCAL
7 NEWSPAPER, A NON-DAILY OR A COMMUNITY NEWSPAPER -- THAT'S ALSO
8 A DIFFERENT LEVEL OF NEWSPAPER.
9 THE ISSUE HERE IS WHETHER OR NOT THE DIFFERENT
10 CATEGORIES OF NEWSPAPERS ARE COMPLEMENTS SO THAT PEOPLE WILL --
11 MANY CONSUMERS WILL BUY MORE THAN ONE, ONE OF EACH OF THESE --
12 IN THESE LAYERS -- RATHER THAN COMPETITIVE. AND THE RELEVANT
13 MARKET CONCEPT FOCUSES PREDOMINANTLY ON THOSE PAPERS WHICH ARE
14 COMPETITIVE, ONE FOR ANOTHER, ALTERNATIVES. THAT'S WHAT WE ARE
15 REALLY FOCUSING ON AND NOT THOSE NEWSPAPERS WHICH ARE
16 COMPLEMENTS, WHERE IT IS FREQUENT OR COMMON FOR A CONSUMER TO
17 BUY ONE AND ANOTHER.
18 SO I -- I LOOKED AT THE -- AT THE MODEL OF NEWSPAPER
19 DEMAND WHICH FOCUSES ON LEVELS OF NEWSPAPERS, IF THAT'S THE
20 RIGHT LANGUAGE.
21 THE COURT: I THINK -- DR. COMANOR, I THINK THE
22 QUESTION IS WHETHER OR NOT YOU PERFORMED AN ANALYSIS OF THE
23 CROSS-ELASTICITY OF DEMAND OF THE SAN FRANCISCO CHRONICLE AND
24 EXAMINER WITH THE NEW YORK TIMES AND THE WALL STREET JOURNAL.
25 IS THAT NOT THE QUESTION? 479
COMANOR - CROSS / ROSCH
1 MR. ROSCH: THAT'S THE QUESTION, YOUR HONOR.
2 THE WITNESS: I JUST REVIEWED THESE STUDIES.
3 THE COURT: THE ANSWER TO THE QUESTION IS NO?
4 THE WITNESS: YES, EXCEPT TO REVIEW THESE STUDIES.
5 BY MR. ROSCH:
6 Q. WELL, LET ME PUT IT A SLIGHTLY DIFFERENT WAY, THEN,
7 DOCTOR. WHAT PERCENTAGE OF SAN FRANCISCO RESIDENTS READ ONE OR
8 MORE OF THOSE NEWSPAPERS -- THAT IS TO SAY, THE NEW YORK TIMES,
9 THE USA TODAY OR WALL STREET JOURNAL -- INSTEAD OF THE
10 CHRONICLE OR THE EXAMINER?
11 A. UNFORTUNATELY, I DIDN'T HAVE DATA AVAILABLE TO ALLOW ME TO
12 ANSWER THAT QUESTION.
13 Q. SO YOU DIDN'T DO ANY STUDY OR ANALYSIS OF THAT?
14 A. I COULDN'T FIND ANY DATA ON THAT, YES, SIR.
15 Q. OKAY. THANK YOU.
16 NOW, THIS EXHIBIT JUST REFERS TO THE CURRENT
17 CIRCULATION OF THE NEWSPAPERS LISTED, DOESN'T IT?
18 A. YES, SIR.
19 Q. AND IT DOESN'T PURPORT TO REFLECT WHAT'S LIKELY TO HAPPEN
20 IN THE FUTURE, DOES IT?
21 A. IT WILL REFLECT THE FUTURE UNLESS THINGS CHANGE, YES, SIR.
22 Q. WELL, YOU KNOW SINCE YOUR DEPOSITION LAST WEEK, DON'T YOU,
23 THAT THE SAN JOSE MERCURY NEWS HAS ANNOUNCED THAT IT'S GOING TO
24 BUILD ITS CIRCULATION IN SAN FRANCISCO BY ADDING A LOT OF
25 REPORTERS AND BY CUTTING ITS PRICE IN SAN FRANCISCO. YOU KNOW 480
COMANOR - CROSS / ROSCH
1 THAT ANNOUNCEMENT HAS BEEN MADE, DON'T YOU?
2 A. THAT'S WHAT THEY SAY.
3 Q. AND THAT WASN'T FACTORED INTO YOUR CONCLUSION HERE BECAUSE
4 YOU DIDN'T KNOW ABOUT IT UNTIL YOUR DEPOSITION; ISN'T THAT
5 CORRECT?
6 A. THAT IS CORRECT.
7 Q. AND SINCE YOUR DEPOSITION, YOU HAVE ALSO KNOWN THAT THE
8 LOS ANGELES TIMES HAS ANNOUNCED PLANS TO INCREASE ITS
9 CIRCULATION IN THE BAY AREA, INCLUDING SAN FRANCISCO, BY MAKING
10 AN ALLIANCE WITH THE OWNERS OF THE CONTRA COSTA TIMES. YOU
11 KNOW THAT NOW, TOO, DON'T YOU?
12 A. YES, SIR.
13 Q. AND THAT WASN'T FACTORED INTO YOUR CONCLUSION BECAUSE YOU
14 DIDN'T KNOW ABOUT THAT UNTIL YOUR DEPOSITION, EITHER; ISN'T
15 THAT CORRECT?
16 A. THAT IS CORRECT.
17 Q. NOW, YOUR DENOMINATOR, I TAKE IT, DOESN'T ALSO -- IT ALSO
18 DOESN'T -- EXCUSE ME -- REFLECT THE HOUSEHOLDS OR PEOPLE IN SAN
19 FRANCISCO WHO USE TELEVISION OR RADIO INSTEAD OF THE CHRONICLE
20 OR THE EXAMINER AS THE SOURCE OF THEIR NEWS AND EDITORIAL
21 COMMENT AND/OR ADVERTISING?
22 A. I DON'T KNOW HOW TO ANSWER THAT. IT'S CLEAR WE DO NOT
23 INCLUDE OTHER MEDIA, AND WE BASED -- AND I RESTED THAT
24 CONCLUSION ON OTHER SETS OF ISSUES. WE TALKED ABOUT THAT
25 BEFORE. 481
COMANOR - CROSS / ROSCH
1 Q. OKAY. NOW, WHAT PERCENTAGE OF SAN FRANCISCO RESIDENTS
2 DOES THAT CONSTITUTE, THAT IS TO SAY, WHO USE T.V. OR RADIO AS
3 THE SOURCE OF NEWS AND EDITORIAL COMMENT OR ADVERTISING INSTEAD
4 OF THE EXAMINER OR THE CHRONICLE?
5 A. I DON'T KNOW HOW ONE WOULD -- WOULD INVESTIGATE THAT.
6 Q. BUT YOU DIDN'T?
7 A. I CERTAINLY DID NOT.
8 Q. OKAY. NOW, YOU WILL AGREE, WILL YOU NOT, THAT RADIO IS A
9 SOURCE OF NEWS AND EDITORIAL COMMENT AND ADVERTISING FOR SAN
10 FRANCISCANS?
11 A. FOR SOME PURPOSES YES, FOR SOME PURPOSES NO.
12 Q. DO YOU KNOW HOW MANY RADIO STATIONS IN SAN FRANCISCO ARE
13 SUCH A SOURCE?
14 A. NO.
15 Q. WOULD YOU BE SURPRISED IF I TOLD YOU THAT THERE ARE 32
16 A.M. RADIO STATIONS AND 43 P.M. RADIO STATIONS IN THE SAN
17 FRANCISCO AREA?
18 A. NO.
19 THE COURT: 43 FM?
20 MR. ROSCH: I BEG YOUR PARDON?
21 THE COURT: FM?
22 MR. ROSCH: P.M. -- FM.
23 MR. ALIOTO: AFTERNOON RADIO.
24 (LAUGHTER)
25 MR. ROSCH: NOT YET. THANK YOU, YOUR HONOR. 482
COMANOR - CROSS / ROSCH
1 BY MR. ROSCH:
2 Q. CAN YOU TELL ME WHAT ANY OF THE RADIO STATIONS IN SAN
3 FRANCISCO ARE?
4 A. NO.
5 Q. DO YOU KNOW IF THERE ARE ANY ALL NEWS RADIO STATIONS?
6 A. I PRESUME THERE ARE.
7 Q. AND TELEVISION IS ALSO A SOURCE OF NEWS AND EDITORIAL
8 COMMENT AND ADVERTISING FOR SAN FRANCISCANS; ISN'T THAT
9 CORRECT?
10 A. FOR SOME -- FOR SOME THINGS YES, FOR SOME THINGS NO.
11 Q. NOW, HOW MANY NON-CABLE T.V. STATIONS ARE THERE IN THE BAY
12 AREA?
13 A. I DON'T KNOW.
14 Q. CAN YOU TELL ME THE NAMES OF ANY -- OR CALL NUMBERS, IF
15 YOU WILL -- OF ANY T.V. STATIONS IN SAN FRANCISCO WHICH
16 CONSTITUTE A SOURCE OF NATIONAL AND LOCAL NEWS PLUS
17 ADVERTISING?
18 A. NO.
19 Q. AND, I TAKE IT, YOU DIDN'T CONDUCT ANY ANALYSIS OF THE
20 CROSS-ELASTICITY OF DEMAND BETWEEN THE CHRONICLE AND THE
21 EXAMINER ON THE ONE HAND AND THESE MEDIA ON THE OTHER?
22 A. THAT IS INCORRECT.
23 Q. YOU DID CONDUCT SUCH A --
24 A. I REVIEWED STUDIES THAT WERE DONE BY OTHERS, YES, SIR, AND
25 WE TALKED ABOUT -- 483
COMANOR - CROSS / ROSCH
1 Q. THESE ARE THE TWO STUDIES YOU TALKED ABOUT THIS MORNING?
2 A. YES, SIR. YES, SIR.
3 Q. OKAY. NOW, I WOULD LIKE TO ASK YOU A FEW QUESTIONS ABOUT
4 THE QUOTES THAT YOU TOOK FROM THE CONSUMER MEDIA USAGE STUDY.
5 A. YES, SIR.
6 Q. THOSE QUOTES WERE ON A PAGE WHICH YOU PRESENTED TO ME JUST
7 BEFORE YOUR DEPOSITION, WERE THEY NOT?
8 A. THEY WERE PRESENTED, YES, SIR.
9 Q. YES. AND YOUR COLLEAGUE, DR. RIDDLE, PREPARED THAT PAPER,
10 DID HE NOT?
11 A. YES, HE DID.
12 Q. AND, IN FACT, AS OF THE TIME THAT YOUR DEPOSITION WAS
13 TAKEN LAST WEE , YOU HAD NEVER REVIEWED THE STUDY ITSELF FROM
14 WHICH THOSE EXCERPTS WERE TAKEN, HAD YOU, SIR?
15 A. THAT IS CORRECT. I HAVE REVIEWED THAT REPORT SINCE THEN.
16 Q. OKAY. AND SO YOU KNOW THAT THAT REPORT DOESN'T SAY WHAT
17 QUESTIONS WERE ASKED IN THE SURVEY, DOES IT?
18 A. IT SAYS WHAT IT SAYS.
19 Q. WELL, DO YOU RECALL WHETHER IT SAYS WHAT QUESTIONS WERE
20 ASKED?
21 A. IT SAYS THE CONCLUSIONS AND THE PURPOSES OF THE REPORT.
22 IT DOESN'T ASK THE -- IT DOESN'T PROVIDE THE SPECIFIC
23 QUESTIONS, YOU'RE RIGHT.
24 Q. AND IT DOESN'T SAY WHAT STEPS, IF ANY, WERE TAKEN TO
25 ENSURE ITS STATISTICAL RELIABILITY, DOES IT? 484
COMANOR - CROSS / ROSCH
1 A. IT'S -- IT'S THE NEWSPAPER ASSOCIATION OF AMERICA REPORT
2 WHICH I REVIEWED, YES, SIR.
3 Q. OKAY. NOW, I DON'T BELIEVE THAT STUDY IS IN EVIDENCE,
4 YOUR HONOR, AND I'D LIKE TO PUT IT IN EVIDENCE.
5 MR. SHULMAN: NO OBJECTION.
6 THE COURT: WHAT IS THE EXHIBIT NUMBER, MR. ROSCH?
7 MR. ROSCH: IF YOU WILL BEAR WITH ME FOR A MOMENT
8 HERE, YOUR HONOR.
9 THE COURT: CERTAINLY.
10 (PAUSE IN THE PROCEEDINGS.)
11 THE COURT: IT SOUNDS LIKE YOUR TESTIMONY IS
12 CLEARING UP YOUR THROAT.
13 THE WITNESS: I CERTAINLY HOPE SO.
14 MR. ROSCH: IT'S EXHIBIT 352, YOUR HONOR.
15 THE COURT: ALL RIGHT.
16 MR. ROSCH: AND I WILL OFFER IT IN EVIDENCE. I
17 BELIEVE THERE IS NO OBJECTION.
18 THE COURT: WAS THAT PREMARKED, MR. ROSCH?
19 MR. ROSCH: NO, IT WASN'T, YOUR HONOR.
20 THE COURT: VERY WELL. HEARING NO OBJECTION TO 352,
21 352 WILL BE ADMITTED.
22 (DEFENDANT'S EXHIBIT C-352
23 RECEIVED IN EVIDENCE)
24 ////
25 BY MR. ROSCH: 485
COMANOR - CROSS / ROSCH
1 Q. DO YOU HAVE THAT STUDY BEFORE YOU, SIR?
2 A. YES, I DO.
3 Q. CAN YOU TURN TO THE PREFACE OF THE STUDY?
4 A. I HAVE IT.
5 Q. I WOULD LIKE TO QUOTE A PART OF THE PREFACE WHICH WAS NOT
6 QUOTED BY YOU THIS MORNING. IT SAYS, QUOTE:
7 "THE MEDIA INDUSTRY IS FACED WITH AN
8 UNPRECEDENTED NUMBER OF CHALLENGES. COMPETITION
9 FOR THE PUBLIC'S TIME IS FIERCE AND CONSUMERS
10 TODAY HAVE A WIDE RANGE OF OPPORTUNITIES AND
11 CHOICES IN MEDIA."
12 DO YOU SEE THAT, SIR?
13 A. YES, SIR.
14 Q. DO YOU AGREE THAT COMPETITION FOR THE PUBLIC'S TIME IS
15 FIERCE AND THAT CONSUMERS TODAY HAVE A WIDE RANGE OF
16 OPPORTUNITIES AND CHOICES IN MEDIA?
17 A. IT DEPENDS WHAT YOU MEAN BY "COMPETITION," BUT THAT'S WHAT
18 THOSE WORDS SAY, YES, SIR.
19 Q. OKAY. I WOULD LIKE YOU TO TURN TO PAGE 2.
20 THERE THE STUDY SAYS THAT -- AND I WILL QUOTE:
21 "20 YEARS AGO 67 PERCENT OF AMERICANS
22 REGULARLY READ A DAILY NEWSPAPER. TODAY
23 READERSHIP IS AT 51 PERCENT."
24 A. PARDON ME. COULD YOU SHOW ME WHERE THAT IS? OH, PAGE 2.
25 Q. RIGHT AT THE TOP -- 486
COMANOR - CROSS / ROSCH
1 A. OH --
2 Q. -- OF PAGE 2.
3 A. OH, YES, I SEE IT.
4 Q. NOW, THAT WOULD SUGGEST, WOULD IT NOT, DOCTOR, THAT NEARLY
5 HALF OF AMERICANS TODAY ARE USING OTHER MEDIA BESIDES WEEKLY
6 NEWSPAPERS AS THE SOURCE OF THEIR NEWS AND EDITORIAL
7 INFORMATION AND ADVERTISING?
8 THE COURT: WEEKLY OR WEEKDAY?
9 MR. ROSCH: WEEKDAY. I'M SORRY, YOUR HONOR. THANK
10 YOU.
11 THE WITNESS: YES.
12 BY MR. ROSCH:
13 Q. THE STUDY FURTHER STATES AT PAGE 2 THAT -- AND I WILL
14 QUOTE:
15 "ON AN AVERAGE WEEKDAY LOCAL NEWSPAPERS" --
16 NOT JUST DAILY NEWSPAPERS -- "REACH" --
17 A. PARDON ME. COULD YOU SHOW ME WHERE YOU ARE READING?
18 Q. YES. IT'S UNDER DAILY MEDIA USAGE, THAT HEADING.
19 A. YES.
20 Q. IT SAYS:
21 "THE MEDIA USAGE STUDY REVEALS THAT ON AN
22 AVERAGE WEEKDAY LOCAL NEWSPAPERS REACH
23 APPROXIMATELY SIX OUT OF TEN ADULTS. LOCAL T.V.
24 NEWS CAPTURES SEVEN OUT OF TEN."
25 DO YOU SEE THAT, SIR? 487
COMANOR - CROSS / ROSCH
1 A. YES, SIR.
2 Q. DOES THAT SUGGEST TO YOU THAT MORE PEOPLE USE LOCAL T.V.
3 THAN NEWSPAPERS AS THE SOURCE OF THEIR NEWS AND EDITORIALS?
4 A. FOR LOCAL NEWS, YES, IT DOES SAY THAT.
5 Q. OKAY. NOW, I WOULD LIKE YOU TO TURN TO PAGE 3, IF YOU
6 WILL, SIR. AND IT'S UNDER "MEDIA LOYALTY." IT SAYS, AND I
7 QUOTE:
8 "CONSUMERS WERE ASKED WHICH MEDIA THEY WOULD
9 MISS IF NOT AVAILABLE. LOCAL NEWSPAPERS WOULD
10 BE MISSED LESS THAN LOCAL T.V. NEWS."
11 DO YOU SEE THAT?
12 A. YES, SIR.
13 Q. AND THE CHART THAT ACCOMPANIES IT SHOWS THAT DAILY
14 NEWSPAPERS ALSO RATED BELOW NEWS RADIO. IS THAT NOT CORRECT?
15 A. YES, IT IS CORRECT.
16 Q. NOW, THAT WOULD SUGGEST, WOULD IT NOT, THAT TELEVISION AND
17 RADIO ARE FIERCE COMPETITORS WITH NEWSPAPERS AS SOURCES OF NEWS
18 AND EDITORIAL CONTENT, WOULDN'T IT?
19 A. IT DEPENDS WHAT YOU MEAN BY "COMPETITORS." IT DEPENDS.
20 Q. PAGE --
21 A. IT DEPENDS WHAT YOU MEAN, ECONOMIC COMPETITORS OR
22 ALTERNATIVES. IT DEPENDS WHAT YOU MEAN.
23 Q. HOW ABOUT ALTERNATIVES?
24 A. ALTERNATIVES WOULD BE FINE.
25 Q. THANK YOU, SIR. 488
COMANOR - CROSS / ROSCH
1 PAGE 13 OF THE STUDY, IF YOU WILL. YOU QUOTED THE
2 FIRST PARAGRAPH TO THE COURT THIS MORNING, THE ONE THAT --
3 GOING -- THAT TALKED ABOUT THE FRANCHISE, HOW NEWSPAPERS HAVE A
4 FRANCHISE? DO YOU REMEMBER THAT?
5 A. YES, SIR.
6 Q. THE SECOND PARAGRAPH, HOWEVER, I'D LIKE TO READ INTO THE
7 RECORD, AND IT SAYS THAT:
8 "INCREASINGLY NEWSPAPERS WILL CONTINUE TO
9 COMPETE FOR ADVERTISING DOLLARS AND AUDIENCES
10 WITH OTHER FORMS OF MEDIA."
11 DO YOU SEE THAT?
12 A. YES, SIR.
13 Q. DO YOU AGREE?
14 A. THERE WOULD CERTAINLY BE ALTERNATIVES BUT NOT COMPETITION
15 IN THE -- IN -- AS REFLECTED IN CROSS-ELASTICITY'S DEMAND.
16 BECAUSE NEWSPAPERS AND OTHER MEDIA HAVE DIFFERENT FUNCTIONS.
17 Q. AND WE ARE AGREED, AREN'T WE, DOCTOR -- I THOUGHT WE
18 HAD -- THAT THE FACT THAT ONE PRODUCT MAY HAVE A DIFFERENT
19 FUNCTION FROM ANOTHER PRODUCT DOESN'T NECESSARILY MEAN THAT
20 IT'S NOT THE SAME MARKET?
21 A. I DON'T KNOW THAT WE'RE AGREED ON THAT.
22 Q. OKAY. NOW, I THINK YOU REFERRED TO ANOTHER STUDY THIS
23 MORNING, AND IT WAS ONE THAT YOU PUT INTO EVIDENCE THAT DEALT
24 WITH CROSS-ELASTICITIES OF DEMAND JOURNALISM -- IN THE
25 JOURNALISM QUARTERLY; IS THAT CORRECT? 489
COMANOR - CROSS / ROSCH
1 A. YES, SIR.
2 Q. AND THAT'S THE OTHER STUDY ON WHICH YOU RELIED; IS THAT
3 NOT CORRECT?
4 A. YES, SIR.
5 Q. FIRST OF ALL, I BELIEVE YOU TESTIFIED THIS MORNING THAT
6 THIS WAS A STUDY THAT WAS CONDUCTED BACK IN 1985; ISN'T THAT
7 CORRECT?
8 A. I BELIEVE IT WAS PUBLISHED IN '87. I ASSUME IT WAS
9 CONDUCTED PRIOR TO THAT.
10 Q. CAN YOU TAKE A LOOK AT PAGE 348?
11 A. YES, SIR.
12 Q. WHERE IT SAYS THAT THE DATA THAT WERE USED WERE FROM 1971
13 AND 1985?
14 A. YES, I SEE THAT.
15 THE COURT: MR. ROSCH, DO YOU HAVE A COPY OF THAT?
16 MR. ROSCH: OH, I'M SORRY, YOUR HONOR. I CERTAINLY
17 DO.
18 THE COURT: IS THAT YOUR ONLY COPY?
19 MR. ROSCH: NO, NO. I HAVE ANOTHER (INDICATING).
20 BY MR. ROSCH:
21 Q. AND THE DATABASE THAT WAS USED FOR THIS STUDY INCLUDED ALL
22 NEWSPAPERS IN THE UNITED STATES WITHOUT DISCRIMINATION; ISN'T
23 THAT CORRECT?
24 A. YES, SIR.
25 Q. SO THE NEWSPAPER FROM MY WIFE'S HOMETOWN, BROKEN BOW, 490
COMANOR - CROSS / ROSCH
1 NEBRASKA, WOULD BE IN THERE AS WELL AS THE SAN FRANCISCO
2 CHRONICLE AND EXAMINER; IS THAT RIGHT?
3 A. I PRESUME YOU ARE CORRECT.
4 Q. AND THIS STUDY HAD TO DO JUST WITH NATIONAL ADVERTISING,
5 DIDN'T IT?
6 A. YES, SIR.
7 Q. IT DIDN'T HAVE TO DO WITH ANY OTHER FORM OF ADVERTISING?
8 A. THAT'S CORRECT.
9 Q. AND, IN FACT, IT SAID SPECIFICALLY THAT THE RESULTS CANNOT
10 SAFELY BE EXTRAPOLATED TO THE OTHER ADVERTISING MARKETS; ISN'T
11 THAT CORRECT?
12 A. THAT'S WHAT IT SAYS.
13 Q. AND JUST SO I AM CLEAR ABOUT THIS, THE RESULT AS THEY
14 RELATED TO NATIONAL ADVERTISING DID NOT FOCUS ON METROPOLITAN
15 NEWSPAPERS, DID THEY?
16 A. MY UNDERSTANDING IS THE DATA DEALT WITH ALL NEWSPAPERS.
17 THAT'S WHAT YOU SAID AND YOU ARE CORRECT.
18 Q. AND WHAT THIS GENTLEMAN CONCLUDES IS THAT -- AND I WILL --
19 QUOTING FROM PAGE 350. HE SAYS THAT BASED ON HIS STUDY, QUOTE:
20 "NATIONAL ADVERTISERS ARE NOT SUFFICIENTLY
21 PRICE SENSITIVE TO CONSIDER NEWSPAPERS MUCH OF A
22 SUBSTITUTE FOR OTHER MEDIA."
23 DO YOU SEE THAT?
24 A. YES, I DO.
25 Q. WELL, WE KNOW THAT'S NOT TRUE WITH RESPECT TO THE 491
COMANOR - CROSS / ROSCH
1 CHRONICLE AND THE EXAMINER, DON'T WE, SIR?
2 A. NO, SIR.
3 Q. THEY GET A SUBSTANTIAL AMOUNT OF NATIONAL ADVERTISING,
4 DON'T THEY?
5 A. YES, SIR.
6 Q. THANK YOU.
7 NOW, YOU PRESENTED TO THE COURT THIS MORNING TWO
8 EXHIBITS WHICH ARE ENTITLED "NATIONAL AND LOCAL ADVERTISING
9 RATES BY COUNTY," AND ONE THAT IS ENTITLED "CLASSIFIED RATES BY
10 TARGET COUNTY."
11 CAN YOU PULL THOSE OUT, PLEASE?
12 I THINK THAT THOSE ARE, YOUR HONOR, EXHIBITS 144,
13 145 AND, I BELIEVE, 147.
14 THE COURT: I BELIEVE THAT IS CORRECT. 1 . . .
15 MR. ROSCH: I WISH I . . .
16 (PAUSE IN THE PROCEEDINGS.)
17 THE COURT: 144 IS NATIONAL AND LOCAL ADVERTISING
18 RATES BY COUNTY.
19 MR. ROSCH: THAT ONE I WANT.
20 THE COURT: 145 IS "CLASSIFIED SECTION ADVERTISING
21 RATES BY TARGET COUNTY."
22 MR. ROSCH: THAT ONE I WANT.
23 THE COURT: 146 IS "ADVERTISEMENTS PLACED BY SAN
24 FRANCISCO SELLERS."
25 MR. ROSCH: THAT'S -- THAT ONE I DON'T WANT YET. 492
COMANOR - CROSS / ROSCH
1 THE COURT: OKAY. AND 147 IS "NATIONAL AND LOCAL
2 ADVERTISING RATES BY COUNTY."
3 MR. ROSCH: THAT IS WHAT I WANT, YEAH, THOSE THREE,
4 144, 145 AND 147.
5 THE COURT: FINE.
6 MR. ROSCH: NOW, I WOULD LIKE TO, IF I MAY, APPROACH
7 THE EASEL, YOUR HONOR?
8 THE COURT: YOU MAY.
9 (PAUSE IN THE PROCEEDINGS.)
10 MR. ROSCH: JUDGE ZIRPOLI ONCE TOLD ME I WOULD NEVER
11 BE ON HIS BASKETBALL TEAM. I GUESS THAT'S RIGHT.
12 BY MR. ROSCH:
13 Q. NOW, DOCTOR, ON THOSE EXHIBITS, AS I UNDERSTAND IT, YOU
14 ARE TALKING ABOUT THREE KINDS OF ADVERTISERS, IS THAT NOT
15 CORRECT, NATIONAL, RETAIL AND CLASSIFIED? IS THAT RIGHT?
16 A. YES, SIR.
17 Q. AND THEN I THINK YOU SAID THAT YOU WERE WORKING WITH TWO
18 KINDS OF RATES, ONE OF WHICH WAS ZONE RATE --
19 A. NO, ONLY FOR RETAIL.
20 Q. OKAY. I WILL -- I WILL TRY AND MAKE THAT DIVISION -- ONE
21 OF WHICH IS ZONE RATE. AND THAT IS FOR THE SAN FRANCISCO
22 CHRONICLE/EXAMINER ONLY AND FOR SOME RETAIL, CORRECT?
23 A. NO. IT'S FOR -- IT'S FOR RETAIL. IT'S MY UNDERSTANDING
24 THAT THAT APPLIES TO RETAIL. I DIDN'T SAY "SOME." I SAID I
25 UNDERSTAND THAT APPLIES TO RETAIL. 493
COMANOR - CROSS / ROSCH
1 Q. ARE YOU SAYING THAT THE SAN FRANCISCO CHRONICLE AND
2 EXAMINER DO NOT OFFER NON-ZONE RATES FOR RETAIL?
3 A. NO, I DIDN'T SAY THAT. I SAID YOU CAN -- THERE IS A RATE
4 FOR ALL EDITIONS AND THERE IS A RATE FOR ZONAL PRICING.
5 Q. FOR RETAIL?
6 A. THAT IS CORRECT.
7 Q. OKAY.
8 THE COURT: IS THAT TRUE FOR NATIONAL -- THAT'S NOT
9 TRUE FOR NATIONAL?
10 THE WITNESS: THAT IS NOT TRUE FOR NATIONAL.
11 BY MR. ROSCH:
12 Q. OKAY. AND THEN WE ALSO HAVE -- ARE YOU FAMILIAR WITH THE
13 TERM -- I'M SORRY, YOUR HONOR. I WILL STEP AWAY.
14 THE COURT: THAT'S ALL RIGHT.
15 BY MR. ROSCH:
16 Q. ARE YOU FAMILIAR WITH THE TERM "ROP"?
17 A. NO.
18 Q. YOU HAVE NEVER HEARD OF THE TERM "RUN OF PRESS" OR "ROP"?
19 A. NO.
20 Q. WELL, LET ME TRY IT OUT ON YOU AS A NEW TERM, DOCTOR,
21 WHICH MEANS THAT IT'S A RATE THAT APPLIES, NOT IN A ZONE BUT
22 WHEREVER THE PAPER IS SOLD. SO LET ME CALL THAT AN ROP RATE.
23 A. THAT'S THE RATE THAT WE USED IN THE FIRST OF OUR
24 (INDICATING).
25 Q. AND THAT APPLIES FIRST TO ALL SF/CHRON AD RATES EXCEPT 494
COMANOR - CROSS / ROSCH
1 RETAIL ZONE RATES AND TO ALL OF THE AD RATES FOR THE OTHER
2 PAPERS SHOWN. RIGHT?
3 A. YES, SIR.
4 Q. AND THEN, IF I UNDERSTAND YOUR EXHIBITS CORRECTLY, YOU
5 CALCULATED THE RATES THAT ARE SHOWN ON THAT -- ON THOSE
6 EXHIBITS ON THE BASIS OF A PER THOUSAND CIRCULATION FOR THE
7 HOME COUNTY OF THE PAPER INVOLVED?
8 A. NO, SIR.
9 Q. IS THAT NOT CORRECT?
10 A. NO, SIR.
11 Q. IS THAT NOT CORRECT FOR THE -- TELL ME WHICH ONES THAT'S
12 NOT CORRECT FOR.
13 A. WE FOCUSED NOT ONLY ON THE HOME COUNTY BUT ALL THE
14 COUNTIES.
15 Q. NOW --
16 A. FOR EXAMPLE, THE SANTA CLARA, THE SAN JOSE MERCURY IN
17 CONTRA COSTA COUNTY CIRCULATION. SO IT'S NOT ONLY THE HOME
18 COUNTY.
19 Q. NOW, LET ME SEE IF I UNDERSTAND THIS, THOUGH. IT SAYS
20 HERE, FOR EXAMPLE, IN EXHIBIT 144:
21 "DISPLAY ADVERTISING RATES ARE LOWEST ON A
22 PER THOUSAND CIRCULATION BASIS FOR TARGET COUNTY
23 ADS PLACE IN THE TARGET COUNTY LOCAL NEWSPAPER."
24 DO YOU SEE THAT?
25 A. YES, SIR. 495
COMANOR - CROSS / ROSCH
1 Q. AND SO WHEN YOU ARE TALKING ABOUT PER THOUSAND
2 CIRCULATION, YOU ARE TALKING ABOUT -- FOR EXAMPLE, IN THE CASE
3 OF THE SAN FRANCISCO EXAMINER, YOU ARE TALKING ABOUT PER
4 THOUSAND CIRCULATION IN SAN FRANCISCO, ARE YOU NOT?
5 A. IN THE FIRST COLUMN BUT NOT THE SECOND COLUMN.
6 Q. OKAY. FAIR ENOUGH.
7 AND IN THE SECOND COLUMN WHAT YOU ARE TALKING ABOUT
8 IS PER -- THERE THE SAN FRANCISCO EXAMINER AND CHRONICLE'S
9 ADVERTISING ON A PER THOUSAND BASIS IN ALAMEDA COUNTY; IS THAT
10 CORRECT?
11 A. YES, SIR.
12 Q. AND IN THE THIRD IN CONTRA COSTA COUNTY.
13 A. YES, SIR.
14 THE COURT: LET'S SEE. AT PRESENT YOU ARE REFERRING
15 TO 144?
16 MR. ROSCH: I AM REFERRING TO 144, YOUR HONOR.
17 BY MR. ROSCH:
18 Q. AND THAT'S TRUE ALSO OF 145 AND 147, IS THAT NOT CORRECT?
19 A. THE -- THE RELEVANT POPULATION IS IN THE RELEVANT COUNTY,
20 YES, SIR.
21 Q. ALL RIGHT.
22 THE COURT: SO THAT IS TRUE OF EXHIBITS 144, 145 AND
23 147?
24 THE WITNESS: YES.
25 THE COURT: OKAY. THANK YOU. 496
COMANOR - CROSS / ROSCH
1 BY MR. ROSCH:
2 Q. SO WHEN YOU WERE DEALING WITH THAT 1000 -- PER 1000
3 POPULATION FIGURE --
4 A. CIRCULATION.
5 Q. -- CIRCULATION FIGURE, THAT WAS BASED ON A
6 COUNTY-BY-COUNTY BASIS?
7 A. YES, SIR, THE CIRCULATION IN THE INDIVIDUAL COUNTY.
8 Q. IT WASN'T BASED ON, SAY, THE SAN FRANCISCO CHRONICLE'S
9 CIRCULATION WHEREVER THE PAPER MAY BE SOLD?
10 A. THAT IS CORRECT. IT WAS CIRCULATION BY COUNTY BY COUNTY.
11 Q. OKAY. AND YOU DID NOT DO THAT CALCULATION OR RATE
12 COMPARISON, DID YOU?
13 A. I DON'T UNDERSTAND YOUR QUESTION.
14 Q. YES. DID YOU COMPARE THE RATES PER THOUSAND CIRCULATION
15 FOR THE NEWSPAPERS SHOWN ON THOSE EXHIBITS WHICH ARE THE
16 CHRONICLE/EXAMINER, THE OAKLAND TRIBUNE, SAN JOSE MERCURY AND
17 THE CONTRA COSTA TIMES ON A PER THOUSAND TOTAL CIRCULATION
18 BASIS?
19 A. YOU MEAN, WHEREVER THEY HAPPENED?
20 Q. THAT'S RIGHT.
21 A. NO, I DIDN'T.
22 Q. AND HAD YOU DONE THAT, THE NUMBERS WOULD BE VERY DIFFERENT
23 THAN WHAT ARE SHOWN ON THESE EXHIBITS, WOULDN'T THEY?
24 A. I DON'T KNOW. I HAVEN'T DONE IT.
25 Q. OKAY. NOW, CAN YOU TELL ME WHAT PERCENTAGE OF 497
COMANOR - CROSS / ROSCH
1 CHRONICLE/EXAMINER RETAIL ADVERTISERS USED THE ZONE RETAIL
2 RATES?
3 A. NO, I CAN'T. SOME DO AND SOME DON'T. I DON'T KNOW THE
4 PROPORTIONS.
5 Q. WOULD YOU BE SURPRISED TO LEARN THAT IT'S LESS THAN ONE
6 PERCENT?
7 A. NO. I DON'T KNOW. I DON'T KNOW WHAT -- HOW MANY DO IT.
8 I DON'T KNOW THAT.
9 Q. WELL, YOU DO KNOW THAT EXCEPT FOR THE RETAILERS WHO BUY
10 THOSE ZONE RATES, THEIR ADS, LIKE THE -- ALL THE OTHER
11 ADVERTISERS, RUN IN ALL EDITIONS OF THE NEWSPAPERS WHEREVER
12 THEY ARE SOLD?
13 A. THAT IS CORRECT.
14 Q. OKAY. NOW, AREN'T THE ADVERTISERS WHO BUY ROP
15 ADVERTISING, RUN-OF-PRESS ADVERTISING, FROM THE CHRONICLE AND
16 EXAMINER BUYING THOSE ADS BECAUSE OF THE TOTAL CIRCULATION OF
17 THE PAPER, NOT JUST THE PAPER'S CIRCULATION IN SAN FRANCISCO?
18 A. NOT NECESSARILY.
19 Q. WELL, WHAT PERCENTAGE OF THOSE ADVERTISEES-- I'M SORRY --
20 OF THOSE ADVERTISERS ARE BUYING THE ROP ADS JUST BECAUSE OF THE
21 CHRONICLE/EXAMINER'S SAN FRANCISCO CIRCULATION? DID YOU DO A
22 STUDY OR ANALYSIS OF THAT KIND?
23 A. I HAVE OTHER INFORMATION BEARING ON THAT QUESTION, BUT I
24 DIDN'T DO THE SPECIFIC QUESTION THAT YOU ASKED, BUT I HAVE
25 OTHER INFORMATION THAT'S BEARING ON THAT. 498
COMANOR - CROSS / ROSCH
1 Q. AREN'T THE ADVERTISERS WHO ARE BUYING ROP ADVERTISING IN
2 THE NEWSPAPER BUYING IT BECAUSE OF THE TOTAL CIRCULATION OF THE
3 PAPER, NOT JUST THE PAPER'S CIRCULATION IN THE ADVERTISER'S
4 HOME COUNTY?
5 A. NOT NECESSARILY, NO, SIR.
6 Q. WELL, WHAT PERCENTAGE OF THOSE ADVERTISERS ARE BUYING
7 THOSE ADS JUST BECAUSE OF THE NEWSPAPER'S CIRCULATION IN THE
8 ADVERTISER'S COUNTY?
9 A. I DON'T HAVE THE NUMBERS ON THAT, AS I SAID, BUT WE HAVE
10 SOME OTHER INFORMATION THAT HAS BEARING ON THAT.
11 Q. AND THAT OTHER INFORMATION IS YOUR EXHIBIT 147, CORRECT?
12 A. THE -- COULD YOU TELL ME THE TITLE?
13 Q. THAT'S THE ONE THAT'S "ADVERTISEMENTS PLACED BY SAN
14 FRANCISCO SELLERS IN THE CHRONICLE, EXAMINER AND ADJACENT
15 COUNTY NEWSPAPERS"?
16 A. YES, SIR.
17 Q. OKAY. WE WILL GET TO THAT ONE IN JUST A MOMENT.
18 A. OKAY .
19 THE COURT: BEFORE YOU DO THAT, LET ME JUST GO BACK,
20 IF I MIGHT. I THINK I UNDERSTAND THE WITNESS' TESTIMONY WITH
21 RESPECT TO EXHIBITS 144, 145 AND 147. THESE WERE BASED UPON --
22 THESE PERCENTAGES WERE PERCENTAGES THAT APPEAR -- THEY ARE
23 DOLLAR FIGURES, I GATHER.
24 THE WITNESS: THESE ARE DOLLAR FIGURES PER THOUSAND
25 CIRCULATION, WHICH IS THE WAY PRICES -- 499
COMANOR - CROSS / ROSCH
1 THE COURT: RIGHT.
2 AND DENOMINATOR IN EACH CASE IS THE CIRCULATION OF
3 EACH NEWSPAPER IN THE INDIVIDUAL COUNTY ARRAYED IN EACH COLUMN?
4 THE WITNESS: YES, SIR.
5 THE COURT: SO FOR THE SAN FRANCISCO CHRONICLE AND
6 EXAMINER, THE FIRST NUMBER UNDER THE SAN FRANCISCO COLUMN,
7 DENOMINATOR THERE, IS CIRCULATION OF THE CHRONICLE AND EXAMINER
8 IN SAN FRANCISCO?
9 THE WITNESS: YES, SIR.
10 THE COURT: AND THE NEXT COLUMN IS THE CIRCULATION
11 OF THE SAN FRANCISCO CHRONICLE AND EXAMINER IN ALAMEDA COUNTY?
12 THE WITNESS: YES, SIR.
13 THE COURT: AND THEN IN SANTA CLARA COUNTY AND SO
14 FORTH?
15 THE WITNESS: YES, SIR.
16 THE COURT: AND THE SAME IS TRUE WITH RESPECT TO THE
17 (X)(X)(X)CHRONICLE.
18 THE WITNESS: YES.
19 THE COURT: THANK YOU.
20 MR. ROSCH: THANK YOU, YOUR HONOR.
21 BY MR. ROSCH:
22 Q. DOCTOR, I TAKE IT, THAT THE SAN FRANCISCO CHRONICLE AND
23 EXAMINER WITH THE EXCEPTION OF THEIR ZONE RATES DO NOT OFFER
24 RATE CARDS ON THE BASIS THAT ARE SHOWN IN THESE EXHIBITS, DO
25 THEY? 500
COMANOR - CROSS / ROSCH
1 A. I DON'T UNDERSTAND YOUR QUESTION.
2 Q. YES. THEIR RATE CARDS -- WITH THE EXCEPTION OF ZONE
3 RATES, THEIR RATES DO NOT OFFER RATES ON THE BASIS OF PER
4 THOUSAND, PER CIRCULATION, PER COUNTY?
5 A. I STILL DON'T UNDERSTAND YOUR QUESTION. THEY HAVE -- THEY
6 OFFER RATES IN A ZONE AND THEY OFFER OVERALL RATES. THAT'S
7 RIGHT.
8 Q. BUT THEY AREN'T CALCULATED ON THE RATE CARD THE WAY THAT
9 YOU CALCULATE THEM HERE, ARE THEY?
10 A. THERE ARE RATE PER COLUMN INCH, BUT WE ALL KNOW THAT THE
11 RELEVANT PRICE FOR ADVERTISING IS A RATE PER THOUSAND. THAT'S
12 THE COMMON WAY IN WHICH ADVERTISING RATES ARE EXPRESSED. AND I
13 DID IT, AS WELL.
14 Q. BUT IT ISN'T ON A RATE PER THOUSAND FOR A PARTICULAR
15 COUNTY, IS IT?
16 A. IT'S NOT -- THAT'S NOT LISTED ON THE CARD, THAT IS
17 CORRECT.
18 Q. THANK YOU.
19 NOW, YOU HAVE ALSO PREPARED AN EXHIBIT ENTITLED
20 "ADVERTISEMENTS PLACED BY SAN FRANCISCO SELLERS IN THE
21 CHRONICLE, EXAMINER AND ADJACENT COUNTY NEWSPAPERS." AND I
22 BELIEVE THAT IS EXHIBIT 147.
23 LET ME TRY AND STRUGGLE ALONG FOR THAT ONE.
24 MR. HUSTON: IT SHOULD BE UP AT THE TOP.
25 (PAUSE IN THE PROCEEDINGS.) 501
COMANOR - CROSS / ROSCH
1 MR. ROSCH: I APOLOGIZE, YOUR HONOR. IT'S JUST
2 GOING TO TAKE ME A MOMENT TO FIND THIS.
3 THE COURT: THAT'S FINE.
4 (PAUSE IN THE PROCEEDINGS.)
5 BY MR. ROSCH:
6 Q. NOW, LET ME SEE IF I CAN GET THE BACKGROUND OF THIS
7 PARTICULAR EXHIBIT. THIS IS EXHIBIT 147.
8 AS I UNDERSTAND IT, THIS ONE IS BASED ON A REVIEW OF
9 ADS --
10 THE COURT: I THINK THIS IS 146.
11 MR. ROSCH: OKAY. I'M SORRY, YOUR HONOR. YES, IT
12 IS. 146 IS WHAT I AM TALKING ABOUT.
13 THE COURT: ALL RIGHT.
14 BY MR. ROSCH:
15 Q. DO YOU HAVE THAT BEFORE YOU, DOCTOR?
16 A. YES, I DO.
17 THE COURT: ALL RIGHT.
18 BY MR. ROSCH:
19 Q. THANK YOU.
20 NOW, AS I UNDERSTAND IT, THIS IS BASED ON A REVIEW
21 OF THE ADS FOR THE NEWSPAPERS LISTED THAT YOUR COLLEAGUE,
22 DR. ARMSTRONG, CONDUCTED ON THOSE NEWSPAPERS FOR ONE DAY,
23 RIGHT?
24 A. YES, SIR.
25 Q. MONDAY, APRIL THE 17TH. 502
COMANOR - CROSS / ROSCH
1 A. YES, SIR.
2 Q. AND I ASKED YOU ABOUT THIS AT YOUR DEPOSITION LAST WEEK.
3 YOU TOLD ME YOU DIDN'T CHECK THE DATA HE USED; IS THAT CORRECT?
4 A. THAT'S CORRECT.
5 Q. AND YOU TOLD ME THAT YOU DIDN'T KEEP THE DATA ON WHICH IT
6 WAS BASED; IS THAT CORRECT?
7 A. DR. ARMSTRONG MAY HAVE IT. I DON'T HAVE IT, THAT'S
8 CORRECT.
9 Q. OKAY. SO WE DON'T KNOW HOW HE DID THIS; ISN'T THAT
10 CORRECT?
11 A. HE DID IT THE WAY IT'S INDICATED HERE ON THE TABLE.
12 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
13
14
15
16
17
18
19
20
21
22
23
24
25 503
COMANOR - CROSS / ROSCH
1 Q. NOW, YOU HAVEN'T DONE ANY REVIEW SINCE THIS OF THIS KIND,
2 I TAKE IT? YOU HAVEN'T REVIEWED THE NEWSPAPERS ON ANY OTHER
3 DAY?
4 A. THAT'S CORRECT.
5 Q. SO YOU DON'T KNOW WHETHER THIS IS TYPICAL OR ATYPICAL; IS
6 THAT FAIR TO SAY?
7 A. I ASSUMED IT'S TYPICAL, BUT I DON'T KNOW THAT, THAT IS
8 CORRECT.
9 Q. AND YOU HAVEN'T DONE THIS KIND OF STUDY WITH RESPECT TO
10 ANY SAN FRANCISCO NONDAILY NEWSPAPERS; HAVE YOU?
11 A. NO, I HAVE NOT.
12 Q. NOW, I'D LIKE TO KNOW ABOUT WHO THESE ADVERTISERS ARE.
13 WHO ARE THE 15 ADVERTISERS UNDER THE CHRONICLE? CAN YOU
14 IDENTIFY ANY OF THEM?
15 A. NO.
16 Q. HOW ABOUT THE 10 UNDER THE EXAMINER, CAN YOU IDENTIFY ANY
17 OF THOSE?
18 A. NO.
19 Q. OR THE TWO IN THE OAKLAND TRIBUNE, CAN YOU IDENTIFY ANY OF
20 THOSE?
21 A. NO.
22 Q. ARE THEY THE SAME ADVERTISERS; THAT IS TO SAY, IS THERE AN
23 OVERLAP?
24 A. I DON'T HAVE THE DATA HERE. THESE ARE THE NUMBER OF SAN
25 FRANCISCO SELLERS WHO ADVERTISED IN THE RELEVANT PAPERS ON THAT 504
COMANOR - CROSS / ROSCH
1 DAY, THAT IS CORRECT.
2 Q. NOW, HOW MANY -- OR LET ME PUT IT DIFFERENTLY.
3 WHAT PERCENTAGE OF RETAILER ADVERTISEMENTS PLACED IN
4 THE CHRONICLE/EXAMINER FOR THAT DAY WERE PLACED BY PEOPLE OR
5 FIRMS LOCATED OUTSIDE SAN FRANCISCO?
6 A. I DON'T KNOW. THERE WOULD BE NATIONAL ADS. THIS IS ONLY
7 RETAIL ADS, SO THIS ONLY --
8 Q. I'M TALKING ABOUT RETAIL ADS NOW.
9 A. I DON'T KNOW THE ANSWER TO THAT QUESTION. WE FOCUSED ON
10 SAN FRANCISCO SELLERS BECAUSE THEY'RE THE RELEVANT PEOPLE, THE
11 MAN SIDE OF THE MARKET WHOSE CROSS ELASTICITY OF DEMAND IS
12 INDICATIVE OF THE PRESENCE OF A RELEVANT MARKET.
13 Q. NOW, IT SAYS THAT -- IT DISPLAYS AN ADDRESS AND/OR A PHONE
14 NUMBER LOCATED IN SAN FRANCISCO. DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. AND WAS THAT TRUE -- IS THAT THE CRITERION HE USED FOR
17 BOTH, SELECTING BOTH THE CLASSIFIED AUTO AND THE RETAILER
18 ADVERTISERS?
19 A. YES, SIR.
20 Q. SO NOT ALL OF THESE ADVERTISERS HAD AN ADDRESS IN SAN
21 FRANCISCO. HE WAS LOOKING AT THE PHONE NUMBER; IS THAT RIGHT?
22 A. HE LOOKED AT ONE OR THE OTHER.
23 Q. OKAY. NOW, IN LOOKING AT THE PHONE NUMBERS, WHAT
24 CRITERION DID HE USE?
25 A. THERE WAS A PHONE NUMBER WHICH WAS INDICATIVE OF LOCATION 505
COMANOR - CROSS / ROSCH
1 IN SAN FRANCISCO COUNTY. I DON'T HAVE THE PRECISE INDICATION.
2 I HAVE ONLY -- THE ONLY THING I KNOW IS WHAT'S INDICATED HERE.
3 MR. ROSCH: PETER, COULD I HAVE THE NEWSPAPER FOR
4 THAT DAY, PLEASE.
5 MAY I APPROACH THE WITNESS, PLEASE, YOUR HONOR?
6 THE COURT: YOU MAY.
7 MR. HUSTON: HE'S GOT A COPY.
8 MR. ROSCH: HE'S GOT ONE? THEN LET ME HAND ONE UP
9 HERE.
10 THE COURT: DO I NEED TO READ THE NEWS OF
11 APRIL 17TH?
12 MR. ROSCH: YOU DON'T HAVE TO DO THAT, YOUR HONOR.
13 Q. WOULD YOU TAKE A LOOK AT SECTION E IN THE NEWSPAPER? I
14 BELIEVE THAT'S WHERE THE CLASSIFIED ADS ARE KEPT.
15 A. YES, SIR.
16 Q. CAN YOU TURN TO THE PAGE WHERE THE AUTOMOBILE ADS ARE
17 LOCATED?
18 A. (WITNESS EXAMINES DOCUMENT.) E14, IS THAT THE ONE YOU
19 WANT?
20 Q. I THINK THAT'S WHERE IT STARTS.
21 HE REFERS TO -- WHAT HE SAYS HERE IS THAT THERE WERE
22 1,102 CLASSIFIED ADS IN THAT PAPER WHICH WERE PLACED BY
23 SOMEBODY IN SAN FRANCISCO. ISN'T THAT WHAT HE'S SAYING THERE?
24 A. YES, IT IS.
25 Q. AND YOU SAY HE KNEW THAT EITHER BY THE ADDRESS THEY LISTED 506
COMANOR - CROSS / ROSCH
1 OR BY PHONE NUMBER; RIGHT?
2 A. THAT'S WHAT HE TOLD ME.
3 Q. OKAY. AND EXCEPT FOR THE DEALERS, THERE ARE NO ADDRESSES
4 LISTED IN THOSE CLASSIFIED ADS; ARE THERE?
5 A. THAT'S RIGHT. THEY'RE TELEPHONE NUMBERS.
6 Q. RIGHT. NOW, WHAT DID HE -- DID HE USE THE 415 AREA CODE?
7 A. I DON'T KNOW THE DETAILS OF WHAT CRITERIA HE USED.
8 Q. WELL, LET'S ASSUME THAT HE USED THE 415 AREA CODE.
9 A. OKAY.
10 Q. IS THAT CONFINED TO SAN FRANCISCO?
11 A. I DON'T THINK SO, BUT I DON'T KNOW.
12 Q. THANK YOU.
13 DOCTOR --
14 MR. ROSCH: I'M THROUGH WITH THE NEWSPAPER, YOUR
15 HONOR.
16 (LAUGHTER)
17 THE COURT: WELL, THERE WAS A GOOD DEAL ON A VOLVO.
18 (LAUGHTER)
19 BY MR. ROSCH:
20 Q. DOCTOR, YOU'RE FAMILIAR WITH THE ELZINGA-HOGARTY ANALYSIS
21 FOR DEFINING A RELEVANT GEOGRAPHIC MARKET; ARE YOU NOT?
22 A. NO.
23 Q. WELL, LET ME ASK YOU. YOU'VE HEARD OF IT; HAVEN'T YOU?
24 A. I KNOW KEN ELZINGA AND I KNOW HE WROTE AN ARTICLE HAVING
25 TO DEAL WITH MARKET DEFINITION, BUT I'M NOT FAMILIAR WITH HIS 507
COMANOR - CROSS / ROSCH
1 ANALYSIS. NO, I HAVE NOT REVIEWED IT.
2 Q. ARE YOU AWARE OF THE FACT THAT IT'S BEEN USED EXTENSIVELY
3 BY THE COURTS, INCLUDING MOST RECENTLY JUDGE CHESNEY IN THE
4 SUTTER HOSPITAL CASE IN THIS DISTRICT THAT'S REPORTED AT 84
5 F.SUPP. 3D AT 10 -- I'M SORRY, F.SUPP. 2D AT 1057?
6 A. NO.
7 MR. ROSCH: INCIDENTALLY, YOUR HONOR, THAT HAS TO BE
8 A WRONG CITE. IT'S GOT TO BE 840 SOMETHING.
9 THE COURT: WHAT ARE YOU READING FROM?
10 MR. ROSCH: I BEG YOUR PARDON?
11 THE COURT: WHAT ARE YOU READING FROM?
12 MR. ROSCH: IT'S THE SUTTER HOSPITAL.
13 THE COURT: NO, WHY IS THE CITE WRONG?
14 MR. ROSCH: MY NOTES.
15 THE COURT: AH.
16 BY MR. ROSCH:
17 Q. YOU'VE EXPRESSED THE OPINION THAT THROUGHOUT THE PERIOD OF
18 THE JOINT OPERATING AGREEMENT BETWEEN HEARST AND THE CHRONICLE,
19 THAT THE EXAMINER IS NOT A FAILING COMPANY. I THINK I HEARD
20 YOU SAY THAT TODAY; IS THAT CORRECT?
21 A. THAT IS CORRECT.
22 Q. AND, AS I UNDERSTAND YOU, BY THAT YOU JUST MEAN THAT THE
23 EXAMINER IS A PROFITABLE BUSINESS IF YOU INCLUDE THE SUBSIDY
24 THAT HEARST RECEIVES FROM THE JOA; ISN'T THAT CORRECT?
25 A. THAT'S NOT THE TERM I WOULD USE. IF YOU INCLUDE ALL OF 508
COMANOR - CROSS / ROSCH
1 THE PROVISIONS OF THE JOA AGREEMENT WHICH HAVE BEEN ENTERED
2 INTO FOR SOME TIME, YES, SIR.
3 Q. COULD YOU TAKE A LOOK, PLEASE, AT YOUR DEPOSITION AT PAGE
4 81, LINE 23, AND GOING OVER TO 82, LINE 14?
5 A. (WITNESS EXAMINES DOCUMENT.)
6 Q. DO YOU HAVE THAT, DOCTOR?
7 A. YES, I DO.
8 Q. I'D LIKE TO READ THAT INTO THE RECORD WITH THE COURT'S
9 PERMISSION.
10 THE COURT: VERY WELL.
11 MR. ROSCH: "Q. THE FIRST SENTENCE OF THAT SAYS,"
12 QUOTE, "'THROUGHOUT THE PERIOD OF THE JOINT
13 OPERATING AGREEMENT BETWEEN HEARST AND THE
14 CHRONICLE, WHICH WILL LAST AT LEAST THROUGH
15 2005, THE EXAMINER IS NOT A FAILING COMPANY,'
16 END QUOTE. DO YOU SEE THAT?"
17 A. YES, SIR.
18 Q. I'M SORRY, I'M READING FROM THE DEPOSITION.
19 "A. YES, I DO.
20 "Q. WHAT DO YOU MEAN BY THAT?"
21 A. OH, SORRY.
22 Q. "A. I MEAN IT'S A PROFITABLE
23 COMPANY.
24 "Q. IS THE EXAMINER A COMPANY?
25 "A. WELL, YOU'RE RIGHT TO FOCUS ON THAT. 509
COMANOR - CROSS / ROSCH
1 IT'S A PROFITABLE BUSINESS. I MODIFY MY ANSWER
2 TO USE THE WORD 'BUSINESS.'
3 "Q. DO YOU MEAN THAT THE REVENUES
4 ATTRIBUTABLE TO THE PUBLICATION OF THE EXAMINER
5 EXCEED THE EXPENSES ATTRIBUTABLE TO THE
6 PUBLICATION OF THE EXAMINER?
7 "A. INCLUDING THE SUBSIDY RECEIVED FROM THE
8 JOA, YES."
9 DID YOU GIVE THAT TESTIMONY?
10 A. YES. I'D LIKE TO MODIFY IT.
11 MR. SHULMAN: WOULD YOU READ TO LINE 17, PLEASE.
12 MR. ROSCH: I'D BE GLAD TO.
13 THE WITNESS: I'D LIKE TO MODIFY. I USED THE WORD
14 "SUBSIDY" THERE AND I THINK I SPOKE TOO QUICKLY. I MEANT TO
15 INCLUDE ALL THE PROVISIONS OF THE JOA. SO THAT WHILE I DID SAY
16 THE WORD "SUBSIDY," I THINK THAT WAS TOO QUICK AN ANSWER AND
17 I'D LIKE TO MODIFY MY RESPONSE NOW.
18 MR. ROSCH: OF COURSE, SIR.
19 DO YOU WANT ME TO STILL READ IT?
20 MR. SHULMAN: (NODS HEAD.)
21 MR. ROSCH: A COUPLE OF LINES MORE, YOUR HONOR.
22 THE COURT: VERY WELL.
23 MR. ROSCH: STARTING AT 15 AND GOING THROUGH 17:
24 "Q. HOW ABOUT EXCLUDING THAT SUBSIDY?
25 "A. I DIDN'T DO THAT BECAUSE HEARST HAS A 510
COMANOR - CROSS / ROSCH
1 LEGAL RIGHT TO THAT SUBSIDY THROUGH AT LEAST
2 2005."
3 Q. NOW, DOCTOR, YOU WERE ASKED THE FOLLOWING QUESTION AND YOU
4 GAVE THE FOLLOWING ANSWER THIS MORNING, THE QUESTION WAS:
5 "Q. DID YOU CONSIDER WHETHER THE EXAMINER
6 WAS PROFITABLE OUTSIDE THE JOA?"
7 AND YOU SAID, "NO." REMEMBER THAT?
8 A. YES, SIR.
9 Q. NOW, IN FACT, YOU PREPARED AN ANALYSIS AS TO WHETHER THE
10 EXAMINER IS PROFITABLE OUTSIDE THE JOA ON A STAND-ALONE BASIS;
11 DID YOU NOT?
12 A. NO, SIR. I REVIEWED CERTAIN -- I PUT DOWN CERTAIN NUMBERS
13 ON A PIECE OF PAPER, BUT I DID NOT RELY ON THEM AND THAT WAS
14 NOT AN ANALYSIS.
15 MR. ROSCH: WELL, I'D LIKE TO GET -- HAVE THE -- PUT
16 THEM INTO EVIDENCE, PLEASE. YOUR HONOR, I BELIEVE....
17 (PAUSE IN PROCEEDINGS.)
18 THE COURT: LET ME ASK YOU, APPROXIMATELY HOW MUCH
19 LONGER DO YOU HAVE OF THE WITNESS? MAYBE THIS WOULD BE A GOOD
20 TIME TO TAKE OUR LUNCH BREAK, MR. ROSCH, WHILE YOU'RE LOOKING
21 FOR THOSE DOCUMENTS.
22 MR. ROSCH: YOUR HONOR, I'D STILL LIKE TO QUESTION
23 THE WITNESS ABOUT HIS VIEWS WITH RESPECT TO THE
24 INTERRELATIONSHIP BETWEEN THE ANTITRUST LAWS AND THE NEWSPAPER
25 PRESERVATION ACT. QUITE FRANKLY, I BELIEVE THAT I CAN DO THAT 511
COMANOR - CROSS / ROSCH
1 IN A PRETTY BRIEF PERIOD OF TIME.
2 THE COURT: ALL RIGHT. LET'S CARRY ON.
3 MR. ROSCH: BUT I CERTAINLY DON'T WANT TO IMPOSE
4 ON -- OKAY.
5 THE COURT: GO RIGHT AHEAD.
6 MR. ROSCH: MAY I APPROACH THE WITNESS, YOUR HONOR?
7 THE COURT: YOU MAY.
8 BY MR. ROSCH:
9 Q. DOCTOR, I'LL SHOW YOU A DOCUMENT WHICH IS A FAX
10 TRANSMITTAL TO MICHAEL WEAVER WHICH ALSO CONTAINS A DOCUMENT
11 THAT IS ENTITLED "1988 INCOME STATEMENTS EXAMINER." DO YOU SEE
12 THAT?
13 A. YES.
14 Q. AND ON THE RIGHT-HAND SIDE THERE'S A COLUMN THAT'S
15 ENTITLED "WITHOUT JOA."
16 A. YES, I DO SEE THAT.
17 Q. DO YOU SEE THAT?
18 A. UH-HUH.
19 Q. AND THEN THERE'S SOME CALCULATIONS UNDER THAT COLUMN. DO
20 YOU SEE THAT?
21 A. YES, I DO.
22 Q. AND ALL OF THIS IS IN YOUR HANDWRITING; IS IT NOT?
23 A. YES, IT IS.
24 Q. AND WHAT DOES IT SHOW FOR THE EXAMINER OUTSIDE THE JOA?
25 MR. SHULMAN: EXCUSE ME, JUST SO WE'RE CLEAR, I DID 512
COMANOR - CROSS / ROSCH
1 STIPULATE THIS INTO EVIDENCE AS EXHIBIT 345, YOUR HONOR.
2 THE COURT: ALL RIGHT. EXHIBIT 345. HAS THAT BEEN
3 PREMARKED?
4 MR. SHULMAN: YES, YOUR HONOR. IT'S IN THE BOOK.
5 IT'S CHRONICLE 345.
6 THE WITNESS: COULD YOU REPEAT YOUR QUESTION?
7 BY MR. ROSCH:
8 Q. YEAH. THAT'S YOUR HANDWRITING; IS IT NOT?
9 A. YES, IT IS.
10 Q. AND THAT'S YOUR CALCULATION ON THE RIGHT-HAND SIDE?
11 A. YES, IT IS.
12 Q. AND IT'S HEADED "WITHOUT JOA"?
13 A. YES, IT SAYS THAT.
14 Q. AND WHAT DOES IT SHOW THAT THE OPERATING REVENUE -- OR
15 OPERATING PROFIT IS FOR THE EXAMINER?
16 A. IF YOU ASSUME THAT THE REVENUE -- THE NET REVENUES OF THE
17 JOA SHOULD BE DIVIDED ACCORDING TO CIRCULATION, THEN IT SHOWS
18 THAT THE EXAMINER HAS A NEGATIVE RETURN, BUT --
19 Q. OF 9 MILLION -- EXCUSE ME. I'M SORRY.
20 A. -- BUT RESTING ON THIS ARBITRARY ASSUMPTION AND IT'S THE
21 REASON WHY I DIDN'T GO FORTH WITH THIS ANALYSIS.
22 Q. BUT YOUR ANALYSIS SHOWED THAT IT WOULD SUFFER A
23 9-MILLION-DOLLAR LOSS; IS THAT NOT CORRECT?
24 A. THAT'S WHAT THESE NUMBERS SHOW, BUT NOT MY ANALYSIS AND I
25 DIDN'T DRAW ANY CONCLUSIONS FROM THIS BECAUSE IT RESTED ON AN 513
COMANOR - CROSS / ROSCH
1 ARBITRARY AND ARTIFICIAL ASSUMPTION.
2 Q. NOW, DOCTOR, I'D LIKE TO ASK YOU A FEW QUESTIONS ABOUT THE
3 SCHOOL OF ALLOCATIVE EFFICIENCY AND THE SCHOOL OF NUMBER OF
4 COMPETITORS, IF I MAY.
5 THE ALLOCATIVE EFFICIENCY MODEL I BELIEVE YOU SAID
6 HAS BEEN THE DOMINANT MODEL IN ANTITRUST ENFORCEMENT SINCE THE
7 '80'S; IS THAT CORRECT?
8 A. YES, SIR.
9 Q. AND YOU'D AGREE THAT UNDER THAT MODEL, A MERGER THAT
10 REDUCES THE NUMBER OF COMPETITORS DOESN'T VIOLATE THE CLAYTON
11 OR SHERMAN ACTS UNTIL IT HARMS CONSUMER WELFARE? YOU WOULD
12 AGREE WITH THAT?
13 A. YES.
14 Q. AND YOU'D AGREE THAT UNDER THE ALLOCATIVE EFFICIENCY MODEL
15 DEFINITION OF CONSUMER WELFARE, IT MEANS THAT CONSUMER WELFARE
16 IS MAXIMIZED WHEN THE RESOURCES ARE ALLOCATED TO THEIR BEST
17 USE?
18 A. YES.
19 Q. SO TO PUT IT DIFFERENTLY, IF CONSUMERS AREN'T SUPPORTING
20 AN ENTERPRISE, THE RESOURCES THAT ARE BEING DEVOTED TO THAT
21 ENTERPRISE OUGHT TO BE DEVOTED INSTEAD TO AN ENTERPRISE THAT
22 THEY ARE SUPPORTING; ISN'T THAT CORRECT?
23 A. USING THE CRITERIA OF ALLOCATIVE EFFICIENCY, THAT IS
24 CORRECT.
25 Q. THANK YOU. 514
COMANOR - CROSS / ROSCH
1 NOW, YOU WOULD AGREE, WOULD YOU NOT, THAT A MERGER
2 OF TWO NEWSPAPERS WHICH AREN'T OPERATING UNDER A JOA WOULD NOT
3 VIOLATE THE CLAYTON OR SHERMAN ACTS IF THE MERGER RESULTS IN
4 RESOURCES BEING ALLOCATED TO THEIR BEST ECONOMIC USE? YOU
5 WOULD AGREE WITH THAT; WOULD YOU NOT?
6 A. NO.
7 Q. WELL, LET ME PUT IT DIFFERENTLY THEN.
8 YOU WOULD AGREE THAT A MERGER OF TWO NEWSPAPERS
9 WHICH AREN'T OPERATING UNDER A JOA SHOULD BE EVALUATED UNDER
10 THE ALLOCATIVE EFFICIENCY STANDARD IN DETERMINING WHETHER OR
11 NOT IT VIOLATES THE CLAYTON OR SHERMAN ACT?
12 A. NO.
13 Q. SO YOUR POSITION IS THAT EVEN A MERGER OF TWO NEWSPAPERS
14 WHICH AREN'T OPERATING UNDER A JOA SHOULD BE EVALUATED IN
15 ACCORDANCE WITH THE NUMBER-OF-COMPETITORS DOCTRINE?
16 A. YES.
17 Q. AND IS THAT BECAUSE OF THE NEWSPAPER PRESERVATION ACT?
18 A. YES.
19 Q. NOW, I BELIEVE YOU TOLD ME AT YOUR DEPOSITION THAT YOUR
20 OPINION IN THAT RESPECT IS BASED ON A NINTH CIRCUIT OPINION AND
21 A CONGRESSIONAL REPORT. DO YOU REMEMBER THAT?
22 A. YES.
23 Q. NOW, YOU REVIEWED THE NINTH CIRCUIT OPINION FOR THE FIRST
24 TIME IN YOUR LIFE IN JANUARY WHEN MR. SHULMAN GAVE IT TO YOU;
25 ISN'T THAT CORRECT? 515
COMANOR - CROSS / ROSCH
1 A. YES.
2 Q. AND YOU ALSO REVIEWED THE CONGRESSIONAL REPORT FOR THE
3 FIRST TIME IN JANUARY WHEN MR. SHULMAN GAVE IT TO YOU; IS THAT
4 CORRECT?
5 A. YES.
6 Q. NOW, WHEN YOU WERE DEPOSED LAST WEEK, YOU COULD NOT RECALL
7 THE NAME OF THE NINTH CIRCUIT CASE, AND I'VE LOOKED AND THERE
8 ARE ONLY TWO NINTH CIRCUIT CASES THAT I FOUND THAT DISCUSS THE
9 NEWSPAPER PRESERVATION ACT. CAN YOU TELL ME TODAY WHICH ONE IT
10 IS?
11 A. YES.
12 Q. WHAT IS IT?
13 A. I HAVE IT HERE.
14 Q. IS THAT ONE THAT I GAVE TO YOU?
15 A. I DON'T KNOW WHAT YOU GAVE TO ME. THIS IS NOT YOUR COPY.
16 Q. OKAY.
17 A. THE --
18 Q. WHAT'S THE -- HOW IS IT ENTITLED?
19 A. COMMITTEE FOR AN INDEPENDENT P-I V. HEARST.
20 Q. OKAY.
21 A. AND YOU WANT THE CITE?
22 Q. YES, PLEASE.
23 A. 704 F.2D 467.
24 Q. OKAY. IF YOU COULD JUST HAVE THAT HANDY, PLEASE.
25 A. YES, SIR. 516
COMANOR - CROSS / ROSCH
1 Q. NOW, WHEN YOU WERE DEPOSED LAST WEEK, YOU ALSO COULDN'T
2 REMEMBER THE CONGRESSIONAL REPORT THAT YOU WERE REFERRING TO.
3 DO YOU HAVE THAT NOW?
4 A. YES.
5 Q. THAT'S ONE I'VE JUST GIVEN TO YOU AS WELL; ISN'T IT?
6 A. I DON'T KNOW. I HAVE MY OWN COPY OF WHAT I WAS REFERRING
7 TO.
8 Q. CAN YOU DIG IT OUT THERE, PLEASE?
9 A. THERE'S A LOT OF PAPERS HERE. LET ME FIND IT.
10 Q. YEAH, I KNOW. I APOLOGIZE.
11 A. (WITNESS EXAMINES DOCUMENTS.)
12 Q. I TELL YOU WHAT, I THINK I CAN GIVE YOU ANOTHER ONE.
13 A. LET ME -- I'M SURE I HAVE IT.
14 MR. ROSCH: IF I COULD HAND THAT UP TO THE COURT.
15 I'VE MARKED THAT AS EXHIBIT 353. HERE YOU GO.
16 MAY I APPROACH THE WITNESS, YOUR HONOR?
17 THE COURT: YES.
18 MR. ROSCH: HERE YOU GO.
19 THE COURT: HAS THIS BEEN ADMITTED?
20 MR. ROSCH: NO, IT HASN'T. I'LL MOVE ITS ADMISSION,
21 YOUR HONOR.
22 THE COURT: ANY OBJECTION, MR. SHULMAN?
23 MR. SHULMAN: I HAVE TO SEE IT FIRST, YOUR HONOR.
24 THE COURT: ALL RIGHT.
25 (PAUSE IN PROCEEDINGS.) 517
COMANOR - CROSS / ROSCH
1 MR. SHULMAN: NO OBJECTION.
2 THE COURT: VERY WELL. 353 WILL BE ADMITTED.
3 (DEFENDANTS' EXHIBIT C-353
4 RECEIVED IN EVIDENCE)
5 BY MR. ROSCH:
6 Q. IS EXHIBIT 353 THE HOUSE REPORT OR THE CONGRESSIONAL
7 REPORT THAT YOU HAD IN MIND?
8 A. YES. I HAD A DIFFERENT VERSION, BUT IT'S THE SAME THING.
9 Q. OKAY. I'LL REPRESENT TO YOU THAT IT'S THE ONE THAT YOU
10 MENTIONED IN YOUR AFFIDAVIT.
11 A. OKAY.
12 Q. NOW, DOCTOR, WHERE DOES THE CONGRESSIONAL REPORT REFER TO
13 THE STANDARD THAT SHOULD BE USED TO EVALUATE THE MERGER OF
14 NEWSPAPERS OPERATING UNDER A JOA? INDEED, LET ME JUST ASK IT A
15 LITTLE MORE BROADLY.
16 DOES THAT CONGRESSIONAL REPORT REFER AT ALL TO THE
17 SUBJECT OF THE STANDARD THAT SHOULD BE USED IN EVALUATING A
18 MERGER BY TWO NEWSPAPERS OPERATING UNDER A JOA?
19 A. IT DECLARES A PUBLIC POLICY STATEMENT INTEREST THAT, ONE,
20 THAT IMPLIES THAT THE NUMBER OF INDEPENDENT EDITORIAL AND
21 REPORTING VOICES IS A CRITICAL, IS AN ESSENTIAL FACTOR TO BE
22 SUPPORTED. IT SAYS THAT ON THE FIRST PAGE.
23 AND THAT TELLS ME THAT WHAT'S RELEVANT HERE IS NOT
24 MERELY THE PRICE THAT'S CHARGED FOR ADVERTISING AND CIRCULATION
25 BUT, RATHER, THE NUMBER OF INDEPENDENT EDITORIAL AND REPORTING 518
COMANOR - CROSS / ROSCH
1 VOICES THAT IS THE ESSENCE OF PUBLIC POLICY STANDARDS TOWARDS
2 NEWSPAPERS. THAT'S WHAT THIS REPORT SAYS AND THAT'S WHAT I
3 TOOK -- THAT'S WHAT I TOOK TO MEAN THAT IT AFFECTS HOW
4 ANTITRUST POLICY SHOULD BE ADMINISTERED, YES.
5 Q. TO BORROW MR. ALIOTO'S WONDERFUL QUESTIONING, LET ME TRY
6 IT AGAIN.
7 WHERE IN THAT REPORT DOES IT MENTION THE SUBJECT OF
8 A MERGER BETWEEN TWO NEWSPAPERS OPERATING UNDER A JOA? DOES IT
9 ANYPLACE?
10 A. IT DOESN'T FOCUS ON THAT DETAIL. WHAT IT DOES DO IS FOCUS
11 ON IS IT DECLARED A PUBLIC POLICY STATEMENT FROM WHICH ONE CAN
12 DERIVE APPROPRIATE STANDARDS.
13 Q. AND IN THE NINTH CIRCUIT CASE, DOCTOR, WHERE DOES THE
14 NINTH CIRCUIT CASE DISCUSS THE STANDARD THAT SHOULD APPLY TO A
15 MERGER OF NEWSPAPERS OPERATING UNDER JOA?
16 A. MAY I READ THE RELEVANT LANGUAGE?
17 Q. OF COURSE.
18 A. I'M ON PAGE 14. DO YOU WANT TO READ IT WITH ME?
19 Q. NO, THAT'S FINE. GO AHEAD.
20 THE COURT: THIS IS THE POST-INTELLIGENCER CASE?
21 MR. ROSCH: NO, THIS IS COMMITTEE FOR AN
22 INDEPENDENT.
23 THE COURT: THAT'S THE POST-INTELLIGENCER CASE, THE
24 SEATTLE NEWSPAPER CASE.
25 MR. ROSCH: OH, I'M SORRY. YES, YOUR HONOR. 519
COMANOR - CROSS / ROSCH
1 THE WITNESS: BOTTOM OF PAGE 14. POLICY OF THE ACT,
2 STATING IN ITS FIRST SECTION:
3 THAT POLICY IS TO MAINTAIN EDITORIAL AND
4 REPORTORIAL INDEPENDENCE AMONG NEWSPAPERS
5 THROUGH THE PRESERVATION OF A NEWSPAPER -- OF
6 NEWSPAPER PUBLICATION IN AREAS WHERE A JOINT
7 OPERATING AGREEMENT HAS BEEN HERETOFORE ENTERED
8 INTO BECAUSE OF ECONOMIC DISTRESS OR IS
9 HEREAFTER EFFECTIVE IN ACCORDANCE WITH
10 PROVISIONS OF THIS CHAPTER. THE DECLARATION AND
11 THE LEGISLATIVE HISTORY COMPEL THE CONCLUSION
12 THAT THE ACT ITSELF IS A POLICY DETERMINATION
13 THAT THE PRESERVATION OF EDITORIAL DIVERSITY
14 THROUGH JOINT OPERATING AGREEMENTS OUTWEIGHS ANY
15 POTENTIAL ANTICOMPETITIVE EFFECTS THIS ANTITRUST
16 EXEMPTION MIGHT CAUSE.
17 BY MR. ROSCH:
18 Q. YOU'LL AGREE WITH ME, WILL YOU NOT, DOCTOR, THAT THAT
19 PASSAGE DOES NOT REFER TO THE SUBJECT OF A MERGER BETWEEN TWO
20 NEWSPAPERS UNDER A JOA?
21 A. NO, I DON'T AGREE WITH THAT.
22 Q. DOES IT MENTION THAT?
23 A. IT DOES -- IT DOES IN THE FOLLOWING SENSE: IT SAYS THAT
24 WHAT'S RELEVANT FOR PUBLIC POLICY TOWARDS NEWSPAPERS IS A
25 NUMBER OF INDEPENDENT VOICES AND NOT ANTITRUST -- 520
COMANOR - CROSS / ROSCH
1 ANTICOMPETITIVE EFFECTS, BY WHICH I TAKE IT TO MEAN ALLOCATIVE
2 EFFICIENCY.
3 I THINK THIS STATEMENT COMPELS THE VIEW THAT THE
4 APPROPRIATE STANDARD IS THE SECOND ONE THAT MR. SHULMAN WROTE
5 DOWN AND NOT THE FIRST.
6 Q. NOW, DOCTOR, YOU'RE NOT A MEMBER OF THE BAR; ARE YOU?
7 A. NO, I'M NOT.
8 Q. AND YOU DON'T HOLD A LAW DEGREE?
9 A. THAT'S CORRECT.
10 Q. AND YOU'VE NEVER BEEN A LAW SCHOOL STUDENT; HAVE YOU?
11 A. I'M JUST A PROFESSOR.
12 (LAUGHTER)
13 Q. TOUCHE.
14 YOU'VE NEVER TESTIFIED AS A LEGAL EXPERT BEFORE;
15 HAVE YOU?
16 A. WELL, ANTITRUST IS THE MIXTURE OF LAW AND ECONOMICS, AND
17 SO IT'S DIFFICULT TO DO ANTITRUST ECONOMICS WITHOUT DOING IT IN
18 THE CONTEXT OF ANTITRUST LAW. THOSE TWO THINGS FIT TOGETHER
19 LIKE HAND IN GLOVE, SO -- AND I'VE TESTIFIED A LOT ABOUT
20 ANTITRUST ECONOMICS. I DON'T KNOW THAT I CAN DO THAT WITHOUT
21 DEALING WITH ANTITRUST LAW AT THE SAME TIME.
22 Q. YOU'VE NEVER MENTIONED THE NEWSPAPER PRESERVATION ACT IN
23 ANY PUBLICATION THAT YOU'VE AUTHORED; HAVE YOU?
24 A. THAT IS CORRECT.
25 Q. AND YOU'VE NEVER TAUGHT THE NEWSPAPER PRESERVATION ACT IN 521
COMANOR - CROSS / ROSCH
1 YOUR CLASSES?
2 A. THAT IS CORRECT.
3 Q. YOU HAVE WRITTEN BEFORE ABOUT HOW THE ANTITRUST LAWS
4 SHOULD APPLY IN OTHER CONTEXTS; HAVE YOU NOT?
5 A. YES, SIR.
6 Q. AND SPECIFICALLY YOU'VE WRITTEN ABOUT HOW THEY OUGHT TO
7 APPLY TO VERTICAL CUSTOMER AND TERRITORIAL RESTRICTIONS PLACED
8 ON DEALERS BY MANUFACTURERS; ISN'T THAT CORRECT?
9 A. YES, SIR.
10 Q. AND YOUR VIEWS IN THAT REGARD WERE CONSIDERED BY THE
11 SUPREME COURT IN THE GTE/SYLVANIA CASE; WERE THEY NOT?
12 A. MY FIRST ARTICLE ON THAT QUESTION, YES, NOT MY SECOND.
13 Q. AND YOUR VIEWS WERE REJECTED; WERE THEY NOT?
14 A. YES. I'VE REJECTED THOSE AS WELL. MY SECOND ARTICLE IN
15 THE HARVARD LAW REVIEW TAKES A DIFFERENT VIEW, DIFFERENT
16 APPROACH.
17 Q. COULD YOU BE WRONG ON THIS ONE TOO?
18 A. I DON'T THINK SO, BUT I COULD BE.
19 MR. ROSCH: THANK YOU, SIR.
20 THE COURT: ALL RIGHT. DO ANY OF THE OTHER
21 DEFENDANTS INTEND TO CROSS-EXAMINE MR. COMANOR?
22 MR. HOCKETT: YOUR HONOR, WE DO.
23 MR. CONNELL: WE DO, YOUR HONOR.
24 THE COURT: ALL RIGHT. WELL, THEN, THIS WOULD BE A
25 GOOD TIME TO TAKE A LUNCHEON BREAK. LET'S BE BACK AND RESUME 522
COMANOR - CROSS / ROSCH
1 WITH FURTHER CROSS-EXAMINATION AT 1:30.
2 (LUNCHEON RECESS WAS TAKEN AT 12:45 P.M.)
3 AFTERNOON SESSION 1:40 P.M.
4 THE COURT: WELL, HAVE WE LOST SOME OF THE PARTIES?
5 MR. HOCKETT: APPARENTLY, YOUR HONOR. WE'RE READY
6 TO PROCEED AND HAVE NO OBJECTION TO DOING SO.
7 THE COURT: WELL, WHO ARE WE GOING TO USE AS A
8 WITNESS?
9 MR. BALABANIAN: I CAN DO IT, YOUR HONOR.
10 (PAUSE IN PROCEEDINGS.)
11 THE COURT: MR. HOCKETT, DO YOU HAVE ANY IDEA WHERE
12 THE LAWYERS ARE FOR THE PLAINTIFF AND FOR THE HEARST
13 CORPORATION?
14 MR. HOCKETT: WE HAVE SENT OUT A SCOUTING
15 EXPEDITION --
16 THE COURT: HERE'S MR. SHULMAN AND THE WITNESS.
17 MR. HOCKETT: -- AND IT DIDN'T TURN UP ANYTHING.
18 MR. SHULMAN: I'M SORRY.
19 THE COURT: DID YOUR CLOCK STOP?
20 MR. SHULMAN: I THOUGHT YOUR HONOR SAID 2:00
21 O'CLOCK.
22 THE COURT: 1:30.
23 MR. SHULMAN: OH, I AM SORRY.
24 THE COURT: WHERE'S THE LAWYERS -- WHERE ARE THE
25 LAWYERS FOR THE HEARST CORPORATION? 523
COMANOR - CROSS / HOCKETT
1 (NO RESPONSE)
2 (PAUSE IN PROCEEDINGS.)
3 MR. HALLING: YOUR HONOR, WE APOLOGIZE.
4 MR. CONNELL: WE APOLOGIZE, YOUR HONOR.
5 MR. HALLING: WE DID NOT UNDERSTAND THE TIMING.
6 THE COURT: I THINK IT WAS CLEAR, AND I JUST CHECKED
7 THE RECORD, 1:30 WAS WHEN WE WERE TO RESUME. I'M NOT
8 PUNCTILIOUS ABOUT STARTING ON THE MINUTE, BUT WE'RE 25 MINUTES
9 LATE, COUNSEL.
10 MR. HALLING: WE APOLOGIZE.
11 MR. CONNELL: WE'RE QUITE SORRY, YOUR HONOR.
12 THE COURT: ALL RIGHT. MR. HOCKETT, YOU MAY
13 CROSS-EXAMINE THE WITNESS.
14 CROSS-EXAMINATION
15 BY MR. HOCKETT:
16 Q. GOOD AFTERNOON, DR. COMANOR.
17 A. GOOD AFTERNOON.
18 Q. MY NAME IS CHRISTOPHER HOCKETT AND I AM A LAWYER FOR EXIN
19 LLC, THE INTERVENOR.
20 I TAKE IT, SIR, THAT YOU HAVE NO KNOWLEDGE OF EXIN'S
21 BUDGETS, REVENUE PROJECTIONS, PRO FORMAS FOR THE PAPER?
22 A. YES, SIR, THAT'S CORRECT.
23 Q. YOU HAVE NO SUCH KNOWLEDGE?
24 A. THAT IS CORRECT.
25 Q. AND YOU HAVE NEVER PREPARED A BUDGET OR P & L OR PRO FORMA 524
COMANOR - CROSS / HOCKETT
1 FOR EXIN'S PROPOSED OPERATION OF THE SAN FRANCISCO EXAMINER;
2 HAVE YOU?
3 A. NO, I HAVE NOT.
4 Q. AND, IN FACT, YOU NEVER PREPARED A BUDGET PRO FORMA OR P &
5 L STATEMENT FOR ANY BUSINESS; IS THAT CORRECT, SIR?
6 A. THAT'S CORRECT.
7 Q. AND IF I HEARD YOU CORRECTLY THIS MORNING, YOU TESTIFIED
8 THAT YOU CAN'T TELL WHAT'S GOING TO HAPPEN IN THE NEWSPAPER
9 BUSINESS FIVE YEARS FROM NOW; IS THAT CORRECT?
10 A. THERE'S A LOT OF UNCERTAINTY OUT THERE. I CAN'T BE SURE.
11 Q. BUT YOU ARE COMFORTABLE TELLING US THAT EXIN WON'T BE
12 SUCCESSFUL AFTER HEARST'S OBLIGATIONS UNDER THE CONTRACT
13 EXPIRE; IS THAT TRUE?
14 A. THE REPORT SUBMITTED WITH THE HEARST HART-SCOTT-RODINO
15 FILING IS VERY EXPLICIT IN REVIEWING THE LITERATURE AND
16 DESCRIBING THE ECONOMICS OF THE NEWSPAPER MARKETS IN SUCH
17 CIRCUMSTANCES. AND SO WHAT I HAVE DONE IS REVIEWED THAT
18 REPORT. I DID NOT CARRY OUT ANY NEW ANALYSIS ABOVE AND BEYOND
19 THAT REPORT, YES, SIR.
20 Q. YOUR CONCLUSIONS ABOUT THE FANGS' LIKELY FORTUNES
21 OPERATING THE EXAMINER ARE BASED ON HEARST'S EXPERTS'
22 TESTIMONY?
23 A. NOT ONLY. ALSO ON DR. ROSSE'S TESTIMONY, WHICH APPEARED
24 IN HIS DEPOSITION. HE SAID THE SAME THING.
25 Q. AND DO YOU GENERALLY AGREE WITH THE STATEMENTS AND 525
COMANOR - CROSS / HOCKETT
1 CONCLUSIONS OF HEARST'S EXPERTS?
2 A. SOMETIMES I DO AND SOMETIMES I DON'T. IT DEPENDS ON
3 WHETHER I AGREE WITH THEM.
4 Q. I TAKE IT THAT THE GIST OF THE TESTIMONY THAT YOU JUST
5 REFERENCED WAS THAT IF EXIN OUTSIDE THE JOA DID THE SAME SORT
6 OF THINGS WITH THE EXAMINER AS HEARST NOW DOES INSIDE THE JOA,
7 THEY WOULD FAIL; IS THAT A FAIR SUMMARY?
8 A. I THINK -- I'M NOT QUITE SURE I UNDERSTOOD YOUR QUESTION.
9 Q. LET ME REPHRASE IT.
10 THE FANGS UNDER THE TRANSACTION THAT'S BEFORE THE
11 COURT OR A COROLLARY TO THAT TRANSACTION WOULD BE OPERATING THE
12 NEWSPAPER OUTSIDE OF A JOINT OPERATING AGREEMENT. DO YOU
13 UNDERSTAND THAT?
14 A. YES, I DO.
15 Q. AND DO YOU UNDERSTAND THE TESTIMONY THAT YOU REFERENCED OF
16 MR. ROSSE, THAT IF THE FANGS OPERATED THE EXAMINER IN THE WAY
17 THAT HEARST DOES NOW, THAT IT WOULD NOT BE LIKELY TO SUCCEED;
18 IS THAT CORRECT?
19 A. IF IT -- IF IT IS OPERATED IN A COMPETITIVE FASHION TO THE
20 CHRONICLE, IT WOULD NOT SUCCEED, THAT IS DR. ROSSE'S TESTIMONY
21 WITH WHICH I AGREE.
22 Q. AND IT'S TRUE THAT YOU REALLY DON'T HAVE ANY IDEA WHAT
23 EXIN LLC INTENDS TO DO INSOFAR AS OPERATING THE EXAMINER; IS
24 THAT CORRECT?
25 A. I DON'T HAVE ANY KNOWLEDGE OF THEIR SPECIFIC PLANS, THAT'S 526
COMANOR - CROSS / HOCKETT
1 CORRECT.
2 Q. YOU TESTIFIED THIS MORNING ABOUT CONTRACT INCENTIVES.
3 A. YES, SIR.
4 Q. YOU SAID THAT YOU HAD REVIEWED THE CONTRACT BETWEEN HEARST
5 AND EXIN AS PART OF YOUR WORK; IS THAT CORRECT?
6 A. YES, SIR.
7 Q. IN YOUR REVIEW OF THAT CONTRACT, DO YOU REMEMBER THAT EXIN
8 GETS TO KEEP ALL THE REVENUE ASSOCIATED WITH THE OPERATION OF
9 THE SAN FRANCISCO EXAMINER AFTER IT TAKES IT OVER?
10 A. YES, SIR.
11 Q. NOW --
12 MR. HOCKETT: MAY I APPROACH THE EASEL, YOUR HONOR?
13 THE COURT: YES, YOU MAY.
14 BY MR. HOCKETT:
15 Q. MR. SHULMAN DID SOME ANALYSIS WITH YOU ON THE EASEL HERE,
16 AND YOU AGREED WITH HIM THAT UP TO $25 MILLION PER YEAR HEARST
17 WAS OBLIGATED TO PAY THE EXAMINER'S COST OF OPERATIONS 100
18 CENTS ON THE DOLLAR; IS THAT CORRECT, SIR?
19 A. YES, SIR.
20 Q. OKAY.
21 A. FOR YEARS TWO AND THREE.
22 Q. NOW, I WANT TO MAKE SURE THAT WE UNDERSTAND THIS
23 PERFECTLY. SO AT THE RISK OF BEING SIMPLISTIC, I'M GOING TO
24 HOLD OUT A DOLLAR. WE'LL CALL THIS THE MARGINAL DOLLAR. AND
25 LET'S PRETEND THAT THIS IS A DOLLAR THAT HEARST IS MAKING 527
COMANOR - CROSS / HOCKETT
1 AVAILABLE TO EXIN LLC TO FUND OPERATIONS OF THE EXAMINER.
2 A. YES. IN WHICH YEAR ARE YOU REFERRING TO?
3 Q. LET'S FOR SIMPLICITY STICK WITH YEARS TWO AND THREE AS YOU
4 DID WITH MR. SHULMAN.
5 A. OKAY.
6 Q. NOW, EXIN HAS TWO CHOICES. IT CAN TAKE THE DOLLAR AND
7 INVEST IT IN THE BUSINESS OF THE EXAMINER, AND IT IS ENTITLED
8 UNDER THE CONTRACT TO RETAIN ALL REVENUES THAT INVESTMENT
9 PRODUCES; CORRECT?
10 A. YES, SIR.
11 Q. OR IT CAN REFUSE THE DOLLAR AND TAKE 50 CENTS IN SAVED
12 COSTS AS LONG AS WE ARE BETWEEN 15 AND 25 MILLION IN
13 REIMBURSABLE COSTS; IS THAT CORRECT?
14 A. I'M NOT FOLLOWING YOU. MAYBE YOU COULD EXPLAIN IT -- OR
15 I'M REALLY NOT FOLLOWING YOU.
16 MR. HOCKETT: MAY I APPROACH THE WITNESS, YOUR
17 HONOR?
18 THE COURT: VERY WELL.
19 BY MR. HOCKETT:
20 Q. I'M HANDING YOU PLAINTIFF'S EXHIBIT 35, WHICH IS THE
21 CONTRACT.
22 A. YES, SIR.
23 Q. IS THAT THE CONTRACT YOU REVIEWED?
24 A. IT APPEARS TO BE.
25 Q. AND THE PART THAT YOU WERE LOOKING AT THIS MORNING IS THE 528
COMANOR - CROSS / HOCKETT
1 PART ON THE BOTTOM OF PAGE 5 AND THE TOP OF PAGE 6; CORRECT?
2 A. YES, SIR.
3 Q. AND THE STATEMENT THAT YOU READ WAS:
4 "IF AT THE END OF A REIMBURSEMENT YEAR THE
5 BUYER'S AGGREGATE REIMBURSABLE COSTS FOR SUCH
6 YEAR, AS SET FORTH IN THE COST STATEMENT AS
7 DEFINED BELOW, ARE $15 MILLION OR MORE BUT LESS
8 THAN THE CAP AMOUNT OF 25 MILLION, THE COMPANY
9 SHALL PAY BUYER, IN ADDITION TO THE REIMBURSABLE
10 COSTS FOR SUCH YEAR, ONE HALF OF THE AMOUNT BY
11 WHICH THE CAP EXCEEDS THE BUYER'S REIMBURSABLE
12 COSTS FOR SUCH YEAR BUT NO MORE THAN
13 $5 MILLION."
14 IS THAT WHAT IT SAYS?
15 A. YES, IT DOES.
16 Q. MEANING THAT IF THERE HAVE BEEN $15 MILLION IN
17 REIMBURSABLE COSTS AND EXIN IS MAKING A DECISION ABOUT WHETHER
18 TO INVEST A MARGINAL DOLLAR, OPTION ONE IS IT CAN INVEST THE
19 DOLLAR AND RETAIN WHATEVER REVENUES FLOW FROM THAT DOLLAR OR
20 OPTION TWO IS THEY CAN FOREGO MAKING THE EXPENDITURE, SAVE
21 MONEY UNDER THE CAP AND THEY'LL RECEIVE HALF OF THE SAVINGS
22 UNDER THIS CLAUSE; IS THAT CORRECT?
23 A. YES, SIR.
24 Q. NOW, YOU TESTIFIED THAT THERE'S AN INCENTIVE NOT TO TAKE
25 THE DOLLAR, THERE'S AN INCENTIVE TO TAKE THE 50 CENTS. AND YOU 529
COMANOR - CROSS / HOCKETT
1 SAID THAT THAT WOULD BE TRUE UNLESS THERE'S A DIFFERENCE IN
2 REVENUE. DO YOU REMEMBER THE TESTIMONY THAT YOU GAVE?
3 A. THAT'S NOT QUITE WHAT I SAID. WHAT I SAID IS THAT BEYOND
4 $15 MILLION, ACCORDING TO THIS CONTRACT, EXPENSES ARE
5 REIMBURSABLE ONLY 50 CENTS ON THE DOLLAR PLUS, OF COURSE, ANY
6 REVENUES ASSOCIATED WITH THOSE EXPENDITURES. I DID SAY THAT.
7 Q. BUT A MINUTE AGO --
8 MR. HOCKETT: MAY I APPROACH THE EASEL, YOUR HONOR?
9 Q. -- YOU TOLD ME THAT EXPENSES UP TO $25 MILLION ARE
10 REIMBURSABLE AT THE RATE OF 100 CENTS ON THE DOLLAR; CORRECT?
11 A. YES, THAT'S CORRECT.
12 Q. OKAY. SO IF THERE ARE REVENUES GENERATED FROM THE
13 EXPENDITURE OF THE MARGINAL DOLLAR IN EXCESS OF 50 CENTS, THEN
14 THE INCENTIVE IS TO INVEST THE MONEY; ISN'T THAT CORRECT?
15 A. THAT IS CORRECT, ON A MARGINAL BASIS.
16 Q. NOW, LET'S JUST SAY IF HEARST'S DOLLAR WOULD GENERATE
17 REVENUE OF A DOLLAR, WHAT WOULD A RATIONAL PERSON DO HERE?
18 WOULD IT TAKE THE DOLLAR, INVEST IT AND EARN A DOLLAR OR WOULD
19 HE TAKE 50 CENTS?
20 A. UNDER YOUR HYPOTHETICAL, YOU'RE ABSOLUTELY CORRECT.
21 Q. YOU DON'T EVEN NEED AN ECONOMIST TO TELL THAT A DOLLAR IS
22 BETTER THAN 50 CENTS?
23 A. I DON'T KNOW ABOUT THAT.
24 Q. NOW, LET'S TAKE THAT ASSUMPTION A LITTLE FURTHER.
25 MR. HOCKETT: MAY I GO TO THE EASEL AGAIN, PLEASE, 530
COMANOR - CROSS / HOCKETT
1 YOUR HONOR?
2 THE COURT: YES.
3 BY MR. HOCKETT:
4 Q. WHEN MR. SHULMAN WENT THROUGH THIS WITH YOU, HE HAD YOU
5 ANALYZE THE AMOUNT OF THE SUBSIDY, THEN HE SAID WHAT WOULD
6 HAPPEN IF 15 MILLION IN COSTS WERE INCURRED, THERE WOULD BE A
7 10-MILLION-DOLLAR SAVINGS WHICH WOULD BE DIVIDED 50-50
8 RESULTING IN A PAYMENT OF $5 MILLION; CORRECT?
9 A. HE DIDN'T USE THOSE WORDS, BUT THE NUMBERS ARE CORRECT,
10 YES.
11 Q. OKAY. AND THEN YOU SAID, WELL, LET'S ADD THIS UP. YOU
12 RECEIVED 50 MILLION -- 15 MILLION IN COST SUBSIDIES AND
13 $5 MILLION IN THE COST SAVINGS PAYMENT LEADING TO $20 MILLION.
14 A. THAT'S CORRECT.
15 Q. OKAY. LET'S USE THE SAME METHODOLOGY BUT LET'S COUNT
16 REVENUE THIS TIME, OKAY? LET'S ASSUME THAT A DOLLAR INVESTED
17 IN THE EXAMINER GENERATES A DOLLAR OF REVENUE, ALL OF WHICH
18 EXIN IS ENTITLED TO KEEP UNDER THE CONTRACT.
19 A. JUST SO I UNDERSTAND YOUR HYPOTHETICAL, DO YOU MEAN THAT
20 IT'S A DOLLAR OF EXPENDITURES PRODUCES A DOLLAR OF ADDITIONAL
21 REVENUES REGARDLESS OF HOW MUCH THEY SPEND?
22 Q. NO.
23 A. THERE'S NO SAVINGS -- THEN I DON'T UNDERSTAND YOU.
24 Q. EXCUSE ME. THE DOLLAR THAT'S OFFERED BY HEARST --
25 A. YES. 531
COMANOR - CROSS / HOCKETT
1 Q. -- IF INVESTED LEADS TO A DOLLAR OF REVENUE.
2 A. YES.
3 Q. NOT PROFIT BUT REVENUE.
4 A. IS THAT TRUE AT ALL LEVELS, SO IT'S A CONSTANT?
5 Q. THAT'S CORRECT.
6 A. THERE'S NO DIFFERENCE BETWEEN INVESTING THE FIRST DOLLAR
7 OR THE TENTH DOLLAR OR THE THOUSANDTH DOLLAR?
8 Q. FOR SIMPLICITY, THAT'S WHAT WE WILL ASSUME.
9 A. OKAY.
10 Q. AND WE WILL ASSUME THAT WE ARE IN THE TERRITORY BETWEEN 15
11 AND $25 MILLION.
12 A. YES.
13 Q. ARE YOU WITH ME?
14 A. YES, I AM.
15 Q. OKAY. LET'S TAKE THE EXAMPLE WHERE THERE'S A
16 25-MILLION-DOLLAR CAP ON REIMBURSABLE COSTS; CORRECT?
17 A. YES.
18 Q. AND LET'S SAY THAT THE AMOUNT OF COSTS INCURRED ARE
19 25 MILLION RESULTING IN A SAVINGS OF ZERO. DO YOU FOLLOW ME?
20 A. YES.
21 Q. AND UNDER THE ASSUMPTIONS THAT WE'VE MADE, THIS
22 $25 MILLION OF EXPENDITURES GENERATES $25 MILLION IN REVENUE.
23 ARE YOU WITH ME?
24 A. YES.
25 Q. NOW, USING THE METHODOLOGY THAT MR. SHULMAN USED WITH YOU, 532
COMANOR - CROSS / HOCKETT
1 YOU ADD THIS UP. IT'S $25 MILLION IN COSTS ADVANCED, AND WE'RE
2 DEALING WITH REVENUE NOW, WE'RE GOING TO ADD THAT IN,
3 $25 MILLION IN REVENUE GENERATED FOR A TOTAL OF 50. DO YOU
4 FOLLOW ME SO FAR?
5 A. YES, SIR.
6 Q. OKAY. NOW LET'S TAKE THE EXAMPLE THAT MR. SHULMAN USED,
7 AND WE'LL USE THE SAME REVENUE ASSUMPTIONS AND WE'LL USE THE
8 SAME NUMBERS THAT HE USED WITH YOU, WHICH IS TO SAY A
9 25-MILLION-DOLLAR CAP AND $15 MILLION OF COSTS, WHICH LEADS TO
10 A SAVINGS OF 10 MILLION, HALF OF WHICH IS SHARED WITH EXIN
11 UNDER THE CONTRACT. DO YOU AGREE WITH THAT?
12 A. THERE'S NOTHING TO AGREE WITH. I UNDERSTAND WHAT YOU'VE
13 WRITTEN.
14 Q. YOU UNDERSTAND ME?
15 A. YES.
16 Q. OKAY. SO LET'S ADD THAT UP.
17 THERE'S $15 MILLION IN REVENUE -- EXCUSE ME,
18 $15 MILLION IN COSTS ADVANCED, WHICH GENERATE $15 MILLION IN
19 REVENUE; CORRECT?
20 A. CORRECT.
21 Q. AND THEN YOU HAVE HALF OF $10 MILLION IN SHARED COST
22 SAVINGS, WHICH GIVES YOU WHAT?
23 A. DO YOU WANT ME TO ADD IT UP?
24 Q. YES.
25 A. IT'S 35. 533
COMANOR - CROSS / HOCKETT
1 Q. 35. SO IF YOU ASSUME, AS WE DID HERE, THAT INVESTING A
2 DOLLAR IN THE OPERATION OF EXIN GENERATES A DOLLAR OF
3 REVENUE -- WE'RE NOT TALKING ABOUT PROFIT, WE'RE TALKING ABOUT
4 REVENUE -- THEN THE INCENTIVE IS TO SPEND ALL THE WAY UP TO THE
5 25-MILLION-DOLLAR CAP; ISN'T IT?
6 A. IF YOU MAKE THAT ASSUMPTION, WHICH IS INCONSISTENT WITH
7 THE HEARST FILINGS AND WITH DR. ROSSE'S TESTIMONY, YES, SIR.
8 Q. SIR, IT IS CORRECT; IS IT NOT?
9 A. THE MATH IS CORRECT.
10 Q. AND, INDEED, IF YOU COULD GET ANYTHING MORE THAN 50 CENTS
11 IN REVENUE FROM THE INVESTMENT OF A DOLLAR FROM HEARST, THE
12 CONTRACT'S INCENTIVES ARE TO SPEND THE MONEY; ISN'T THAT
13 CORRECT?
14 A. ONLY IF YOU MAKE THAT ASSUMPTION. IT ALL TURNS ON YOUR
15 ASSUMPTION THAT A DOLLAR OF COSTS PROMOTES A DOLLAR OF
16 REVENUES, AND THERE'S NO BASIS OF THAT ASSUMPTION.
17 Q. AND YOUR ASSUMPTION, SIR, IS THAT A DOLLAR'S EXPENDITURE
18 WILL NOT RESULT IN ANY RETURN ON THE INVESTMENT; IS THAT
19 CORRECT, SIR?
20 A. IT'S NOT MY ASSUMPTION.
21 Q. THAT WAS THE ASSUMPTION THAT UNDERLAY YOUR TESTIMONY
22 THAT --
23 A. BUT IT'S NOT MY --
24 Q. -- INCENTIVES ARE NOT TO SPEND MONEY.
25 A. BUT IT'S NOT MY ASSUMPTIONS. THE ASSUMPTION THAT'S 534
COMANOR - CROSS / CONNELL
1 CONTAINED IN THE REPORTS I MENTIONED.
2 Q. AND BECAUSE YOU KNOW NOTHING OF THE FANGS' PLANS FOR THE
3 BUSINESS, YOU HAVE NO WAY TO JUDGE WHETHER OR NOT THEIR
4 INVESTMENT OF A MARGINAL DOLLAR IS OR IS NOT LIKELY TO GENERATE
5 REVENUE; IS THAT CORRECT?
6 A. I KNOW WHAT THE ANALYSIS IS AND I KNOW WHAT THE ECONOMICS
7 IS FROM HAVING READ IT, NOT HAVING DONE IT MYSELF, AND I AGREE
8 WITH THE REPORTS THAT I HAVE READ AND THAT LED TO MY
9 CONCLUSIONS, YES, SIR.
10 Q. YOU HAVE DONE NO WORK ON THIS YOURSELF; IS THAT CORRECT?
11 A. THAT IS CORRECT.
12 MR. HOCKETT: THANK YOU. THAT'S ALL I HAVE FOR NOW.
13 THE COURT: VERY WELL. SIR, YOUR NAME?
14 MR. CONNELL: GERALD CONNELL FOR THE HEARST
15 CORPORATION, YOUR HONOR.
16 THE COURT: MR. CONNELL, VERY WELL.
17 MR. CONNELL: I DO APOLOGIZE, YOUR HONOR, FOR
18 GETTING BACK HERE LATE. I THINK IT WAS MY FAULT. I THOUGHT I
19 HEARD 2:00 AND I WANT TO TAKE THE BLAME FOR THAT.
20 THE COURT: ALL RIGHT.
21 MR. CONNELL: I'M SORRY.
22 CROSS-EXAMINATION
23 BY MR. CONNELL:
24 Q. DR. COMANOR, GOOD AFTERNOON, SIR?
25 A. GOOD AFTERNOON. 535
COMANOR - CROSS / CONNELL
1 Q. DR. COMANOR, YOU'RE NOT AN EXPERT ON THE NEWSPAPER
2 PRESERVATION ACT; ARE YOU?
3 A. NO.
4 Q. DO YOU RECOGNIZE, SIR, THAT AT THE TIME THE JOA IN
5 QUESTION HERE WAS FORMED IN 1965, THAT THE HEARST NEWSPAPERS
6 WERE A FAILING ENTERPRISE?
7 A. I DON'T KNOW THAT.
8 Q. DID YOU DO ANY EXAMINATION OF THE RECORD IN ORDER TO MAKE
9 ANY DETERMINATION ON THAT ISSUE?
10 A. IT WAS BACK IN THE 1960'S. NO, SIR, I DID NOT.
11 Q. YOU WERE EMPLOYED, WERE YOU NOT, IN 1965 IN THE OFFICE OF
12 THE ASSISTANT ATTORNEY GENERAL ANTITRUST?
13 A. YES, I WAS.
14 Q. SPECIAL ECONOMIC ASSISTANT TO DON TURNER?
15 A. YES, I WAS.
16 Q. IN THAT CAPACITY DID YOU HAVE ANY CONTACT WITH THE ISSUE
17 OF THIS JOA AND ITS FORMATION?
18 A. IT'S 35 YEARS AGO. NOT THAT I CAN RECALL.
19 Q. LET ME SHOW YOU A DOCUMENT THAT'S BEEN ADMITTED IN
20 EVIDENCE AS H-0902.
21 MR. CONNELL: MAY I APPROACH THE WITNESS, YOUR
22 HONOR?
23 THE COURT: YOU MAY.
24 BY MR. CONNELL:
25 Q. DR. COMANOR, WHAT I'VE HANDED YOU IS A PAGE FROM A VOLUME 536
COMANOR - CROSS / CONNELL
1 OF THE HEARINGS THAT WERE HELD ON THE NEWSPAPER PRESERVATION
2 ACT, AND IT HAPPENS TO BE THE TWO ITEMS I'M INTERESTED IN
3 DIRECTING YOUR ATTENTION TO ARE AT THE TOP OF THAT PAGE. ONE
4 OF THEM IS LABELED "A TALKING STATEMENT" AND THE NEXT ONE IS A
5 LETTER DATED AUGUST 30, 1965, FROM THE ASSISTANT -- FROM THE
6 ATTORNEY GENERAL TO WILLIAM J. MANNING, WHO I WILL REPRESENT TO
7 YOU AT THE TIME WAS COUNSEL TO THE HEARST CORPORATION.
8 THE COURT: COUNSEL, LET ME INTERRUPT. THE WITNESS'
9 CURRICULUM VITAE WAS EXHIBIT NUMBER WHAT?
10 MR. CONNELL: I DON'T KNOW. PERHAPS MR. SHULMAN.
11 (PAUSE IN PROCEEDINGS.)
12 MR. CONNELL: 148 I'M TOLD IS THE CV FOR
13 DR. COMANOR.
14 THE COURT: SORRY FOR THE INTERRUPTION.
15 MR. CONNELL: YES, SIR.
16 Q. HAVE YOU HAD AN OPPORTUNITY TO JUST TAKE A LOOK AT THOSE
17 TWO FAIRLY SHORT ITEMS?
18 A. ONLY THE FIRST ITEM. LET ME READ THE SECOND ONE.
19 Q. WOULD YOU TAKE A LOOK AT THE OTHER ONE, PLEASE.
20 A. CERTAINLY.
21 Q. AND JUST TELL ME WHEN YOU'VE DONE THAT.
22 A. (WITNESS EXAMINES DOCUMENT.) YES, I'VE READ THEM NOW
23 BOTH.
24 Q. AND YOU WILL NOTICE THAT BOTH OF THOSE WRITINGS ARE TO THE
25 SAME EFFECT; THAT IS, THAT THE DEPARTMENT OF JUSTICE AT THIS 537
COMANOR - CROSS / CONNELL
1 TIME RECOGNIZED THAT HEARST'S NEWSPAPERS IN SAN FRANCISCO WERE
2 SUFFERING SUBSTANTIAL LOSSES OR SIGNIFICANT LOSSES; CORRECT?
3 A. YES, SIR.
4 Q. AND WOULD YOU HAVE ANY REASON TO DOUBT THAT THAT WAS AT
5 THAT TIME AN ACCURATE STATEMENT BY THE JUSTICE DEPARTMENT BASED
6 ON SUFFICIENT EVIDENCE?
7 A. NO.
8 Q. ARE YOU AWARE THAT AT ABOUT THIS TIME THERE WAS ALSO
9 PENDING A CASE THAT HAD BEEN BROUGHT BY THE ANTITRUST DIVISION
10 CHALLENGING A JOINT NEWSPAPER OPERATING ARRANGEMENT IN ANOTHER
11 CITY?
12 A. NO.
13 Q. YOU WERE NOT -- YOU'RE NOT FAMILIAR WITH THE CITIZEN
14 PUBLISHING COMPANY CASE; CORRECT?
15 A. CORRECT.
16 Q. YOU'RE NOT FAMILIAR WITH THE FACT THAT IT WAS THE DECISION
17 OF THE SUPREME COURT IN THAT CASE THAT REALLY CAUSED A LOBBYING
18 EFFORT THAT LED TO THE PASSAGE OF THE NEWSPAPER PRESERVATION
19 ACT?
20 A. NO.
21 Q. OKAY. BASED ON WHAT YOU NOW HAVE BEFORE YOU CONCERNING
22 THE FINANCIAL CONDITION OF THE HEARST PAPERS IN SAN FRANCISCO
23 IN 1965, WOULD YOU BELIEVE THAT THEY WOULD HAVE BEEN FAILING
24 NEWSPAPERS AT THAT TIME?
25 A. I DON'T KNOW. IT'S NOT REALLY ENOUGH INFORMATION TO ALLOW 538
COMANOR - CROSS / CONNELL
1 ME TO MAKE THAT JUDGMENT.
2 Q. IS IT YOUR VIEW, DR. COMANOR, THAT THE APPROPRIATE, THE
3 APPROPRIATE THING TO DO IN THIS CASE WOULD BE NOT FOR HEARST TO
4 TRANSFER THE EXAMINER TO MR. FANG BUT TO SIMPLY CLOSE IT DOWN
5 BECAUSE IT'S A FAILING ENTERPRISE?
6 A. I DIDN'T UNDERSTAND THE PREMISE OF THAT QUESTION.
7 MR. CONNELL: COULD I HAVE IT READ BACK, PLEASE?
8 (RECORD READ AS FOLLOWS: "IS IT YOUR VIEW, DR.
9 COMANOR, THAT THE APPROPRIATE, THE APPROPRIATE
10 THING TO DO IN THIS CASE WOULD BE NOT FOR HEARST
11 TO TRANSFER THE EXAMINER TO MR. FANG BUT TO
12 SIMPLY CLOSE IT DOWN BECAUSE IT'S A FAILING
13 ENTERPRISE?")
14 THE WITNESS: NO.
15 BY MR. CONNELL:
16 Q. YOU DO AGREE, I TAKE IT, WITH THE VIEW OF DR. ROSSE THAT
17 OPERATED OUTSIDE THE JOA THE EXAMINER WOULD FAIL?
18 A. I DISTINGUISH THE EXAMINER BEING OPERATED BY AN
19 INDEPENDENT PUBLISHER, SUCH AS THE FANGS, AND AN INDEPENDENT --
20 AND THE EXAMINER OPERATED BY THE HEARST CORPORATION WHO HAS
21 STATED THAT -- IN ONE OF THEIR MISSION STATEMENTS, THAT IT IS
22 THE INTENTION OF THE HEARST CORPORATION TO MAINTAIN A NEWSPAPER
23 PRESENCE AND COMPETE FOR THE MARKETPLACE FOLLOWING THE DEMISE
24 OF THE JOA. IF THERE IS ANY PROSPECT FOR A SUCCESSFUL SECOND
25 NEWSPAPER IN SAN FRANCISCO, IT WOULD CERTAINLY MORE LIKELY BE 539
COMANOR - CROSS / CONNELL
1 ACHIEVED WITH THE HEARST CORPORATION, GIVEN THIS MISSION, THAN
2 BY ANYONE ELSE.
3 Q. I'M SORRY. I THOUGHT I HEARD YOU TESTIFY PREVIOUSLY THAT
4 YOU AGREED WITH DR. ROSSE'S CONCLUSION AS EXPRESSED IN THE
5 STUDY YOU DID. AM I WRONG?
6 A. I AGREED WITH HIS CONCLUSION THAT THERE ARE GREAT
7 PROSPECTS THAT THE EXAMINER WOULD FAIL FOLLOWING THE END OF THE
8 JOA. I ALSO STATED THAT I HAVE NO OPINION ABOUT WHAT WOULD
9 HAPPEN IN 2005 BECAUSE IT'S VERY PROBLEMATICAL WHAT WILL
10 HAPPEN.
11 Q. WHICH IS TO SAY YOU JUST DON'T KNOW?
12 A. THAT IS CORRECT.
13 Q. IT COULD GET A LOT WORSE BETWEEN NOW AND 2005; RIGHT?
14 A. NO, NOT UNDER THE JOA, NO, SIR.
15 Q. EXCUSE ME?
16 A. I DON'T THINK SO.
17 Q. HOW DO YOU KNOW WHAT IS GOING TO HAPPEN TO THE JOA
18 REVENUES BETWEEN NOW AND 2005?
19 A. I ASSUME THAT THE JOA WILL BE MAINTAINED THROUGH THE
20 PERIOD FOR WHICH IT WILL REMAIN VALID, WHICH IS CERTAINLY 2005.
21 Q. YOU ASSUME THAT WHAT?
22 A. THAT THE JOA WILL REMAIN IN EFFECT BECAUSE THAT IS THE
23 CONTRACT WHICH IS IN PLACE.
24 Q. IT'S A PRIVATE CONTRACT; RIGHT?
25 A. YES, SIR. 540
COMANOR - CROSS / CONNELL
1 Q. AND THE PARTIES PRESENTLY HAVE AGREED TO TERMINATE THAT
2 ARRANGEMENT; RIGHT?
3 A. I THOUGHT THAT WAS THE SUBJECT OF THIS LAWSUIT.
4 Q. THAT'S CORRECT, IT IS. BUT THAT'S, YOU UNDERSTAND, THE
5 ARRANGEMENT THAT'S IN FRONT OF THIS COURT IS AN AGREEMENT TO
6 TERMINATE THE JOA; IS IT NOT? IS THAT CORRECT?
7 A. YES.
8 Q. OKAY. AND ARE YOU FAMILIAR WITH THE FACT THAT OVER THE
9 PERIOD OF TIME SINCE THE PASSAGE OF THE NEWSPAPER PRESERVATION
10 ACT IN 1970 THAT MANY OTHER JOINT OPERATING ARRANGEMENTS IN
11 THIS COUNTRY HAVE TERMINATED?
12 A. YES.
13 Q. AND YOU ARE AWARE THAT NONE OF THOSE -- IN NONE OF THOSE
14 JOA TERMINATIONS HAS THE JUSTICE DEPARTMENT CHALLENGED THE
15 TERMINATION?
16 A. I DON'T KNOW THAT; BUT IF YOU REPRESENT THAT TO ME, I WILL
17 ACCEPT YOUR REPRESENTATION.
18 Q. WELL, YOU DIDN'T EXAMINE THAT ISSUE?
19 A. I DO NOT KNOW THAT.
20 Q. ARE YOU FAMILIAR WITH THE FACT THAT IN 1983 THE JOA IN ST.
21 LOUIS WAS TERMINATED?
22 A. NOT PARTICULARLY.
23 Q. ARE YOU FAMILIAR WITH THE FACT THAT IN THAT SITUATION IN
24 1983 THE JUSTICE DEPARTMENT ISSUED A PRESS RELEASE DESCRIBING
25 ITS POSITION RELATIVE TO THE PROPOSED TERMINATION OF THAT JOA? 541
COMANOR - CROSS / CONNELL
1 A. NO.
2 Q. WELL, LET ME SHOW THAT TO YOU.
3 MR. CONNELL: YOUR HONOR, MAY I HAND THE WITNESS
4 H-0938 NOT YET IN EVIDENCE, SIR.
5 THE COURT: YES, YOU MAY.
6 BY MR. CONNELL:
7 Q. DR. COMANOR, IF YOU WOULD SIMPLY BE KIND ENOUGH TO PERUSE
8 THAT AND WHEN YOU FEEL COMFORTABLE THAT YOU'VE READ ENOUGH,
9 JUST LET ME KNOW?
10 A. OKAY.
11 Q. THANK YOU, SIR.
12 A. (WITNESS EXAMINES DOCUMENT.) YES, I'VE READ IT.
13 Q. AND THIS PRESS RELEASE QUOTES THE THEN ASSISTANT ATTORNEY
14 GENERAL, WILLIAM F. BAXTER --
15 A. YES, SIR.
16 Q. -- A GENTLEMAN I BELIEVE YOU KNOW OR KNEW WHEN HE WAS
17 STILL ALIVE?
18 A. I DID KNOW BILL QUITE WELL.
19 Q. A WELL-RESPECTED ASSISTANT ATTORNEY GENERAL; CORRECT?
20 A. YES, SIR.
21 Q. AND IN THIS PRESS RELEASE, I'M LOOKING NOW, DR. COMANOR,
22 AT PAGE 3 WHERE HE SAYS IN QUOTES --
23 MR. SHULMAN: YOUR HONOR, I OBJECT TO COUNSEL'S
24 READING FROM THE STATEMENT THAT IS NOT IN EVIDENCE.
25 MR. CONNELL: WELL, I WILL OFFER IT IN EVIDENCE, 542
COMANOR - CROSS / CONNELL
1 YOUR HONOR.
2 MR. SHULMAN: WE DO OBJECT TO THIS, YOUR HONOR, AS
3 HEARSAY.
4 THE COURT: WELL, I CAN TAKE JUDICIAL NOTICE OF A
5 PRESS RELEASE OF THE DEPARTMENT OF JUSTICE; CAN I NOT,
6 MR. SHULMAN?
7 MR. SHULMAN: YES, YOUR HONOR.
8 THE COURT: ALL RIGHT. PROCEED, MR. CONNELL.
9 MR. CONNELL: THANK YOU, SIR.
10 THE COURT: 938 WILL BE RECEIVED.
11 (DEFENDANTS' EXHIBIT H-0938
12 RECEIVED IN EVIDENCE)
13 BY MR. CONNELL:
14 Q. WHERE IT SAYS, IN QUOTES:
15 "'IF ONE OF THE TWO PUBLICATIONS IS ABLE TO
16 SATISFY THE MORE DEMANDING CITIZEN PUBLISHING
17 COMPANY TEST, IT CAN BE LAWFULLY DISCONTINUED,'
18 HE SAID."
19 DO YOU AGREE WITH THAT?
20 A. I AGREE THAT'S WHAT HE SAID.
21 Q. DO YOU AGREE WITH THE SUBSTANCE OF THAT? DO YOU AGREE
22 THAT THAT'S AN APPROPRIATE TEST?
23 A. I DON'T KNOW.
24 Q. YOU HAVE NOT PREVIOUSLY TRIED TO -- YOU HAVEN'T PREVIOUSLY
25 LOOKED AT THIS, I TAKE IT? 543
COMANOR - CROSS / CONNELL
1 A. I WOULD WANT TO LOOK -- THINK ABOUT THIS.
2 Q. FIRST --
3 A. I HAVE NOT SEEN THIS BEFORE.
4 THE COURT: DON'T INTERRUPT THE WITNESS.
5 MR. CONNELL: I'M SORRY.
6 THE WITNESS: I HAVE NOT SEEN THIS BEFORE, AND I'D
7 WANT TO THINK ABOUT THESE ISSUES MORE FULLY BEFORE I CAN SAY
8 WHETHER I AGREE WITH IT OR NOT. BUT IT CERTAINLY IS CORRECT
9 THAT'S WHAT HE SAID. THAT'S WHAT'S WRITTEN HERE.
10 BY MR. CONNELL:
11 Q. WELL, AS AN ECONOMIST, WOULDN'T YOU THINK THAT IF AN
12 ENTERPRISE, YOU TRY TO SELL IT, OPERATE IT -- TO SOMEONE THAT
13 WOULD OPERATE IT COMPETITIVELY AND NOBODY WANTS IT, THAT IT
14 OUGHT TO BE OKAY JUST TO SHUT IT DOWN?
15 A. IN GENERAL, YES.
16 Q. GO AHEAD. YOU'RE GOING TO QUALIFY IN GENERAL.
17 A. IN GENERAL. THAT'S MY ANSWER.
18 Q. IN ANY EVENT, DO YOU KNOW WHAT HAPPENED AFTER THE PAPER IN
19 ST. LOUIS WAS PUT UP FOR SALE?
20 A. NO.
21 Q. OKAY. ARE YOU FAMILIAR WITH ANOTHER JOA TERMINATION WHICH
22 OCCURRED IN 1985, A COUPLE OF YEARS AFTER THIS ONE, THAT JOA
23 BEING THE ONE THEN IN EXISTENCE IN FRANKLIN CITY, PENNSYLVANIA?
24 A. NO.
25 Q. I TAKE IT THAT IN PREPARING FOR TESTIFYING IN THIS CASE, 544
COMANOR - CROSS / CONNELL
1 YOU DIDN'T TRY AND DO A REVIEW OF JOA TERMINATIONS; IS THAT
2 CORRECT?
3 A. THAT IS CORRECT.
4 Q. LET ME SEE IF YOU KNOW ABOUT ANY OF THEM.
5 ARE YOU FAMILIAR WITH THE TERMINATION OF A JOINT
6 OPERATE ARRANGEMENT IN COLUMBUS, OHIO, IN 1985?
7 A. NO.
8 Q. IN MIAMI, FLORIDA, IN 1988?
9 A. NO.
10 Q. IN SHREVEPORT, LOUISIANA, IN 1991?
11 A. NO.
12 Q. IN KNOXVILLE, TENNESSEE, IN 1991?
13 A. NO.
14 Q. IN TULSA, OKLAHOMA, IN 1992?
15 A. NO.
16 Q. IN PITTSBURGH, PENNSYLVANIA, IN 1992?
17 A. NO.
18 Q. IN EL PASO, TEXAS, IN 1997?
19 A. NO.
20 Q. IN NASHVILLE, TENNESSEE, IN 1998?
21 A. NO.
22 Q. IN EVANSVILLE, INDIANA, IN 1998?
23 A. NO.
24 Q. IN CHATTANOOGA, TENNESSEE, IN 1999?
25 A. NO. 545
COMANOR - CROSS / CONNELL
1 Q. AND WHILE THIS MAY BE OBVIOUS, I SUPPOSE, BUT I'LL ASK YOU
2 ANYWAY, ARE YOU AWARE IN HOW MANY OF THE INSTANCES OF THOSE JOA
3 TERMINATIONS THAT THEY OCCURRED BEFORE THE TERMINATION DATE
4 SPECIFIED IN THE AGREEMENT?
5 A. I'M NOT AWARE.
6 Q. LET ME HAND YOU H-0939 AND ASK YOU TO TAKE A LOOK AT THAT.
7 A. (WITNESS EXAMINES DOCUMENT.)
8 Q. AGAIN, DR. COMANOR, IF YOU WOULD TAKE A LOOK AT IT AND
9 WHEN YOU FEEL COMFORTABLE WITH IT, JUST LET ME KNOW.
10 A. OKAY.
11 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
12
13
14
15
16
17
18
19
20
21
22
23
24
25 546
COMANOR - CROSS / CONNELL
1 MR. CONNELL: YOUR HONOR, BEFORE DR. COMANOR
2 FINISHES READING, THIS IS NOT IN EVIDENCE.
3 DOES YOUR HONOR HAVE A COPY?
4 THE COURT: I DO. IT'S AN ATTORNEY GENERAL RULES
5 PRESS RELEASE IN THE FRANKLIN CASE?
6 MR. CONNELL: IT'S THE BUSINESS REVIEW IN THE
7 FRANKLIN CASE, YOUR HONOR, AND I WOULD OFFER THAT IN EVIDENCE.
8 THE COURT: VERY WELL.
9 SAME OBJECTION. SAME RULING.
10 (DEFENDANT'S EXHIBIT H-939
11 RECEIVED IN EVIDENCE)
12 THE WITNESS: YES, SIR.
13 BY MR. CONNELL:
14 Q. I TAKE IT, YOU HAVE NOT PREVIOUSLY REVIEWED THIS DOCUMENT?
15 A. THAT IS CORRECT.
16 Q. YOU'VE READ IT, HOWEVER?
17 A. I JUST HAVE.
18 Q. AND YOU RECOGNIZE THAT IN PART WHAT IT DOES IS REFER BACK
19 TO THE ST. LOUIS SITUATION WHICH WE HAVE JUST DISCUSSED BRIEFLY
20 AND GOES ON IN A WAY TO EXPLAIN WHAT THE PARTNER DID IN THE
21 ST. LOUIS SITUATION.
22 AND IF I JUST MAY READ THIS TO YOU. I AM LOOKING AT
23 PAGE 2, THE FIRST -- THE SECOND FULL PARAGRAPH, WHERE THE
24 ASSISTANT ATTORNEY GENERAL RULED IN DESCRIBING THE ST. LOUIS
25 SITUATION, SAYS: 547
COMANOR - CROSS / CONNELL
1 "THE DEPARTMENT STATED, THEREFORE, THAT IT
2 WOULD CHALLENGE MERGERS OF JOA NEWSPAPERS
3 UNLESS: (1), ONE OF THE NEWSPAPERS WOULD BE A
4 'FAILING COMPANY' IF OPERATED OUTSIDE THE JOA;
5 AND, (2), THERE WERE NO ALTERNATIVE PURCHASERS
6 WHO WERE WILLING TO OPERATE THE NEWSPAPER
7 OUTSIDE THE JOA."
8 DO YOU AGREE THAT THAT IS AN APPROPRIATE TEST
9 MERGERS OF APPLY IN THE CASE OF A PROPOSED TERMINATION OF A
10 JOINT NEWSPAPER OPERATING ARRANGEMENT?
11 A. NO.
12 Q. WHAT'S WRONG WITH IT?
13 A. I THINK THAT WHEN A JOA IS IN EXISTENCE AND THE JOA HAS
14 AFFECTED THE FORTUNES OF THE NEWSPAPERS AND THERE ARE YEARS
15 REMAINING ON THE LIFE OF THE JOA, WHETHER A COMPANY IS FAILING
16 SHOULD BE CONSIDERED WITHIN THE CONTEXT OF THE JOA, NOT OUTSIDE
17 OF IT.
18 Q. THE TERM OF THE SAN FRANCISCO JOA IN THE FIRST INSTANCE,
19 DO YOU KNOW WHAT IT WAS? IT STARTED IN 1965. DO YOU KNOW HOW
20 LONG IT WAS SUPPOSED MERGERS OF RUN?
21 A. I DON'T REMEMBER PRECISELY, ALTHOUGH I KNOW THERE HAS BEEN
22 ONE EXTENSION.
23 Q. WELL, I WILL TELL YOU, IT'S IN -- IT'S IN EVIDENCE. IT'S
24 1995.
25 A. THAT'S WHAT I RECALL. 548
COMANOR - CROSS / CONNELL
1 Q. DR. COMANOR, ASSUME THAT IN 1995 RATHER THAN FIRST
2 ADVISING CHRONICLE THAT IT WAS GOING TO EXTEND IT FOR TEN YEARS
3 THAT IT DIDN'T AND CHRONICLE DIDN'T AND IT ENDED, UNDER THE
4 CIRCUMSTANCES I HAVE JUST DESCRIBED, WOULD THERE BE ANY BASIS
5 FOR ANYONE FOR ANY REASON THAT CAN THINK OF RELATED TO
6 ANTITRUST AND NEWSPAPER PRESERVATION TO CHALLENGE THAT
7 TERMINATION OF THAT JOA?
8 A. PROBABLY NOT, BUT THAT'S NOT WHAT OCCURRED.
9 Q. WELL, THE ANSWER IS NO, RIGHT?
10 MR. HALLING: THERE WAS NO ANSWER.
11 BY MR. CONNELL:
12 Q. YOU AGREE THE ANSWER IS NO?
13 A. I AGREE.
14 Q. AND IF THE PARTIES IN 1965 HAD PROVIDED INSTEAD FOR A
15 FIVE-YEAR EXTENSION SO THAT WHAT WE NOW HAD IN THE YEAR 2000
16 WAS A JOA JUST ABOUT TO EXPIRE, YOU WOULD AGREE, I TAKE IT,
17 THAT IF IT EXPIRED UNDER THOSE CIRCUMSTANCES, THERE WOULD
18 SIMILARLY BE NO BASIS TO CHALLENGE THAT TERMINATION?
19 A. YES.
20 Q. BUT, I TAKE IT, YOU THINK THAT BECAUSE THE PARTIES IN A
21 PRIVATE CONTRACT ELECTED TO DO IT A LITTLE DIFFERENTLY THAT
22 THERE IS NOW AN OBLIGATION ON THEM NOT TO TERMINATE -- NOT TO
23 TERMINATE; IS THAT CORRECT?
24 A. IT'S NOT QUITE CORRECT.
25 Q. ALL RIGHT. TELL ME WHAT YOU THINK. 549
COMANOR - CROSS / CONNELL
1 A. WE ARE DEALING WITH A FAILING COMPANY ISSUE, AND CERTAINLY
2 WITHIN THE CONTEXT OF THE JOA, WHICH WILL -- WHICH CAN PERSIST
3 FOR FIVE MORE YEARS, NEITHER THE CHRONICLE NOR THE EXAMINER IS
4 A FAILING BUSINESS. THE NUMBERS CLEARLY DEMONSTRATE THAT.
5 NOW, WHAT HAPPENS AT THE END OF THE JOA IS
6 PROBLEMATICAL. BUT IT'S THESE -- THESE BUSINESSES ARE NOT
7 FAILING ENTERPRISES THROUGH THE LIFE OF THE JOA.
8 Q. BECAUSE HEARST WITH ONE-QUARTER THE CIRCULATION OF THE
9 CHRONICLE, DAILY, IS GETTING THE SUBSIDY FROM THE OPERATION OF
10 THE JOA --
11 A. NO, I THINK THAT --
12 Q. DON'T YOU THINK SO?
13 A. I THINK THAT'S NOT THE WAY TO PUT IT. BECAUSE, AFTER ALL,
14 WHEN THE JOA WAS CREATED THERE WERE OTHER TERMS BESIDES THE
15 50/50 SPLIT IN REVENUES. THERE WAS ALSO THE FACT THAT THE
16 HEARST NEWSPAPER WOULD SHIFT TO THE AFTERNOON WHICH, AS
17 FORTUNES WOULD HAVE IT, LEADS IT TO HAVE A LESS LOWER -- HAVE
18 IT TO A LOWER CIRCULATION.
19 I DON'T THINK YOU CAN LOOK AT JUST ONE ASPECT OF THE
20 JOA AGREEMENT. I THINK YOU HAVE TO PUT THEM ALL TOGETHER. AND
21 IN THE CURRENT CONTEXT NEITHER COMPANY -- NEITHER BUSINESS IS A
22 FAILING ENTERPRISE.
23 Q. YOU ARE FAMILIAR, I TAKE IT -- AND I THINK I REMEMBER FROM
24 YOUR TESTIMONY TODAY -- THAT YOU HAVE LOOKED AT THE
25 INCREMENTAL -- ANALYSIS OF INCREMENTAL REVENUES AND EXPENSES 550
COMANOR - CROSS / CONNELL
1 PREPARED IN THIS CASE BY DR. ROSSE AND DR. MCANNENY?
2 A. YES, I HAVE REVIEWED THAT. YES, I HAVE.
3 Q. YOU KNOW DR. ROSSE?
4 A. YES.
5 Q. WOULD YOU BELIEVE THAT DR. ROSSE COULD FAIRLY BE
6 CHARACTERIZED AS THE PREEMINENT EXPERT IN THIS COUNTRY ON THE
7 ECONOMICS OF THE NEWSPAPER BUSINESS?
8 A. THAT'S A TOUGH QUESTION. HE CERTAINLY IS ONE OF THE
9 PREEMINENT EXPERTS. WHETHER HE IS THE PREEMINENT EXPERT I
10 WOULD WANT TO THINK ABOUT.
11 Q. NO OFFENSE INTENDED, DR. COMANOR, BUT ARE YOU ONE OF THE
12 PREEMINENT EXPERTS ON THE NEWSPAPER INDUSTRY?
13 A. PROBABLY NOT.
14 Q. DID YOU -- DID YOU EXAMINE DR. ROSSE'S INCREMENTAL
15 ANALYSIS AND CONCLUDE THAT IT WAS WRONG?
16 A. YES.
17 Q. IN WHAT WAY?
18 A. IT WAS WRONG BECAUSE IT SOUGHT TO EXAMINE THE FORTUNES OF
19 THE EXAMINER WITHOUT THE JOA, AND THAT SHOULD NOT BE DONE.
20 Q. OH.
21 A. YOU SHOULD VIEW THE FORTUNES OF THE EXAMINER IN THE
22 CONTEXT OF THE JOA, AT LEAST THROUGH THE YEAR 2005. AND THAT'S
23 WHY I THINK IT'S WRONG.
24 Q. PUTTING THAT TO ONE SIDE, IF YOU COULD, AS AN INTELLECTUAL
25 EXERCISE, THAT PUTTING THAT TO ONE SIDE, THAT OBJECTION YOU 551
COMANOR - CROSS / CONNELL
1 HAVE, DO YOU FIND FAULT OTHERWISE WITH THE ANALYSIS WHICH
2 ATTEMPTS TO REACH A CONCLUSION ABOUT THE OPERATION OF THE PAPER
3 WITHIN THE JOA?
4 A. WITH ALL DUE RESPECT, THAT'S AN INCOMPLETE HYPOTHETICAL
5 BECAUSE THERE ARE OTHER FACETS -- FACTORS GOING ON.
6 Q. CLARIFY.
7 A. ALL RIGHT. WITHOUT THE JOA, PERHAPS THE EXAMINER WOULD BE
8 A MORNING PAPER. AND PERHAPS THE DISTRIBUTION OF CIRCULATION
9 WOULD BE DIFFERENT.
10 IT'S DIFFICULT TO ANSWER YOUR QUESTION WITH ONLY ONE
11 FACET OF THE JOA WITH NOT ALL OF THE FACETS. AND I THINK THE
12 SHIFTING OF THE EXAMINER FROM MORNING TO AFTERNOON, WHICH WAS
13 PART OF THE JOA AGREEMENT, IS PART AND PARCEL OF THE CURRENT
14 SITUATION.
15 Q. IT HAPPENED 35 YEARS AGO?
16 A. AS PART OF THE JOA, YES, SIR.
17 Q. BUT IT HAPPENED AND WE CAN'T GO BACK AND CHANGE IT, CAN
18 WE?
19 A. I AGREE. ALTHOUGH HEARST HAS TALKED ABOUT THE IDEA OF
20 SHIFTING THE EXAMINER TO A MORNING PAPER AT THE CONCLUSION OF
21 THE JOA. I DID READ THAT IN ONE OF THEIR DOCUMENTS.
22 Q. OKAY. TELL US, IF YOU WILL, HOW MANY INSTANCES YOU ARE
23 FAMILIAR WITH WHERE A NEWSPAPER PUBLISHER WITH ONE-QUARTER OF
24 THE CIRCULATION OF A COMPETING PUBLISHER IN WHAT I WILL
25 DESCRIBE AS METROPOLITAN DAILY NEWSPAPERS HAS SUCCESSFULLY 552
COMANOR - CROSS / CONNELL
1 MOUNTED AN EFFORT AND CLOSED THAT GAP AND BECOME A SUCCESS?
2 A. I DON'T KNOW.
3 Q. THERE AREN'T ANY, ARE THERE, DR. COMANOR?
4 A. I DON'T KNOW.
5 Q. YOU ARE FAMILIAR, SIR, ARE YOU NOT, WITH THE FACT THAT
6 OVER THE COURSE OF THIS CENTURY THERE HAVE -- THERE HAS BEEN
7 VIRTUALLY A COMPLETE DISAPPEARANCE OF CITIES WITH FULLY
8 COMPETING METROPOLITAN DAILY NEWSPAPERS?
9 A. THERE ARE A NUMBER OF CITIES WITH COMPETING DAILY
10 NEWSPAPERS.
11 Q. WHICH ONES?
12 A. NEW YORK, BOSTON -- AND I WAS TOLD ABOUT SOME OTHERS AND I
13 HAVE FORGOTTEN. BUT I KNOW THERE ARE SOME OTHERS.
14 Q. I AM GOING TO HELP YOU.
15 A. OKAY.
16 Q. CHICAGO.
17 A. OKAY.
18 Q. DENVER.
19 A. OKAY.
20 Q. WASHINGTON, D.C.?
21 A. OKAY.
22 THE COURT: WHAT WAS THE -- RIGHT AFTER CHICAGO?
23 YOU MIGHT STAY NEAR THE PODIUM.
24 MR. CONNELL: I'M SORRY. DENVER.
25 THE COURT: DENVER. 553
COMANOR - CROSS / CONNELL
1 MR. CONNELL: WASHINGTON, DENVER -- I SAID "CHICAGO,
2 DENVER AND WASHINGTON, D.C."
3 BY MR. CONNELL:
4 Q. AND YOU, SIR, HAD ALREADY NAMED NEW YORK AND BOSTON?
5 A. YES, SIR.
6 Q. NOW, IF WE LIMIT THIS TO THE 50 LARGEST CITIES OR THE
7 HUNDRED LARGEST CITIES IN THE UNITED STATES, DO YOU THINK THAT
8 WOULD BE A COMPLETE LIST?
9 A. SUPPOSEDLY LIMITED TO THE TOP 20 LARGEST CITIES IN THE
10 UNITED STATES OR THE TOP 15.
11 Q. YOU ARE THE WITNESS.
12 A. I -- I -- THE CITIES THAT YOU MENTIONED ARE ALL LARGER
13 CITIES AND --
14 Q. WELL, DO YOU KNOW OF ANY OTHER CITIES, NO MATTER WHAT
15 SIZE, IN THIS COUNTRY WHERE YOU HAVE COMPETING DAILY
16 NEWSPAPERS?
17 A. NO. WE -- YOU MENTIONED SOME AND -- AND IF YOU REPRESENT
18 THAT THOSE ARE THE ONLY ONES, I WOULD ACCEPT THAT.
19 Q. DO YOU KNOW WHETHER OR NOT -- IN NEW YORK CITY, YOU WOULD
20 AGREE WITH ME THAT'S THE NEW YORK TIMES, THE POST AND THE DAILY
21 NEWS?
22 A. YES, SIR.
23 Q. DO YOU KNOW HOW MANY OF THOSE THREE NEWSPAPERS ARE
24 PROFITABLY OPERATED?
25 A. NO. 554
COMANOR - CROSS / CONNELL
1 Q. DENVER, COLORADO HAS THE DENVER POST AND THE DENVER ROCKY
2 MOUNTAIN NEWS. DO YOU KNOW IF BOTH OF THOSE NEWSPAPERS ARE
3 OPERATING PROFITABLY?
4 A. NO.
5 Q. BOSTON, MASSACHUSETTS, BOSTON GLOBE AND THE BOSTON HERALD.
6 DO YOU KNOW IF BOTH OF THOSE NEWSPAPERS ARE OPERATING
7 PROFITABLY?
8 A. NO.
9 Q. WASHINGTON -- WASHINGTON, D.C., THE WASHINGTON POST AND
10 THE WASHINGTON TIMES, DO YOU KNOW BEFORE I ASK YOU THAT OTHER
11 QUESTION -- DO YOU KNOW WHAT THE RELATIVE CIRCULATIONS OF THE
12 WASHINGTON POST AND THE WASHINGTON TIMES ARE, JUST AN
13 APPROXIMATION?
14 A. NO.
15 Q. DO YOU KNOW WHETHER OR NOT BOTH NEWSPAPERS IN WASHINGTON,
16 D.C. ARE OPERATING PROFITABLY?
17 A. NO.
18 Q. CHICAGO, ILLINOIS, THE TRIBUNE AND THE SUN TIMES, DO YOU
19 KNOW IF BOTH OF THOSE NEWSPAPERS ARE OPERATING PROFITABLY?
20 A. NO.
21 Q. DO YOU THINK, DR. COMANOR, AS AN EXPERT, THAT THERE ARE
22 COMMON FACTORS THAT HAVE LED TO THE DEATH OF COMPETING DAILY
23 NEWSPAPERS ACROSS THIS COUNTRY?
24 A. I THINK THERE PROBABLY ARE, YES, SIR.
25 Q. AND DO YOU THINK THOSE FACTORS WOULD APPLY IN THE CITY OF 555
COMANOR - CROSS / CONNELL
1 SAN FRANCISCO?
2 A. AFTER THE END OF THE JOA, PERHAPS. ALTHOUGH I DON'T KNOW.
3 BUT NOT DURING THE PERIOD OF THE JOA.
4 Q. DR. COMANOR, DO YOU THINK THAT THOSE FACTORS EXIST NOW, TO
5 THE EXTENT THEY ARE ECONOMIC FACTORS, THAT THEY EXIST WHETHER
6 OR NOT YOU'VE GOT A JOA?
7 A. NO. THOSE FACTORS EXIST IN THE ABSENCE OF A JOA. BECAUSE
8 A JOA PUTS THE ECONOMIC OR BUSINESS PARTS OF THE ENTERPRISE
9 TOGETHER. THAT'S MY UNDERSTANDING.
10 Q. THE JOA HAS ELIMINATED ALL COMMERCIAL COMPETITION BETWEEN
11 THE TWO SAN FRANCISCO PAPERS, CORRECT?
12 A. YES, SIR.
13 Q. SO, AS A CONSEQUENCE, THE COMMERCIAL END OF THE BUSINESS,
14 THE TRANSACTION HAS NO -- HAS NO EFFECT AT ALL?
15 A. NO COMPETITIVE IMPACT, THAT'S CORRECT, SIR.
16 Q. RIGHT. OKAY.
17 ARE YOU FAMILIAR AT ALL, SIR, WITH THE SEARCH
18 CONDUCTED BY THE HEARST CORPORATION THROUGH A BROKER IN AN
19 EFFORT TO FIND A BUYER FOR THE EXAMINER AT ABOVE LIQUIDATION
20 VALUE?
21 A. I REVIEWED SOME OF THAT LITERATURE -- SOME OF THOSE
22 DOCUMENTS, YES, SIR.
23 Q. DID YOU CONCLUDE THAT THAT WAS AN EXHAUSTIVE SEARCH FOR A
24 BUYER?
25 A. I DON'T HAVE AN OPINION ABOUT THAT. 556
COMANOR - CROSS / CONNELL
1 Q. YOU JUST DON'T KNOW?
2 A. I JUST DON'T KNOW.
3 Q. ARE YOU AWARE OF THE FACT THAT NOBODY CAME FORWARD TO SAY,
4 "I WILL OFFER YOU LIQUIDATION VALUE OR A DOLLAR MORE FOR ANY
5 COMBINATION OF ASSETS THAT YOU ARE OFFERING FOR SALE"?
6 A. I DON'T THINK SO.
7 Q. AND I HAVE LOST TRACK OF MY QUESTION.
8 YOU DON'T KNOW?
9 A. THAT'S CORRECT.
10 Q. ALL RIGHT.
11 DR. COMANOR, DO YOU HAVE SOME NOTION OF HOW MANY
12 EDITORIAL VOICES SERVED THE CITY OF SAN FRANCISCO AT THE TIME
13 THE JOA WAS FORMED IN 1965?
14 A. DO YOU MEAN WITH DAILY NEWSPAPERS?
15 Q. NO, SIR. I JUST MEAN -- WELL, LET'S TAKE IT -- LET'S TAKE
16 THE PRELIMINARY STEP.
17 WOULD IT BE FAIR TO SAY THAT AN EDITORIAL VOICE
18 WOULD INCLUDE A RADIO STATION?
19 A. YES AND NO. IT DEPENDS ON WHAT YOU ARE DEALING WITH. IT
20 DEPENDS ON THE AUDIENCE. RADIO STATIONS DO HAVE EDITORIAL
21 INVOICES, BUT THEY ARE DIFFERENT KINDS OF VOICES AND THEY REACH
22 DIFFERENT KINDS OF SUBSCRIBERS, CUSTOMERS, THAN DO NEWSPAPERS.
23 Q. BUT RADIO STATIONS CAN FAIRLY BE CHARACTERIZED AS
24 EDITORIAL VOICES IN SOME CASES AT LEAST?
25 A. IN SOME CASES, THAT IS CORRECT. 557
COMANOR - CROSS / CONNELL
1 Q. HOW ABOUT TELEVISION STATIONS?
2 A. I CAN'T RECALL SEEING AN EDITORIAL STATEMENT ON A T.V.
3 STATION, BUT PERHAPS THERE ARE SOME. I CAN'T RECALL ANY.
4 Q. WELL, YOU RECOGNIZE THAT TELEVISION STATIONS REGULARLY AND
5 ROUTINELY BROADCAST NEWS REPORTS, RIGHT?
6 A. NEWS REPORTS, YES.
7 Q. WELL, LET'S TALK ABOUT IT IN THOSE TERMS. PERHAPS I AM
8 CONFUSING YOU AND CONFUSING MYSELF. LET'S JUST LOOK AT THE
9 PEOPLE WHO TELL YOU WHAT'S GOING ON IN THE WORLD, PEOPLE WHO
10 ARE SOURCES OF NEWS. AND THAT WOULD INCLUDE RADIO STATIONS,
11 RIGHT?
12 A. IT MIGHT.
13 Q. IT IS CERTAINLY GOING TO INCLUDE SOME OF THEM, RIGHT?
14 A. IT PROVIDES NEWS BUT OF A DIFFERENT KIND THAN YOU GET
15 ON --
16 Q. WELL, IF YOU --
17 A. -- IN THE NEWSPAPERS.
18 Q. IF YOU COULD BEAR WITH ME. JUST -- IS IT NEWS? YOU GET
19 NEWS?
20 A. IT'S NEWS BUT IT'S NOT THE NEWS IN DEPTH AND DETAIL THAT
21 YOU GET IN A NEWSPAPER. IT'S A DIFFERENT KIND OF THING. IT'S
22 COMPLEMENTARY, I THINK, RATHER THAN COMPETITIVE.
23 Q. I UNDERSTAND. I UNDERSTAND. SOME PEOPLE MIGHT GET ALL OF
24 THEIR NEWS FROM RADIO STATIONS, DON'T YOU THINK?
25 A. THEY MIGHT. 558
COMANOR - CROSS / CONNELL
1 Q. HOW ABOUT T.V. STATIONS? THEY GIVE PEOPLE NEWS, DON'T
2 THEY?
3 A. YES, THEY DO.
4 Q. WEEKLY NEWSPAPERS GIVE PEOPLE NEWS, RIGHT?
5 A. DIFFERENT KINDS OF NEWS BUT -- BUT, YES.
6 Q. BUT NEWS.
7 A. WELL, NEWS IS NOT A HOMOGENOUS COMMODITY. THERE IS
8 DIFFERENT KINDS OF NEWS. SO WHEN YOU SAY THAT, YOU ARE RIGHT
9 IN ONE CONTEXT AND YOU ARE WRONG IN ANOTHER.
10 Q. WELL, TELL ME WHERE I AM RIGHT AND TELL ME WHERE I AM
11 WRONG.
12 A. OKAY. NEWS IS A BROAD SPECTRUM. IT CERTAINLY IS TRUE
13 THAT MANY OF THESE OTHER MEDIA PROVIDE NEWS BROADLY CONCEIVED.
14 BUT THE DEGREE OF ANALYSIS AND DETAIL THAT ONE CAN OBTAIN IN
15 THE PAGES OF A MAJOR DAILY NEWSPAPER IS FAR MORE EXTENSIVE THAN
16 EVEN YOU GET ON THE NETWORK NEWS PROGRAMS ON T.V. YOU GET MUCH
17 MORE DETAIL, MUCH MORE CONSIDERATION, MUCH MORE DIFFERENT --
18 PRESENTATION OF DIFFERENT VIEWS. SO THAT I VIEW IT AS A
19 DIFFERENT KIND OF THING.
20 IN OTHER WORDS, ONE MIGHT WATCH A NEWS PROGRAM ON
21 T.V. AND ALSO READ THE NEWSPAPER FOR MORE DETAIL. THOSE ARE
22 MORE COMPLEMENTS THAN SUBSTITUTES.
23 Q. HOW ABOUT SOMETHING YOU MENTIONED, THE INTERNET?
24 A. YES, SIR.
25 Q. AREN'T THERE A LOT OF SOURCES OF NEWS AVAILABLE BY SITTING 559
COMANOR - CROSS / CONNELL
1 DOWN AT YOUR COMPUTER AND PLUGGING INTO THE INTERNET?
2 A. YES, SIR.
3 Q. A LOT MORE -- OF COURSE, YOU DIDN'T HAVE THAT IN 1965, AND
4 YOU'VE MENTIONED IT, AS WELL, AS A PHENOMENON OR A NEW
5 DEVELOPMENT THAT MIGHT HAVE SOME IMPACT ON THE DELIVERY OF
6 NEWSPAPERS.
7 A. FOR THE MOST PART --
8 Q. AND I WANTED TO ASK YOU BECAUSE I DON'T THINK YOU EXPANDED
9 ON THAT THOUGHT VERY MUCH -- WHAT DO YOU HAVE IN MIND WHEN YOU
10 SAY THAT?
11 A. WHAT I HAVE IN MIND IS THAT WHEN I TAKE -- GET NEWS FROM
12 THE INTERNET, I TYPICALLY GO TO NEWSPAPER SITES, THE L.A. TIMES
13 NEWSPAPER SITE, THE -- THE NEW YORK TIMES NEWSPAPER SITE, THE
14 WALL STREET JOURNAL NEWSPAPER SITE. SO THAT NEWS ON THE
15 INTERNET I KNOW IS AVAILABLE FROM NON-NEWSPAPER SITES, BUT I'VE
16 NEVER USED IT MYSELF. I'VE USED, HOWEVER, THE NEWS -- THE --
17 THE WEB SITES OF MANY DIFFERENT NEWSPAPERS. SO I VIEW THIS AS
18 A WAY OF DISTRIBUTING NEWSPAPERS, ALTHOUGH I AM SURE YOU'RE
19 RIGHT, THAT THERE ARE NON-NEWSPAPER-CONNECTED WEB SITES FROM
20 WHICH THERE IS NEWS AVAILABLE.
21 Q. NEWS AND EDITORIAL OPINION, AS WELL, RIGHT?
22 A. PROBABLY TRUE. I HAVE NEVER SEEN IT, BUT I AM SURE YOU
23 ARE CORRECT.
24 Q. OKAY. ARE YOU FAMILIAR WITH WHAT HAS BEEN HAPPENING TO
25 THE CIRCULATION OF THE EXAMINER OVER THE PAST TEN YEARS? 560
COMANOR - CROSS / CONNELL
1 A. LET ME LOOK AT SOME OF MY DOCUMENTS HERE AND THEN I CAN
2 RESPOND.
3 YES, IT'S CONTAINED IN EXHIBIT 94.
4 Q. AND WHAT HAS HAPPENED TO THE EXAMINER'S CIRCULATION OVER
5 THE PAST TEN YEARS?
6 A. THE PAST TEN YEARS. IT'S DECLINED SLIGHTLY, IF I READ THE
7 NUMBERS FROM THIS CHART. ALTHOUGH -- TEN YEARS. FROM -- JUST
8 A MINUTE. IN 1988 THE CIRCULATION --
9 Q. EXCUSE ME. IS 94 THE EI, THE ECONOMISTS INC. REPORT?
10 A. YES, IT IS.
11 Q. THANKS. WHAT --
12 A. IT'S PAGE 4.
13 Q. WHAT PAGE?
14 A. IT'S PAGE 4 THAT HAS ALL OF THESE NUMBERS.
15 Q. PAGE?
16 A. PAGE -- PAGE 4 (INDICATING).
17 Q. AND --
18 A. THE NUMBERS ARE WHAT THEY ARE.
19 Q. AND IT WOULD TELL YOU THAT THE DAILY CIRCULATION OF THE
20 EXAMINER BETWEEN 1990 WHEN IT WAS 138,000 PLUS A LITTLE BIT HAS
21 DECLINED UP UNTIL 1998, WHICH WAS THE LAST YEAR AVAILABLE FOR
22 THIS REPORT, TO A LITTLE -- TO 114,000 AND A LITTLE BIT -- A
23 FAIRLY SIGNIFICANT DECLINE, IS IT NOT?
24 A. I DON'T KNOW WHETHER THAT'S SIGNIFICANT OR NOT.
25 Q. YOU DON'T KNOW IF A DECLINE FROM THAT TO THAT IS 561
COMANOR - CROSS / CONNELL
1 SIGNIFICANT?
2 A. I DON'T KNOW.
3 Q. IS THAT BECAUSE YOU ARE NOT SUFFICIENTLY FAMILIAR WITH THE
4 NEWSPAPER BUSINESS TO HAVE AN OPINION ON THAT?
5 A. WELL, IT DEPENDS WHAT YOU MEAN BY THE SIGNIFICANCE OF THE
6 DECLINE.
7 Q. WELL --
8 A. AFTER ALL, FROM THE POINT -- FROM THE BUSINESS POINT OF
9 VIEW OF THE EXAMINER, THEIR REVENUES COME IN LARGE PORTION FROM
10 THEIR 50 PERCENT SHARE OF THE JOA. SO IT'S NOT SIGNIFICANT IN
11 TERMS OF THE GENERAL REVENUES UNLESS THAT HAS AFFECTED THE
12 TOTAL JOA REVENUES.
13 Q. WILL A DROP OF THAT MAGNITUDE IN THE DAILY CIRCULATION OF
14 THE EXAMINER HAVE AN IMPACT, ADVERSE ONE, ON THE REVENUES OF
15 THE JOA?
16 A. I DON'T KNOW WHETHER IT WAS MADE UP BY HIGHER PRICES. I
17 DON'T KNOW.
18 Q. THANK YOU.
19 YOU UNDERSTAND, DR. COMANOR, DO YOU, THAT THE
20 NEWSPAPER PRESERVATION ACT DOES NOT REQUIRE NEWSPAPERS TO ENTER
21 INTO JOA'S?
22 A. I UNDERSTAND THAT.
23 Q. IT'S AN EXEMPTION, VOLUNTARY, CORRECT? IF A NEWSPAPER
24 DOESN'T WANT IT, THEY DON'T HAVE TO GO GET IT.
25 A. YES, SIR. 562
COMANOR - CROSS / CONNELL
1 Q. AND THERE IS NO PROVISION IN THE STATUTE OR IN THE
2 REGULATIONS UNDER THE STATUTE, IS THERE, THAT SAYS YOU CAN'T
3 TERMINATE?
4 A. I THINK THAT'S CORRECT.
5 MR. CONNELL: THANK YOU VERY MUCH.
6 THE COURT: REDIRECT, MR. SHULMAN?
7 MR. SHULMAN: YES, YOUR HONOR.
8 REDIRECT EXAMINATION
9 BY MR. SHULMAN:
10 Q. DR. COMANOR, YOU WERE ASKED SOME QUESTIONS CONCERNING THE
11 RELEVANT MARKET AND THE WORK YOU DID IN CONNECTION WITH THE
12 RELEVANT MARKET, RIGHT?
13 A. YES, SIR.
14 Q. DO YOU REMEMBER THAT?
15 OKAY. I WOULD LIKE TO DIRECT YOUR ATTENTION TO SOME
16 TESTIMONY GIVEN BY MR. FANG IN HIS DEPOSITION IN THIS CASE.
17 AND THIS IS AT PAGE 155, LINE 11 OF HIS DEPOSITION.
18 MR. HOCKETT: WOULD YOU GIVE US A MOMENT?
19 MR. SHULMAN: SURE. DOES YOUR HONOR HAVE THE
20 DEPOSITION?
21 THE LAW CLERK: MR. FANG?
22 MR. SHULMAN: FANG.
23 (PAUSE IN THE PROCEEDINGS.)
24 ////
25 BY MR. SHULMAN: 563
COMANOR - REDIRECT / SHULMAN
1 Q. AT PAGE 155, LINE 11, MR. FANG WAS ASKED THIS QUESTION AND
2 THEN YOU GAVE THE FOLLOWING ANSWER:
3 "Q. OKAY. WHY DIDN'T YOU JUST MAKE THE
4 INDEPENDENT A DAILY NEWSPAPER?
5 AND THEN THE ANSWER CONTINUES, IS ON LINE
6 17: "YES. THE INDEPENDENT IS IN A DIFFERENT
7 MARKET THAN THE DAILY NEWSPAPER. IT'S DELIVERED
8 TO EVERY HOME FREE OF CHARGE AND, AS I SAID
9 BEFORE, NEWSPAPERS ARE ADVERTISING DRIVEN. THE
10 ADVERTISERS OF THE INDEPENDENT LOOK TO ADVERTISE
11 IN A NEWSPAPER THAT REACHES AS MANY HOMES AS
12 POSSIBLE. THESE ADVERTISERS ARE ADVERTISERS
13 SUCH AS GROCERY STORES AND DRUGSTORES BECAUSE
14 EVERYBODY NEEDS TO BUY FOOD AND EVERYBODY NEEDS
15 TO BUY SHAMPOO OR ASPIRIN. DAILY NEWSPAPERS
16 DEPEND ON A DIFFERENT TYPE OF ADVERTISER. THOSE
17 ADVERTISERS ARE LOOKING FOR SUBSCRIBERS. SO IF
18 I TURN THE INDEPENDENT INTO A SUBSCRIPTION-ONLY
19 VEHICLE, I WOULD LOSE MY CURRENT ADVERTISING
20 ACCOUNTS OR A LOT OF MY CURRENT ADVERTISING
21 ACCOUNTS THAT REACH -- THAT WISH TO REACH A MASS
22 DISTRIBUTION."
23 THE COURT: THIS IS MR. FANG'S DEPOSITION IN THIS
24 CASE?
25 MR. SHULMAN: YES, YOUR HONOR. 564
COMANOR - REDIRECT / SHULMAN
1 THE COURT: COULD I HAVE THAT?
2 MR. SHULMAN: SORRY.
3 THE LAW CLERK: I DON'T HAVE IT.
4 MR. SHULMAN: (INDICATING).
5 (PAUSE IN THE PROCEEDINGS.)
6 THE COURT: VERY WELL. PICK UP AT THE TOP OF 156?
7 MR. SHULMAN: YES. HE SAID:
8 "A. SO IF I TURN THE INDEPENDENT INTO A
9 SUBSCRIPTION-ONLY VEHICLE, I WOULD LOSE MY
10 CURRENT ADVERTISING ACCOUNTS OR A LOT OF MY
11 CURRENT ADVERTISING ACCOUNTS THAT REACH -- THAT
12 WISH TO REACH A MASS DISTRIBUTION. SO THAT'S
13 WHY I DON'T WANT TO JEOPARDIZE MY OPERATIONS AT
14 THE INDEPENDENT AND I'M NOT GOING TO HAVE THAT
15 AS A DAILY NEWSPAPER."
16 BY MR. SHULMAN:
17 Q. DID YOU HEAR THAT TESTIMONY?
18 A. YES, SIR.
19 Q. HOW DOES THAT AFFECT YOUR OPINION ABOUT THE RELEVANT
20 MARKET IN THIS CASE?
21 A. MR. FANG IS PROVIDING HIS UNDERSTANDING THAT DAILY
22 NEWSPAPERS OPERATE IN A SEPARATE RELEVANT PRODUCT MARKET FROM
23 NON -- FROM NEWSPAPERS WHICH ARE PROVIDED FREE OF CHARGE AND
24 WHICH ARE NOT DAILY NEWSPAPERS. IT'S CONSISTENT WITH THE
25 PROPOSITION THAT THESE PRODUCTS ARE SOLD IN DIFFERENT RELEVANT 565
COMANOR - REDIRECT / SHULMAN
1 PRODUCT MARKETS.
2 Q. OKAY. NOW, I ASKED YOU BEFORE ABOUT SOME TESTIMONY
3 MR. FANG GAVE TO THE JUSTICE DEPARTMENT ABOUT WHAT WOULD HAPPEN
4 IF THE EXAMINER AND THE CHRONICLE RAISED THEIR SUBSCRIPTION
5 PRICES BY TEN PERCENT.
6 DO YOU REMEMBER THAT?
7 A. YES, I DO.
8 Q. OKAY. I WANT TO DIRECT YOUR ATTENTION TO SOME OTHER
9 TESTIMONY HE GAVE TO THE DEPARTMENT OF JUSTICE ON NOVEMBER 8,
10 1999, AND THAT IS AT PAGE 98, LINE 11, TO PAGE 99, LINE 12.
11 THE COURT: ALL RIGHT.
12 MR. CONNELL: COULD YOU GIVE ME THE CITE AGAIN?
13 MR. SHULMAN: 98, LINE 11.
14 BY MR. SHULMAN:
15 Q. HE WAS ASKED BY THE DEPARTMENT OF JUSTICE:
16 "Q. NOW, IF THE CHRONICLE AND EXAMINER WERE
17 TO INCREASE THEIR ADVERTISING PRICES BY FIVE
18 PERCENT ACROSS THE BOARD ON A NON-TRANSITORY
19 BASIS, WOULD THAT DRIVE AWAY SIGNIFICANT
20 ADVERTISING REVENUE -- WOULD THAT DRIVE
21 SIGNIFICANT ADVERTISING REVENUE AWAY FROM THEM
22 TO THE OTHER PUBLICATIONS ON EXHIBIT 10 FROM
23 YOUR PERSPECTIVE?
24 "A. NO.
25 "Q. WHY IS THAT? 566
COMANOR - REDIRECT / SHULMAN
1 "A. IF THE EXAMINER AND CHRONICLE RAISE
2 THEIR ADVERTISING RATES FIVE PERCENT, I DON'T
3 THINK ANY OF THEIR ADVERTISING WOULD GO TO ANY
4 OF THESE PUBLICATIONS.
5 "Q. WHY IS THAT?
6 "A. BECAUSE EACH OF THESE KINDS OF GROUPS
7 OF PUBLICATIONS SERVE DIFFERENT MARKETS. AND,
8 AGAIN, I THINK IF YOU LOOK THROUGH THESE
9 PUBLICATIONS AND YOU LOOK THROUGH THE CHRONICLE
10 AND EXAMINER, NONE OF THESE PUBLICATIONS HAVE
11 ANY OF THE ADVERTISING THAT THE CHRONICLE AND
12 EXAMINER CARRIES. SO FOR AN ADVERTISER TO
13 SWITCH TO A COMPLETELY DIFFERENT MEDIUM OVER
14 FIVE PERCENT ADVERTISING RATE, IT'S NOT GOING TO
15 HAPPEN. EVEN IF THE CHRONICLE/EXAMINER WERE TO
16 RAISE THEIR RATES, YOU KNOW, 100 PERCENT, FOR
17 EXAMPLE, THE DAILY LEGAL PUBLICATIONS SIMPLY
18 COULD NOT PROVIDE THE KIND OF SERVICE THAT THE
19 METROPOLITAN DAILIES PROVIDE."
20 BY MR. SHULMAN:
21 Q. NOW, HOW DOES THAT TESTIMONY AFFECT YOUR OPINION?
22 A. IT CORROBORATES MY CONCLUSION THAT DAILY NEWSPAPERS
23 REPRESENT A SEPARATE RELEVANT PRODUCT MARKET.
24 Q. NOW, YOU WERE ASKED IN YOUR CROSS-EXAMINATION -- YOU WERE
25 SHOWN -- YOU WERE ASKED SOME QUESTIONS ABOUT THE STUDY THAT YOU 567
COMANOR - REDIRECT / SHULMAN
1 LOOKED AT BY THE NEWSPAPER ASSOCIATION OF AMERICA WHERE YOU
2 WERE SHOWN FIGURES THAT SEVEN OUT OF TEN CONSUMERS GET THEIR
3 NEWS FROM TELEVISION.
4 DO YOU REMEMBER THAT?
5 A. YES, I DO.
6 MR. SHULMAN: MAY I USE THE EASEL, YOUR HONOR?
7 THE COURT: YOU MAY.
8 BY MR. SHULMAN:
9 Q. SO WE ARE GOING TO PUT TEN CONSUMERS. I WILL JUST WRITE
10 THAT UP THERE (INDICATING).
11 AND THE SURVEY THAT YOU WERE SHOWN SAID SEVEN OF
12 THOSE CONSUMERS GET THEIR NEWS FROM TELEVISION, RIGHT?
13 A. YES, SIR.
14 Q. OKAY. SO SEVEN NEWS T.V.
15 NOW, IF NEWSPAPERS, DAILY NEWSPAPERS, AND TELEVISION
16 STATIONS WERE DIRECT COMPETITORS FOR CONSUMERS, HOW MANY OF THE
17 TEN CONSUMERS WOULD YOU EXPECT TO SEE WOULD GET THEIR NEWS FROM
18 DAILY NEWSPAPERS?
19 A. THE REMAINING THREE, IF THESE WERE ALTERNATES. SO THAT
20 YOU SUBSTITUTE. YOU EITHER GOT YOUR NEWS FROM T.V. OR FROM
21 NEWSPAPERS. AND THERE WAS ORIGINALLY TEN AND THERE ARE THREE
22 LEFT.
23 Q. ALL RIGHT. NOW, WHAT DOES THE SURVEY SHOW IN TERMS OF HOW
24 MANY OUT OF TEN CONSUMERS GET THEIR NEWS FROM TELEVISION -- GET
25 THEIR NEWS FROM DAILY NEWSPAPERS? 568
COMANOR - REDIRECT / SHULMAN
1 A. LET ME -- LET ME FIND THAT.
2 Q. MAYBE I CAN HELP. BECAUSE I REMEMBER COUNSEL SAID SIX OF
3 THE -- SIX OUT OF TEN CONSUMERS GET THEIR NEWS FROM NEWSPAPERS.
4 DO YOU REMEMBER THAT?
5 A. I THINK SO. OKAY.
6 Q. SO IF SIX OUT OF TEN GET THEIR NEWS FROM NEWSPAPERS -- AND
7 I WILL WRITE THAT -- AND SEVEN OUT OF TEN GET THEIR NEWS FROM
8 TELEVISION, WHAT DOES THAT TELL YOU?
9 THE COURT: WHAT IS THE EXHIBIT NUMBER?
10 MR. SHULMAN: IT'S DEFENDANT'S EXHIBIT?
11 THE COURT: THE EXHIBIT NUMBER?
12 MR. ROSCH: YES, YOUR HONOR. IT'S 352.
13 THE COURT: THANK YOU.
14 BY MR. SHULMAN:
15 Q. IF SEVEN OUT OF TEN CONSUMERS GET THEIR NEWS FROM
16 TELEVISION AND SIX OUT OF TEN GET NEWS FROM NEWSPAPERS, WHAT
17 DOES THAT TELL YOU ABOUT WHETHER NEWSPAPERS, DAILY NEWSPAPERS
18 AND TELEVISION, ARE IN COMPETITION WITH EACH OTHER?
19 A. IT SAYS THAT THERE ARE A NUMBER OF CONSUMERS WHICH GET
20 THEIR NEWS FROM BOTH SOURCES, WHICH WOULD SUGGEST THAT TO THESE
21 CONSUMERS T.V. NEWS AND NEWSPAPER NEWS COMPLEMENTS, NOT
22 SUBSTITUTES. AND IF THEY ARE COMPLEMENTS, THEY WOULD LIE IN
23 SEPARATE RELEVANT MARKETS, NOT IN THE SAME RELEVANT MARKET.
24 Q. YOU WERE ASKED A NUMBER OF QUESTIONS ABOUT WHAT IS GOING
25 TO HAPPEN IN 2005. AND I THINK YOUR TESTIMONY WAS THAT YOU 569
COMANOR - REDIRECT / SHULMAN
1 DIDN'T KNOW.
2 A. THAT IS CORRECT.
3 Q. OKAY. BUT YOU BELIEVE -- WELL, IF AN INJUNCTION IS
4 ENTERED IN THIS CASE, YOU BELIEVE THAT THERE WILL BE TWO
5 NEWSPAPERS IN THIS MARKET UNTIL 2005, RIGHT?
6 A. IF THE TWO COMPANIES CONTINUE TO PRODUCE THEIR NEWSPAPER
7 PRODUCTS IN THE NEXT FIVE YEARS, AS THEY HAVE IN THE PRECEDING
8 TEN YEARS, SAY, I WOULD EXPECT THEM BOTH TO CO-EXIST. THEY ARE
9 BOTH PROFITABLE FIRMS. AND YOU WILL SEE COMPETING SOURCES OF
10 INFORMATION, COMPETING EDITORIAL VIEWPOINTS, AT LEAST THROUGH
11 2005.
12 Q. AND IF HEARST IS ALLOWED TO BUY THE CHRONICLE AND THERE IS
13 ONE NEWSPAPER IN THIS CITY, IN SAN FRANCISCO, WILL THAT EXIST?
14 A. NO. BECAUSE NO ONE EXPECTS THAT THE CHRONICLE OWNED BY
15 THE FANGS IS A LASTING PROPOSITION.
16 MR. ALIOTO: HE SAID "CHRONICLE."
17 THE WITNESS: I MEANT EXAMINER.
18 BY MR. SHULMAN:
19 Q. AND IF HEARST IS ALLOWED TO BUY THE CHRONICLE AND THERE IS
20 ANY POSSIBILITY OF COMPETITION AFTER 2005, WILL THAT BE
21 ELIMINATED?
22 A. YES.
23 Q. NOW, YOU WERE ALSO ASKED ABOUT THE SO-CALLED "FAILING
24 COMPANY TEST" THAT THE DEPARTMENT OF JUSTICE USES. YOU WERE
25 SHOWN THE PRESS RELEASE FROM ASSISTANT ATTORNEY GENERAL BAXTER. 570
COMANOR - REDIRECT / SHULMAN
1 A. YES.
2 Q. OKAY. AND THE TEST THAT IS DESCRIBED THERE IS THAT THE
3 JUSTICE DEPARTMENT WILL PERMIT THE CLOSURE OF A NEWSPAPER IF IT
4 CAN BE SHOWN TO BE A FAILING COMPANY OUTSIDE OF A JOA.
5 A. YES.
6 Q. DO YOU RECALL THAT?
7 AND, OF COURSE, HEARST WAS AWARE OF THAT TEST,
8 RIGHT?
9 A. YES.
10 Q. AND IN THE DOCUMENTS THAT THEY SUBMITTED TO THE DEPARTMENT
11 OF JUSTICE, THE ANTITRUST DIVISION, THE STUDIES THEY SUBMITTED,
12 THEY TRIED TO SATISFY THAT TEST, DID THEY NOT?
13 A. YES. THAT'S THE BASIS OF THE EXHIBIT 94 STUDY WHICH WE
14 HAVE REVIEWED.
15 Q. THEY TRIED TO SHOW THE JUSTICE DEPARTMENT THAT THE
16 EXAMINER WAS A FAILING COMPANY OUTSIDE THE JOA SO THAT THEY
17 COULD BE PERMITTED TO SHUT IT DOWN, CORRECT?
18 A. YES.
19 Q. AND THE JUSTICE DEPARTMENT -- DID THE JUSTICE DEPARTMENT
20 ALLOW THEM TO SHUT IT DOWN?
21 A. MY UNDERSTANDING IS THAT THEY -- THEY REQUIRED THE HEARST
22 CORPORATION NOT ONLY TO FIND A BUYER BUT TO FIND A BUYER WHICH
23 WOULD TAKE THE PRODUCT AT A NEGATIVE PRICE, THAT THEY WOULD
24 SUBSIDIZE SOMEONE TO-- TO TAKE OVER THE EXAMINER.
25 Q. SO IS IT YOUR UNDERSTANDING THAT THE HEARST CORPORATION 571
COMANOR - REDIRECT / SHULMAN
1 WAS UNABLE TO SATISFY THE UNITED STATES DEPARTMENT OF JUSTICE
2 THAT THE EXAMINER IS A FAILING NEWSPAPER OUTSIDE THE JOA?
3 A. IT SEEMS TO BE IMPLIED BY THIS SET OF EVENTS.
4 MR. SHULMAN: THANK YOU. I HAVE NO FURTHER
5 QUESTIONS.
6 THE COURT: MR. CONNELL, BEFORE YOU LEAVE THE STAND,
7 YOU MADE REFERENCE TO EXHIBIT 902, WHICH IS AN EXCERPT FROM
8 HEARINGS BEFORE THE HOUSE JUDICIARY COMMITTEE ANTITRUST
9 SUBCOMMITTEE.
10 THE WITNESS: 902?
11 THE COURT: 902 IS THE EXHIBIT NUMBER.
12 THE WITNESS: OKAY.
13 THE COURT: CAN I ASK YOU IN DUE COURSE TO PROVIDE
14 THE COURT A COPY OF THE ENTIRE SET OF HEARINGS TRANSCRIPTS?
15 MR. CONNELL: YOUR HONOR, THAT SET OF HEARINGS IS
16 ABOUT LIKE THAT (INDICATING).
17 THE COURT: I KNOW. I KNOW.
18 MR. CONNELL: I HAVE GOT ONE BACK IN MY OFFICE IN
19 WASHINGTON.
20 THE COURT: WELL . . .
21 MR. CONNELL: DO YOU WANT IT SHIPPED OUT HERE?
22 THE COURT: WELL, EITHER THAT OR PERHAPS YOU CAN
23 ARRANGE FOR THAT TO BE FURNISHED TO THE COURT THROUGH SOME --
24 SOME SOURCE. OR PERHAPS WHAT I CAN SIMPLY DO IS HAVE OUR
25 LIBRARY OBTAIN A COPY. 572
COMANOR - REDIRECT / SHULMAN
1 MR. CONNELL: YOUR HONOR, IF YOU HAVE A -- I CAN GET
2 IT SENT OUT.
3 THE COURT: ALL RIGHT. LET ME CHECK WITH OUR
4 LIBRARY FIRST. IF IT'S THAT BULKY, IT MAY BE EASIER FOR THEM
5 TO OBTAIN IT THAN --
6 MR. CONNELL: I THINK IT'S ABOUT LIKE THAT
7 (INDICATING).
8 THE COURT: SEVERAL VOLUMES?
9 MR. CONNELL: FIVE OR SIX VOLUMES, YES.
10 THE COURT: I UNDERSTAND.
11 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
12
13
14
15
16
17
18
19
20
21
22
23
24
25 573
COMANOR - REDIRECT / SHULMAN
1 THE COURT: DR. COMANOR, YOU WERE AN ASSISTANT TO
2 ASSISTANT ATTORNEY GENERAL DONALD TURNER?
3 THE WITNESS: YES.
4 THE COURT: WHEN DID YOU BEGIN THAT JOB?
5 THE WITNESS: SEPTEMBER 1, 1965.
6 THE COURT: IS THAT WHEN ASSISTANT ATTORNEY GENERAL
7 TURNER BECAME ASSISTANT ATTORNEY GENERAL IN CHARGE OF THE
8 ANTITRUST DIVISION?
9 THE WITNESS: I THINK HE TOOK OVER THAT JOB MAYBE A
10 MONTH OR TWO EARLIER BUT THAT SUMMER. I CAME AT THE END OF THE
11 SUMMER. I THINK HE CAME SOMEWHERE IN THE MIDDLE OF THE SUMMER.
12 THE COURT: WHO WAS HIS PREDECESSOR?
13 THE WITNESS: YOU KNOW, I DON'T REMEMBER. I'M SURE
14 I COULD LOOK IT UP. I JUST DON'T RECALL.
15 THE COURT: DOES THE NAME WILLIAM H. ORRICK RING A
16 BELL?
17 MR. CONNELL: YES.
18 THE WITNESS: I BELIEVE IT WAS. COULD HAVE BEEN.
19 THE COURT: WAS MR. ORRICK THE PREDECESSOR OF
20 MR. TURNER IN THAT POSITION? DOES THAT REFRESH YOUR
21 RECOLLECTION?
22 THE WITNESS: YEAH, I THINK SO.
23 THE COURT: ALL RIGHT. AND YOU WERE NOT PRESENT, I
24 GATHER, AT ANY TIME BEFORE MR. TURNER BECAME ASSISTANT ATTORNEY
25 GENERAL? 574
COMANOR - REDIRECT / SHULMAN
1 THE WITNESS: THAT IS CORRECT.
2 THE COURT: SO YOU WOULD NOT HAVE KNOWLEDGE, EXCEPT
3 PERHAPS BY SECONDHAND, OF ANY PRESENTATIONS THAT WERE MADE TO
4 THE DEPARTMENT OF JUSTICE ON BEHALF OF THE NEWSPAPERS THAT ARE
5 HERE PRESENT WHEN MR. ORRICK WAS THE ASSISTANT ATTORNEY
6 GENERAL?
7 THE WITNESS: THAT'S CORRECT.
8 THE COURT: NOW, I GATHER FROM THE DEFINITION OF THE
9 PRODUCT MARKET THAT YOU'VE PROVIDED AND THE GEOGRAPHIC MARKET
10 THAT YOU'VE PROVIDED, THAT YOU WOULD CONSIDER THE SAN FRANCISCO
11 NEWSPAPER AGENCY TO BE A MONOPOLIST?
12 THE WITNESS: YES, SIR.
13 THE COURT: YOU HAVE IN YOUR CURRICULUM VITAE TWO
14 ARTICLES THAT AT LEAST TOUCH UPON THE SUBJECT OF PRODUCT
15 DIFFERENTIATION.
16 THE WITNESS: YES, SIR.
17 THE COURT: COULD YOU EXPLAIN THAT CONCEPT --
18 THE WITNESS: YES, SIR.
19 THE COURT: -- IN LAY TERMS? WHAT IS PRODUCT
20 DIFFERENTIATION?
21 THE WITNESS: PERHAPS THE EASIEST WAY TO DESCRIBE
22 THAT IS IN TERMS OF WHAT IT'S NOT. PRODUCTS ARE --
23 THE COURT: IT'S NOT A LOT OF THINGS I'M SURE.
24 THE WITNESS: WELL, ECONOMISTS TALK ABOUT
25 HOMOGENEOUS PRODUCTS WHERE PRODUCTS ARE IDENTICAL BETWEEN THOSE 575
COMANOR - REDIRECT / SHULMAN
1 WHICH ARE SOLD FROM ONE TO ANOTHER. WHEN PRODUCTS ARE NOT
2 IDENTICAL, THEY'RE CALLED DIFFERENTIATED PRODUCTS BY WHICH WE
3 MEAN THAT CONSUMERS CAN HAVE A PREFERENCE FOR ONE PRODUCT
4 VERSUS ANOTHER PRODUCT.
5 THE COURT: WHAT'S THE DIFFERENCE BETWEEN A
6 DIFFERENTIATED PRODUCT AND A DIFFERENT PRODUCT?
7 THE WITNESS: DIFFERENT -- MAYBE NONE. THEY ARE
8 PRODUCTS IN SEPARATE MARKETS, IF THAT'S WHAT YOU MEAN. A
9 PRODUCT IN A DIFFERENT RELEVANT MARKET IS A DIFFERENT
10 PHENOMENON THAN A DIFFERENTIATED PRODUCT, ALTHOUGH IT'S A
11 MATTER OF DEGREE.
12 DIFFERENTIATED PRODUCTS EXIST WHEN THE CROSS
13 ELASTICITIES OF DEMAND BETWEEN THESE TWO PRODUCTS ARE LESS THAN
14 INFINITE; BUT A HOMOGENEOUS PRODUCT, IF YOU RAISE THE PRICE
15 EVEN A LITTLE BIT, EVERYONE WILL SWITCH TO THE LOWER-PRICED
16 PRODUCT BECAUSE THE PRODUCTS ARE IDENTICAL. SO THAT'S A FULLY
17 NONDIFFERENTIATED OR HOMOGENEOUS PRODUCT.
18 WITH DIFFERENTIATED PRODUCTS, CROSS ELASTICITIES OF
19 DEMAND ARE LESS THAN INFINITE BUT THEY'RE NOT SO LOW THAT YOU
20 WOULD DRAW THE CONCLUSION THAT THEY EXIST IN SEPARATE MARKETS,
21 BUT IT'S A MATTER OF DEGREE.
22 THE COURT: WELL, A LOT OF THINGS ARE SUBSTITUTED
23 FOR OTHER THINGS.
24 THE WITNESS: THAT'S RIGHT.
25 THE COURT: APPLES ARE SUBSTITUTES FOR ORANGES, BUT 576
COMANOR - REDIRECT / SHULMAN
1 THEY MAY NOT BE -- EITHER ONE MAY NOT BE A SUBSTITUTE FOR AN
2 AUTOMOBILE.
3 THE WITNESS: THAT'S RIGHT.
4 THE COURT: SO WHERE DO YOU BEGIN TO DRAW THE LINE
5 BETWEEN A DIFFERENT PRODUCT AND A DIFFERENTIATED PRODUCT?
6 THE WITNESS: THERE'S NO RULE IN ECONOMICS, THAT I
7 KNOW OF, TO TELL YOU WHERE TO DO THAT. THE ISSUE IS -- AND
8 THAT'S THE REASON WHY THE JUSTICE DEPARTMENT WENT TO THIS
9 SECOND TEST, WHICH IS WHETHER A HYPOTHETICAL MONOPOLIST CAN
10 RAISE A PRICE 10 PERCENT, SAY, AND NOT ATTRACT SUBSTANTIAL
11 COMPETITION. IT'S ONE WAY OF DEALING WITH THE ARBITRARINESS OF
12 THE DEFINITION OF A MARKET WHICH RESTS ON CROSS ELASTICITIES.
13 CROSS ELASTICITIES ARE CONSIDERED SUFFICIENTLY HIGH
14 THAT PRICES CANNOT BE RAISED WITHOUT ATTRACTING SIGNIFICANT
15 COMPETITION FROM OTHERS.
16 THE COURT: WELL, ARE YOU REFERRING TO THE CRITERIA
17 THAT ARE SET OUT IN THE 1982 MERGER GUIDELINES?
18 THE WITNESS: WHICH HAVE BEEN CONTINUED SINCE THEN,
19 YES, SIR.
20 THE COURT: WITH SOME MODIFICATION; IS THAT CORRECT?
21 THE WITNESS: NOT IN THE MARKET DEFINITION AREA.
22 THE OTHER PARTS OF IT GOT CHANGED, BUT THE MARKET DEFINITION
23 TEST HAS REMAINED FAIRLY STABLE SINCE '82 THROUGH SUBSEQUENT
24 EDITIONS.
25 THE COURT: ALL RIGHT. SO ARE YOU SAYING THAT THE 577
COMANOR - REDIRECT / SHULMAN
1 NOTION OF SUBSTITUTABILITY IS NOT SUFFICIENTLY ROBUST TO COVER
2 SOME OF THE CHARACTERISTICS OR FEATURES THAT THE MERGER
3 GUIDELINES MARKET DEFINITION WOULD CAPTURE?
4 THE WITNESS: YES. THE MARKET DEFINITION -- THE
5 MERGER GUIDELINES NOTION IS MORE PRECISE. 10 PERCENT RISE FOR
6 A SUBSTANTIAL PERIOD OF TIME, COMPETITION DOES NOT OCCUR, IT
7 GIVES YOU -- IT MAKES SOME ARBITRARY JUDGMENTS. BILL BAXTER
8 MADE THOSE JUDGMENTS ORIGINALLY, AND I THINK THEY WERE
9 REASONABLE JUDGMENTS TO MAKE BUT THEY WERE ARBITRARY JUDGMENTS.
10 IT'S A WAY OF LOOKING AT THE SUBSTITUTABILITY ISSUE
11 FROM A SLIGHTLY DIFFERENT PERSPECTIVE, BUT IN PRINCIPLE SHOULD
12 GIVE YOU THE SAME RESULTS.
13 THE COURT: WELL, I WAS GOING TO ASK. TYPICALLY DO
14 THEY RESULT IN THE SAME CONCLUSIONS?
15 THE WITNESS: I THINK THEY DO.
16 THE COURT: ARE THERE INSTANCES IN WHICH THEY DO NOT
17 RESULT IN THE SAME CONCLUSIONS?
18 THE WITNESS: I DON'T THINK SO, ALTHOUGH THERE MAY
19 BE OTHER ECONOMISTS WHO THINK DIFFERENTLY.
20 THE COURT: SO I GATHER YOU'RE SIMPLY SAYING THAT
21 THEY ARE DIFFERENT PERSPECTIVES ON THE SAME THING BUT THEY
22 SHOULD NOT LEAD TO DIFFERENT RESULTS?
23 THE WITNESS: THAT'S MY OPINION.
24 THE COURT: ALL RIGHT. NOW LET'S GO BACK TO THE
25 QUESTION OF PRODUCT DIFFERENTIATION FOR A MOMENT. WHAT ARE THE 578
COMANOR - REDIRECT / SHULMAN
1 CONDITIONS UNDER WHICH IT MAKES ECONOMIC SENSE FOR A FIRM TO
2 DIFFERENTIATE ITS PRODUCTS?
3 THE WITNESS: IF THE FIRM IS ABLE TO FAIRLY, WITHOUT
4 EXCESSIVE COSTS, TO GAIN SOME DEGREE OF LOYALTY FROM A GROUP OF
5 CUSTOMERS SO THE CUSTOMERS WILL NOT SWITCH TO A RIVAL PRODUCT
6 WHEN YOU RAISE YOUR PRICE, IT IS ALWAYS ADVANTAGEOUS FOR THE
7 FIRM TO CREATE DIFFERENTIATED PRODUCTS. IT GIVES THE FIRM SOME
8 DEGREE OF FREEDOM OVER THE PRICES IT CAN CHARGE.
9 AFTER ALL, A PERFECTLY HOMOGENEOUS OR
10 NONDIFFERENTIATED PRODUCT, THE MINUTE YOU RAISE YOUR PRICE EVEN
11 A LITTLE BIT OVER THE PRICE OF YOUR RIVAL'S, EVERYONE WILL
12 SWITCH. SO YOU HAVE LESS FREEDOM TO SET PRICES AND, THEREFORE,
13 TO MAXIMIZE PROFITS.
14 DIFFERENTIATED PRODUCTS IS ALWAYS IN THE INTEREST OF
15 THE SELLER IF IT CAN BE DONE -- IF IT CAN BE ACHIEVED WITHOUT
16 TOO HIGH A COST.
17 THE COURT: HOW DO YOU MEASURE THAT?
18 THE WITNESS: THAT'S THE DIFFICULTY. IN PRINCIPLE
19 IT'S ALWAYS MEASURED BY COST ELASTICITIES; BUT, OF COURSE, WE
20 DON'T HAVE ANY DIRECT WAY OF ESTIMATING THAT PHENOMENON.
21 WE LOOK AT PRODUCTS AND WE LOOK AT CONSUMER
22 BEHAVIOR, AND WE TRY TO CONSIDER WHETHER CONSUMERS WILL SWITCH,
23 BASED ON OTHER EVIDENCE, IN RESPONSE TO PRICE DIFFERENCES. AND
24 WHERE THEY WILL NOT SWITCH DESPITE THE PRESENCE OF PRICE
25 DIFFERENCES, THEN WE CONCLUDE THAT THERE ARE DIFFERENTIATED 579
COMANOR - REDIRECT / SHULMAN
1 PRODUCTS.
2 BUT, OF COURSE, IF THAT DIFFERENCE BECOMES ENORMOUS,
3 THEN WE TAKE A FURTHER STEP AND SAY THEY EXIST IN SEPARATE
4 MARKETS, BUT THERE'S NO NONARBITRARY WAY OF DISTINGUISHING
5 BETWEEN THE CONCEPT OF PRICE PRODUCT DIFFERENTIATION AND THE
6 CONCEPT OF SEPARATE MARKETS, THAT'S RIGHT.
7 THE COURT: BUT IS THIS NOTION ONE BASED ON THE IDEA
8 THAT BY DIFFERENTIATING PRODUCTS, THE FIRM IS ABLE TO ASK FOR A
9 HIGHER PRICE WHICH CERTAIN CUSTOMERS ARE WILLING TO PAY OR A
10 LIMITED QUANTITY; WHEREAS, IF THEY SOLD ONLY ONE PRODUCT, THEY
11 WOULD HAVE TO SELL AT A DIFFERENT PRICE IN ORDER TO MAXIMIZE
12 THEIR REVENUE?
13 THE WITNESS: DO YOU MEAN IF THE SAME SELLER IS
14 PRODUCING MORE THAN ONE PRODUCT?
15 THE COURT: CORRECT. IN ESSENCE, A FIRM IS ABLE TO
16 CAPTURE MORE OF CONSUMER SURPLUS BY DIFFERENTIATING THE
17 PRODUCT; IS THAT THE NOTION?
18 THE WITNESS: ABSOLUTELY. IF A FIRM CAN PRODUCE TWO
19 PRODUCTS WHICH APPEALED -- WHICH ARE DIFFERENTIATED AND WHICH
20 APPEALED TO DIFFERENT SEGMENTS OF THE MARKET, THEY CAN
21 FREQUENTLY DO MUCH BETTER. THEY CAN CHARGE HIGHER PRICES AND
22 OBTAIN HIGHER REVENUES AND OBTAIN MORE OF THE CONSUMER SURPLUS
23 THAT EXISTS THAN IF A FIRM IS STUCK WITH A SINGLE PRODUCT WHICH
24 IS NONDIFFERENTIATED, ESPECIALLY RELATIVE TO ITS RIVALS.
25 THE COURT: ALL RIGHT. NOW, IS THE SITUATION IN THE 580
COMANOR - REDIRECT / SHULMAN
1 SAN FRANCISCO NEWSPAPER PUBLISHING FIELD A SITUATION IN WHICH
2 THE MONOPOLIST FIRM, SAN FRANCISCO NEWSPAPER AGENCY, PUBLISHES
3 DIFFERENTIATED PRODUCTS?
4 THE WITNESS: YES.
5 THE COURT: THE CHRONICLE IS ONE DIFFERENTIATED
6 PRODUCT FROM THE EXAMINER?
7 THE WITNESS: YES.
8 THE COURT: AND WHAT IS YOUR TESTIMONY WITH RESPECT
9 TO THE EFFECT OF THAT PRODUCT DIFFERENTIATION?
10 THE WITNESS: PRODUCT DIFFERENTIATION SHOULD LEAD TO
11 HIGHER REVENUES AND, THEREFORE, HIGHER ADVERTISING -- HIGHER
12 CIRCULATION AND THEREFORE HIGHER ADVERTISING REVENUES THAN WAS
13 LIKELY TO EXIST IF THERE WAS ONLY A SINGLE PRODUCT.
14 THE COURT: SO IT MAKES SENSE FROM A BUSINESS POINT
15 OF VIEW FOR THE AGENCY TO PUT OUT TWO NEWSPAPERS?
16 THE WITNESS: DEPENDING ON THE RELATIVE COSTS. ON
17 THE REVENUE SIDE THAT'S ABSOLUTELY CORRECT, BUT THEN THERE'S
18 THE COST SIDE AND THEN YOU HAVE TO COMPARE THE ADDITIONAL
19 REVENUES FROM THE ADDITIONAL COSTS TO SEE WHETHER ON BALANCE IT
20 MAKES SENSE.
21 THE COURT: ALL RIGHT. AND IN DOING THAT, WOULD YOU
22 LOOK AT THE COST IMPACT OF THE INDIVIDUAL OWNERS OF THESE TWO
23 PRODUCTS, IN THIS CASE THE CHRONICLE AND THE HEARST
24 CORPORATION, OR WOULD YOU LOOK AT IT FROM THE POINT OF VIEW OF
25 THE NEWSPAPER AGENCY AS A WHOLE? 581
COMANOR - REDIRECT / SHULMAN
1 THE WITNESS: UNDER THE JOA, I THINK I WOULD LOOK
2 UNDER -- LOOK AT IT IN TERMS OF THE NEWSPAPER AGENCY AS A
3 WHOLE.
4 THE COURT: ALL RIGHT. SO IN ORDER TO DETERMINE
5 WHETHER THESE DIFFERENTIATED PRODUCTS ARE VIABLE IN THE CONTEXT
6 OF THE JOINT OPERATING AGREEMENT, WHAT ONE MUST DO IS LOOK AT
7 THE IMPACT OF PUTTING OUT TWO PRODUCTS ON THE REVENUES OF THE
8 AGENCY, COSTS OF THE AGENCY AS A WHOLE?
9 THE WITNESS: YES.
10 THE COURT: AND THAT MEASUREMENT MUST BE TAKEN WITH
11 REFERENCE TO THE IMPACT OF BOTH NEWSPAPERS TOGETHER RATHER THAN
12 ONE ALONE?
13 THE WITNESS: WELL --
14 THE COURT: IS THAT CORRECT?
15 THE WITNESS: LET ME TRY TO ANSWER THAT IN THE
16 FOLLOWING WAY: FROM THE VIEWPOINT OF THE JOINT OPERATING
17 ARRANGEMENT, A FIRM CAN MAKE A JUDGMENT AS TO WHETHER IT'S
18 BETTER TO HAVE ONE NEWSPAPER OR TWO NEWSPAPERS, AND THAT
19 DEPENDS ON THE ADDITIONAL REVENUES RELATIVE TO THE ADDITIONAL
20 COSTS.
21 BUT FROM THE VIEWPOINT OF THE INDIVIDUAL COMPANIES,
22 WHAT'S RELEVANT IS THEIR OWN PROFITABILITY AND WHETHER OR NOT
23 THEIR -- UNDER THE TERMS OF THE JOA, WHETHER IT MAKES --
24 WHETHER THEY ARE MAKING A PROFIT.
25 AND SO I CAN IMAGINE A SITUATION WHERE BOTH FIRMS 582
COMANOR - RECROSS / HOCKETT
1 ARE BENEFITING AND PROFITABLE UNDER A JOA EVEN THOUGH THE JOA
2 ITSELF MIGHT PREFER TO HAVE ONLY ONE NEWSPAPER RATHER THAN TWO.
3 THE COURT: COULD THE OPPOSITE SITUATION OCCUR?
4 THE WITNESS: ABSOLUTELY. IN PRINCIPLE THERE'S
5 NO -- BOTH SITUATIONS COULD OCCUR. IT DEPENDS ON THE
6 SITUATION.
7 THE COURT: THEN, I SUPPOSE, IT WOULD CREATE A
8 PRISONER'S DILEMMA; WOULD IT NOT?
9 THE WITNESS: TRUE.
10 THE COURT: THANK YOU, SIR.
11 ALL RIGHT. WHY DON'T WE TAKE A BRIEF RECESS,
12 COUNSEL, AND WE'LL RESUME WITH THE NEXT WITNESS.
13 MR. SHULMAN: YES, YOUR HONOR.
14 THE COURT: WHO IS?
15 MR. SHULMAN: MR. CLANCY.
16 MR. CONNELL: YOUR HONOR --
17 MR. HOCKETT: YOUR HONOR, I HAVE A COUPLE OF
18 ADDITIONAL QUESTIONS FOR THIS WITNESS.
19 THE COURT: ALL RIGHT. MR. HOCKETT.
20 RECROSS-EXAMINATION
21 BY MR. HOCKETT:
22 Q. REALLY JUST TWO, I THINK, DR. COMANOR.
23 YOU TESTIFIED IN CONNECTION WITH HEARST'S PROPOSAL
24 TO PURCHASE THE CHRONICLE AND END THE JOINT OPERATING AGREEMENT
25 THAT THE JUSTICE DEPARTMENT REQUIRED HEARST TO FIND A BUYER AND 583
COMANOR - RECROSS / CONNELL
1 TO PAY SOMEONE, THAT BUYER, TO TAKE IT OVER; IS THAT CORRECT?
2 A. THAT'S WHAT SOMEONE -- THAT'S WHAT THE QUESTIONER
3 REPRESENTED TO ME. I DON'T DISAGREE WITH IT. I'M NOT
4 DISPUTING IT, BUT THAT'S NOT MY KNOWLEDGE OTHER THAN THE
5 QUESTIONER PROVIDING ME THAT.
6 Q. WELL, IN ANY EVENT, THAT'S EXACTLY WHAT'S GOING TO HAPPEN
7 HERE UNLESS MR. REILLY IS SUCCESSFUL IN STOPPING THE PENDING
8 TRANSACTIONS; IS THAT CORRECT?
9 A. PLEASE REPEAT THAT QUESTION.
10 Q. WHAT'S GOING TO HAPPEN HERE UNLESS MR. REILLY SUCCEEDS IN
11 STOPPING THESE TRANSACTIONS IS THAT HEARST, IN ORDER TO BUY THE
12 CHRONICLE AND END THE JOA, HAS FOUND A BUYER AND IS PAYING THAT
13 BUYER TO TAKE OVER THE EXAMINER; ISN'T THAT CORRECT?
14 A. YES. I DON'T KNOW WHETHER --
15 Q. THANK YOU.
16 A. -- THAT WILL BE A SUCCESSFUL ENTERPRISE BUT IN PRINCIPLE,
17 YES.
18 MR. HOCKETT: THANK YOU.
19 THE COURT: MR. CONNELL?
20 RECROSS-EXAMINATION
21 BY MR. CONNELL:
22 Q. MAYBE I CAN DO THIS WITHOUT GOING UP TO THE EASEL.
23 LET'S CHANGE THAT A LITTLE BIT. TEN CONSUMERS,
24 SEVEN OF THEM BUY THE CHRONICLE AND SIX OF THEM BUY THE
25 EXAMINER. COMPLEMENT OR COMPETITIVE? 584
COMANOR - RECROSS / CONNELL
1 A. THAT WOULD SUGGEST TO ME THAT IF THAT WERE IN FACT THE
2 RESULT, THAT THERE WERE A NUMBER OF PEOPLE WHO BOUGHT BOTH,
3 THAT THEY WOULD BE MORE LIKELY TO BE COMPLEMENTS.
4 Q. NOT COMPETING EDITORIAL VOICES, COMPLEMENTARY EDITORIAL
5 VOICES?
6 A. THAT PARTICULAR PIECE OF INFORMATION WOULD BE MORE
7 CONSISTENT WITH THEM BEING COMPLEMENTS. IT MAY NOT BE TRUE.
8 MR. CONNELL: THANK YOU, SIR.
9 THE COURT: ALL RIGHT. NOW WE'LL TAKE OUR BREAK.
10 BE BACK AND READY TO GO AT 20 MINUTES OF THE HOUR, AND LET'S BE
11 BACK ON TIME.
12 MR. SHULMAN: YES, YOUR HONOR.
13 MR. HALLING: YES, YOUR HONOR.
14 MR. CONNELL: YES, YOUR HONOR.
15 MR. ALIOTO: SORRY ABOUT THAT, YOUR HONOR.
16 (RECESS TAKEN AT 3:25 P.M.)
17 (PROCEEDINGS RESUMED AT 3:40 P.M.)
18 THE COURT: VERY WELL, MR. SHULMAN, YOUR NEXT
19 WITNESS, PLEASE.
20 MR. SHULMAN: MAY IT PLEASE THE COURT, PLAINTIFF
21 CALLS THOMAS G. CLANCY.
22 THE CLERK: PLEASE RAISE YOUR RIGHT HAND.
23 THOMAS G. CLANCY,
24 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
25 TESTIFIED AS FOLLOWS: 585
CLANCY - DIRECT / SHULMAN
1 THE CLERK: PLEASE BE SEATED.
2 PLEASE STATE YOUR FULL NAME FOR THE RECORD AND SPELL
3 YOUR LAST NAME.
4 THE WITNESS: THOMAS G. CLANCY, C-L-A-N-C-Y.
5 MR. SHULMAN: MAY IT PLEASE THE COURT.
6 DIRECT EXAMINATION
7 BY MR. SHULMAN:
8 Q. MR. CLANCY, WOULD YOU PLEASE STATE FOR THE COURT YOUR HOME
9 ADDRESS?
10 A. MY HOME ADDRESS IS 92 PARK LANE, TELLURIDE, COLORADO.
11 Q. AND WHAT IS YOUR AGE, SIR?
12 A. 66.
13 Q. WOULD YOU STATE, PLEASE, YOUR EDUCATIONAL BACKGROUND?
14 A. UNIVERSITY OF LOYOLA IN CHICAGO, FOUR YEARS, NO DEGREE.
15 Q. AND --
16 THE COURT: UNIVERSITY OF IOWA?
17 THE WITNESS: LOYOLA UNIVERSITY, YOUR HONOR.
18 THE COURT: LOYOLA UNIVERSITY OF CHICAGO?
19 THE WITNESS: IN CHICAGO, YES.
20 THE COURT: IN CHICAGO, ALL RIGHT.
21 BY MR. SHULMAN:
22 Q. AND HAVE YOU HAD SOME EMPLOYMENT EXPERIENCE, JOB
23 EXPERIENCE, IN THE NEWSPAPER BUSINESS?
24 A. MY ENTIRE BUSINESS CAREER, AFTER I GOT OUT OF THE MARINE
25 CORPS, HAS BEEN IN THE NEWSPAPER BUSINESS. 586
CLANCY - DIRECT / SHULMAN
1 Q. AND CAN YOU STATE THE YEARS THAT YOU SPENT IN THE
2 NEWSPAPER BUSINESS?
3 A. STARTING IN 1959 THROUGH 1993.
4 Q. SINCE 1993, WHAT HAVE YOU DONE?
5 A. ESSENTIALLY I'VE BEEN RETIRED AND I DID DO SOME WORK FOR
6 THE ALAMEDA NEWSPAPER GROUP IN 1994. CURRENTLY I'M A TRUSTEE
7 OF THE TELLURIDE REGIONAL AIRPORT, A TRUSTEE OF THE SAN MIGUEL
8 PUBLIC LIBRARY SYSTEM, A TRUSTEE OF THE FEDERAL DEFENDER
9 PROGRAM FOR THE TWELFTH DISTRICT OF NORTHERN ILLINOIS, THE
10 FEDERAL COURT THERE, AND I'M ALSO ON THE FINANCE COMMITTEE FOR
11 ST. PATRICK'S CHURCH.
12 MR. SHULMAN: OKAY. MAY I APPROACH THE WITNESS,
13 YOUR HONOR?
14 THE COURT: VERY WELL.
15 BY MR. SHULMAN:
16 Q. MR. CLANCY, I HAVE PUT IN FRONT OF YOU WHAT IS IN EVIDENCE
17 IN THIS CASE AS PLAINTIFF'S EXHIBIT 55, AND I WOULD LIKE TO --
18 IF WE CAN DISPLAY THAT.
19 DO YOU RECOGNIZE THIS AS A DECLARATION THAT YOU DID
20 IN CONNECTION WITH THIS LAWSUIT?
21 A. YES, I DO.
22 Q. NOW, THIS BEGINS:
23 "I AM THE FORMER VICE PRESIDENT OF MARKETING
24 OF THE CHICAGO TRIBUNE. I HELD THAT POSITION
25 FOR FIVE YEARS FROM 1979 TO 1984." 587
CLANCY - DIRECT / SHULMAN
1 CAN YOU -- DO YOU SEE THAT?
2 A. YES, I DO.
3 Q. OKAY. AND THAT IS CORRECT?
4 A. YES, IT IS.
5 Q. ALL RIGHT. CAN YOU GIVE US A KIND OF THUMBNAIL BIOGRAPHY
6 OF YOUR EXPERIENCE IN THE NEWSPAPER BUSINESS UP TO THAT TIME
7 UNTIL YOU BECAME THE VICE PRESIDENT OF MARKETING OF THE CHICAGO
8 TRIBUNE?
9 A. I STARTED WITH THE TRIBUNE IN 1959, THE CLASSIFIED
10 ADVERTISING SALES, AND FROM CLASSIFIED I WENT TO RETAIL
11 ADVERTISING SALES IN 1960-'61.
12 I WAS TRANSFERRED TO NEW YORK CITY FOR RETAIL
13 ADVERTISING SALES FOR THE CHICAGO TRIBUNE IN 1964.
14 IN 1967 I TRANSFERRED IN NEW YORK CITY TO THE
15 GENERAL ADVERTISING SIDE OR NATIONAL ADVERTISING.
16 IN 1970 I MOVED BACK TO CHICAGO AND WAS MANAGER OF
17 SALES PLANNING FOR THE NATIONAL OR GENERAL ADVERTISING
18 DIVISION.
19 AND THEN SIX MONTHS LATER I WENT BACK TO TAKE OVER
20 THE NEW YORK DIVISION OF THE ADVERTISING DEPARTMENT FOR THE
21 CHICAGO TRIBUNE, CAME BACK TO CHICAGO IN 1973 AND WAS ASKED TO
22 TAKE OVER HOME DELIVERY SALES AND CIRCULATION DEPARTMENT.
23 APPROXIMATELY A YEAR LATER I WAS GIVEN THE SUBURBAN
24 CIRCULATION MANAGER'S JOB OF THE CHICAGO TRIBUNE.
25 AND THEN IN 1976 I WAS NAMED DIRECTOR OF CIRCULATION 588
CLANCY - DIRECT / SHULMAN
1 FOR THE CHICAGO TRIBUNE.
2 IN 1978 I WAS NAMED A VICE PRESIDENT OF THE COMPANY,
3 AND --
4 THE COURT: OF THE TRIBUNE COMPANY?
5 THE WITNESS: OF THE CHICAGO TRIBUNE WHICH IS A
6 SUBSIDIARY.
7 THE COURT: CHICAGO TRIBUNE.
8 THE WITNESS: AND THEN I WAS NAMED VICE PRESIDENT OF
9 MARKETING FOR THE TRIBUNE.
10 BY MR. SHULMAN:
11 Q. OKAY. AS VICE PRESIDENT OF MARKETING FOR THE CHICAGO
12 TRIBUNE, WHAT WERE YOUR DUTIES AND RESPONSIBILITIES?
13 A. I WAS RESPONSIBLE FOR THE ADVERTISING AND THE PROMOTION
14 AND THE RESEARCH DIVISIONS WITHIN THE CHICAGO TRIBUNE.
15 TO CLARIFY ONE THING, I WOULD LIKE TO LET YOU KNOW
16 THAT THE ADVERTISING WAS THE ADVERTISING OF THE PRODUCT TO BOTH
17 THE CONSUMER AND TO THE TRADE SIDE AND DID NOT INCLUDE
18 ADVERTISING SALES AT THAT TIME.
19 Q. AND WHAT WAS THE CIRCULATION OF THE CHICAGO TRIBUNE
20 APPROXIMATELY WHEN YOU LEFT?
21 A. IT WAS APPROXIMATELY 750,000.
22 Q. AND WAS THAT NEWSPAPER IN --
23 A. THAT WAS DAILY, EXCUSE ME. AND SUNDAY WAS ABOUT A MILLION
24 121,000, SOMEWHERE AROUND THERE.
25 Q. AND WAS THAT NEWSPAPER IN COMPETITION WITH ANY OTHER DAILY 589
CLANCY - DIRECT / SHULMAN
1 NEWSPAPER IN THE CITY OF CHICAGO?
2 A. YES, IT WAS. THE CHICAGO SUN TIMES.
3 Q. ALL RIGHT. NOW, IT SAYS IN YOUR DECLARATION:
4 "FROM 1984 TO 1987 I WAS THE VICE PRESIDENT
5 OF ADVERTISING AND MARKETING OF THE DENVER POST
6 OWNED BY TIMES MIRROR."
7 DO YOU SEE THAT?
8 A. THAT'S CORRECT.
9 Q. AND IS THAT ACCURATE?
10 A. YES, IT IS.
11 Q. OKAY. AS THE VICE PRESIDENT OF ADVERTISING AND MARKETING
12 OF THE DENVER POST, WHAT WERE YOUR DUTIES AND RESPONSIBILITIES?
13 A. I WAS RESPONSIBLE FOR THE SALE OF ADVERTISING TO CONSUMERS
14 AND TO THE TRADE; AND EMBODIED IN THE MARKETING IT CONTAINED
15 THE RESEARCH DIVISION AND THE RESPONSIBILITY FOR THE
16 ADVERTISING AGENCY THAT DID THE WORK FOR PROMOTING THE DENVER
17 POST.
18 Q. BY THE WAY, IN CHICAGO YOU MENTIONED THERE WAS COMPETITION
19 BETWEEN THE CHICAGO TRIBUNE AND THE CHICAGO SUN TIMES?
20 A. YES, THERE WAS.
21 Q. THERE WAS NO JOA IN EFFECT THERE?
22 A. NO.
23 Q. OKAY. IN DENVER WAS THE DENVER POST IN COMPETITION WITH
24 ANOTHER NEWSPAPER?
25 A. YES, IT WAS. THE ROCKY MOUNTAIN NEWS. 590
CLANCY - DIRECT / SHULMAN
1 Q. OKAY. WAS THERE ANY JOA IN EFFECT IN DENVER THEN?
2 A. NO, THERE WAS NOT.
3 Q. NOW, IN 1987 YOU CHANGED JOBS?
4 A. YES, I DID.
5 Q. OKAY. WHAT WAS THE CHANGE THAT TOOK PLACE?
6 A. I WAS RECRUITED TO COME TO THE SAN FRANCISCO NEWSPAPER
7 AGENCY AS A SENIOR VICE PRESIDENT, DIRECTOR OF SALES, WITH
8 RESPONSIBILITY FOR THE ADVERTISING DEPARTMENT, THE CIRCULATION
9 DEPARTMENT AND THE MARKETING DEPARTMENT.
10 Q. OKAY. NOW, YOUR DECLARATION SAYS:
11 "FROM 1987 TO 1990, I WAS THE SENIOR VICE
12 PRESIDENT OF ADVERTISING AND MARKETING," WE'LL
13 SKIP THAT NEXT LITTLE BIT, "OF THE SAN FRANCISCO
14 NEWSPAPER PRINTING COMPANY, DBA SAN FRANCISCO
15 NEWS AGENCY, WHICH PERFORMS ALL COMMERCIAL
16 OPERATIONS OF THE SAN FRANCISCO EXAMINER AND THE
17 SAN FRANCISCO CHRONICLE."
18 DO YOU SEE THAT? THE FIRST PAGE, FIRST PARAGRAPH.
19 A. (WITNESS EXAMINES DOCUMENT.) YES.
20 Q. OKAY.
21 MR. SHULMAN: MAY I GO TO THE EASEL, YOUR HONOR?
22 THE COURT: YES, YOU MAY.
23 MR. SHULMAN: OKAY.
24 Q. LET'S TAKE THE PERIOD 1987 TO 1990. AND YOU WERE --
25 DURING THAT PERIOD OF TIME, YOU WERE THE VICE PRESIDENT OF 591
CLANCY - DIRECT / SHULMAN
1 ADVERTISING AND MARKETING FOR THE AGENCY; RIGHT?
2 A. AT THAT TIME, THAT PERIOD I WAS THE SENIOR VICE PRESIDENT
3 WITH RESPONSIBILITY FOR THE ADVERTISING DEPARTMENT, THE
4 CIRCULATION DEPARTMENT AND THE MARKETING DEPARTMENT.
5 Q. OKAY.
6 A. THERE WERE THREE VICE PRESIDENTS THAT REPORTED TO ME WHO
7 EACH HELD THE DISCRETE RESPONSIBILITY FOR EACH OF THOSE THREE
8 DEPARTMENTS.
9 Q. OKAY. THAT'S ADVERTISING, CIRCULATION AND MARKETING;
10 RIGHT?
11 A. THAT'S CORRECT.
12 Q. AND THE FUNCTIONS OF THE ADVERTISING DEPARTMENT AT THE
13 AGENCY WERE WHAT?
14 A. THAT WAS TO SELL ADVERTISING TO NATIONAL ADVERTISERS,
15 RETAIL ADVERTISERS, CLASSIFIED ADVERTISERS.
16 Q. AND THEN WHAT WAS THE FUNCTION OF THE CIRCULATION
17 DEPARTMENT?
18 A. THE FUNCTION OF THE CIRCULATION DEPARTMENT WAS TO SELL THE
19 NEWSPAPER TO SINGLE COPY, HOME DELIVERY, BULK SALES, AND
20 INCLUDED IN THAT WAS THE PHYSICAL DISTRIBUTION OF THE NEWSPAPER
21 FROM THE MAIL ROOM THROUGH TO THE FINAL USE BY THE CONSUMER.
22 Q. AND THEN WHAT WAS THE FUNCTION OF THE MARKETING
23 DEPARTMENT?
24 A. THE GOAL OF THE MARKETING DEPARTMENT WAS TO PROVIDE
25 MARKETING SUPPORT TO EACH OF THESE -- EACH OF THESE TWO 592
CLANCY - DIRECT / SHULMAN
1 DEPARTMENTS. EMBODIED IN THAT WAS THE WORK THAT WAS DONE ON
2 THE CONSUMER SIDE WITH THE ADVERTISING AGENCY AND TO SEE THAT
3 APPROPRIATE MATERIALS WERE AVAILABLE TO THE ADVERTISING
4 DEPARTMENT, SALES PERSONNEL AND THEIR SOLICITATION OF
5 ADVERTISING.
6 IN ADDITION TO THAT, ON THE CONSUMER SIDE, WHICH
7 WOULD BE THE READER, IT EMBODIED THE WORK THAT WAS DONE TO
8 PROMOTE THE NEWSPAPER TO THE READER.
9 AND, LASTLY, BUT NOT LEAST, WAS THE RESEARCH
10 DEPARTMENT AND THEY ESSENTIALLY DID RESEARCH ON THE TYPE OF
11 READER THAT THE NEWSPAPER HAD, DEMOGRAPHICS, PRODUCT USAGE, ET
12 CETERA.
13 Q. NOW, THE ADVERTISING, CIRCULATION AND MARKETING FUNCTIONS
14 FOR WHICH YOU HAD RESPONSIBILITY, WERE THOSE FOR BOTH THE
15 CHRONICLE AND THE EXAMINER NEWSPAPERS?
16 A. YES, THEY WERE.
17 Q. ALL RIGHT. NOW, FROM 1990 TO 1993 DID YOU HAVE A
18 DIFFERENT POSITION?
19 A. NO. WHAT HAPPENED WAS THE TITLE WAS CHANGED TO EXECUTIVE
20 VICE PRESIDENT, BUT THE RESPONSIBILITIES WERE ESSENTIALLY THE
21 SAME.
22 Q. OKAY. SO WE'LL JUST CROSS OUT THE '90 AND PUT A '93.
23 SO FROM 1987 TO 1993 YOU HAD OVERALL RESPONSIBILITY
24 FOR ADVERTISING, CIRCULATION AND MARKETING FOR THE SAN
25 FRANCISCO NEWSPAPER AGENCY? 593
CLANCY - DIRECT / SHULMAN
1 A. YES.
2 Q. IF WE COULD GO TO THE SECOND PAGE OF YOUR DECLARATION, YOU
3 SAY ON THE FIRST LINE:
4 "IN ADDITION, I AM A FORMER MEMBER OF THE
5 NATIONAL NEWSPAPER ASSOCIATION (FORMERLY THE
6 AMERICAN NEWSPAPER PUBLISHERS ASSOCIATION), THE
7 CIRCULATION MANAGERS GROUP, THE INTERNATIONAL
8 CIRCULATION MANAGERS ASSOCIATION, AND THE
9 INTERNATIONAL NEWS PROMOTION ASSOCIATION."
10 CAN YOU TELL US WHAT THESE ORGANIZATIONS ARE?
11 A. WELL, EACH OF THEM ARE A TRADE ORGANIZATIONS ESSENTIALLY.
12 AND IN THE CASE OF THE NATIONAL NEWSPAPER ASSOCIATION, THAT
13 ORGANIZATION IS PRIMARILY MADE UP OF PUBLISHERS AND MARKETING
14 PEOPLE. AT THE TIME I WAS A DIRECTOR OF THAT -- A MEMBER OF
15 THAT ORGANIZATION.
16 THE CIRCULATION MANAGERS GROUP WAS A GROUP OF
17 CIRCULATION AND/OR EXECUTIVES RESPONSIBLE FOR CIRCULATION THAT
18 MET ON A REGULAR BASIS TO DISCUSS CIRCULATION PROBLEMS THAT
19 DEALT WITH DISTRIBUTION AND COMPETITION.
20 THE INTERNATIONAL CIRCULATION MANAGERS GROUP WAS A
21 FORMAL GROUP TRADE ASSOCIATION THAT INCORPORATED CIRCULATION
22 MANAGERS AND DIRECTORS FROM AROUND THE WORLD BUT PRIMARILY THE
23 U.S. AND CANADA.
24 ACTUALLY, THE INTERNATIONAL NEWS PROMOTION
25 ASSOCIATION, THE INPA, WAS A GROUP THAT WAS AGAIN A TRADE 594
CLANCY - DIRECT / SHULMAN
1 ASSOCIATION THAT WAS MADE UP OF PEOPLE WITH RESPONSIBILITY FOR
2 PROMOTING THE NEWSPAPER BOTH TO THE ADVERTISER AND TO THE
3 CONSUMER.
4 Q. NOW, YOU SAID THAT FROM 1987 TO 1993, WHEN YOU WERE THE
5 SENIOR VICE PRESIDENT OR EXECUTIVE VICE PRESIDENT FOR THE SAN
6 FRANCISCO NEWSPAPER AGENCY, YOU HAD THREE VICE PRESIDENTS
7 REPORTING TO YOU; RIGHT?
8 A. THAT'S CORRECT.
9 Q. APPROXIMATELY HOW MANY EMPLOYEES OF THE AGENCY DID YOU
10 HAVE RESPONSIBILITY FOR?
11 A. I REALLY DON'T RECALL A PRECISE NUMBER, BUT IT WOULD HAVE
12 BEEN IN TOTAL SOMEWHERE ON THE OTHER SIDE OF PROBABLY 1200
13 EMPLOYEES.
14 Q. OKAY.
15 A. INCLUDING CIRCULATION DEPARTMENT, THE ADVERTISING
16 DEPARTMENT AND THE MARKETING DEPARTMENT.
17 Q. OKAY. NOW, WERE YOU RETAINED OR CONTACTED BY MR. REILLY
18 OR BY SOMEBODY ON BEHALF OF MR. REILLY TO BECOME INVOLVED IN
19 THE MATTER THAT'S THE SUBJECT OF THIS LAWSUIT?
20 A. YES.
21 Q. CAN YOU EXPLAIN THE CIRCUMSTANCES THAT LED TO YOUR
22 ENGAGEMENT IN CONNECTION WITH THIS LAWSUIT?
23 A. I WAS CONTACTED AND ASKED IF I WOULD TALK WITH MR. REILLY
24 ABOUT COMING HERE TO -- COMING TO SAN FRANCISCO TO TALK ABOUT
25 THE TRANSACTION THAT TOOK PLACE OR WAS ABOUT TO TAKE PLACE WITH 595
CLANCY - DIRECT / SHULMAN
1 HEARST AND FANG ORGANIZATION.
2 MR. REILLY AND I DID NOT GET AN OPPORTUNITY TO TALK
3 DIRECTLY BEFORE I CAME. I WAS IN TELLURIDE BUT HE WAS IN THE
4 SOUTH PACIFIC, AND WE JUST MISSED EACH OTHER. SO I WAS ASKED
5 TO COME TO A MEETING ON EITHER THURSDAY OR FRIDAY, WHICH WOULD
6 HAVE BEEN EITHER THE 23RD OR 24TH OF MARCH, TO COME TO SAN
7 FRANCISCO AND ATTEND A MEETING ON MARCH 25TH, AND I DID THAT.
8 Q. OKAY. AND WHO WAS AT THAT MEETING?
9 A. AT THAT MEETING WAS MR. ALIOTO, MR. WEAVER, MR. INGRAM,
10 MR. FLOOD, MR. PAGE, MR. BARLETTA, MR. OSBORN, MR. REILLY. I
11 HOPE I SAID MR. ALIOTO.
12 MR. ALIOTO: THAT'S OKAY.
13 THE WITNESS: AND MR. HILBERT.
14 I THOUGHT I STARTED WITH YOU, MR. ALIOTO.
15 BY MR. SHULMAN:
16 Q. OKAY. YOU RECOGNIZE MR. ALIOTO AND MR. HILBERT AS THE
17 LAWYERS SITTING AT THE TABLE HERE?
18 A. THAT'S CORRECT.
19 Q. OKAY. YOU MENTIONED A NUMBER OF OTHER PEOPLE:
20 MR. WEAVER, MR. INGRAM, MR. FLOOD, MR. PAGE, MR. OSBORN AND
21 MR. BARLETTA; CORRECT?
22 A. THAT'S CORRECT.
23 Q. OKAY. ARE THOSE PEOPLE THAT TO YOUR UNDERSTANDING HAVE
24 SOME EXPERIENCE IN THE NEWSPAPER BUSINESS?
25 A. ALL OF THOSE PEOPLE, OTHER THAN MR. ALIOTO AND 596
CLANCY - DIRECT / SHULMAN
1 MR. HILBERT, I HOPE I'M BEING ACCURATE IN THIS, BUT ALL OF THEM
2 WERE EXECUTIVES OF NEWSPAPERS.
3 Q. OKAY. AND IN CONNECTION WITH THAT MEETING DID YOU REVIEW
4 THE INFORMATION THAT WAS PUBLICLY AVAILABLE AT THAT TIME ABOUT
5 THE TRANSACTION THAT HEARST HAD ANNOUNCED TO TRANSFER THE
6 EXAMINER TO THE FANGS?
7 A. PRIOR TO THAT MEETING, MY -- THE ONLY THING I WAS REALLY
8 AWARE OF WAS THAT, A, WHEN I SPOKE WITH MR. BARLETTA, HE TOLD
9 ME THE GIST OF IT, THE GIST BEING THAT WE WERE GOING TO TALK
10 ABOUT THE HEARST SALE TO THE FANG ORGANIZATION. PRIOR TO THAT
11 I WAS AWARE OF IT.
12 I GET MY NEW YORK TIMES DELIVERED OVER THE INTERNET
13 BECAUSE I LIVE IN AN INACCESSIBLE PLACE WHERE I AM RIGHT NOW,
14 SO I DID SEE A VERY BRIEF, SIX OR SEVEN PARAGRAPHS, ON THE
15 SALE.
16 Q. OKAY. IF YOU LOOK AT PARAGRAPH 2 OF YOUR DECLARATION, IT
17 SAYS, QUOTE:
18 "I AM AWARE OF THE REPORTED TRANSACTION
19 BETWEEN THE HEARST CORPORATION (HEARST) AND AN
20 AFFILIATE OF PAN-ASIA VENTURE CAPITAL
21 CORPORATION, EXIN LLC, (COLLECTIVELY PAN-ASIA)
22 FOR THE SALE OF THE EXAMINER. I AM INFORMED
23 THAT PAN-ASIA INTENDS TO OBTAIN FROM HEARST THE
24 EXAMINER NAME, SUBSCRIBER LIST, WEBSITE AND
25 ARCHIVES, AS WELL AS NEWSROOM COMPUTERS AND 597
CLANCY - DIRECT / SHULMAN
1 FURNITURE, NEWS RACKS, DISTRIBUTION TRUCKS,
2 VEHICLES UTILIZED BY NEWSROOM PERSONNEL AND THE
3 RIGHT TO SPONSOR THE BAY TO BREAKERS RACE. I AM
4 INFORMED THAT PAN-ASIA HAS DECLINED TO PURCHASE
5 THE PRINTING PRESSES, PLANT AND BUILDINGS
6 CURRENTLY USED IN PUBLISHING THE EXAMINER."
7 DO YOU SEE THAT?
8 A. YES, I DO.
9 Q. AND DID YOU -- WAS THAT INFORMATION THAT WAS MADE KNOWN TO
10 YOU AT THE TIME OF THIS MEETING?
11 A. YES, IT WAS.
12 Q. AND THE THIRD PARAGRAPH SETS FORTH INFORMATION ABOUT THE
13 TERMS OF THE AGREEMENT. I'M NOT GOING TO READ IT IN DETAIL,
14 BUT IT TALKS ABOUT THE SUBSIDY OF $16 MILLION FOR THE FIRST
15 YEAR AND UP TO $25 MILLION A YEAR FOR ACTUAL COSTS FOR THE
16 FOLLOWING TWO YEARS. DO YOU SEE THAT?
17 A. YES, I DO.
18 Q. AND THAT WAS INFORMATION THAT WAS AVAILABLE TO YOU?
19 A. YES.
20 Q. OKAY. NOW, THE NEXT PARAGRAPH YOU SAY:
21 "BASED UPON THOSE FACTS AND MY EXPERIENCE IN
22 THE INDUSTRY, THE PRESENT SUBSIDY BY HEARST WILL
23 NOT BE ABLE UNDER ANY CIRCUMSTANCES TO SUPPORT
24 THE PROBABILITY OR EVEN THE POSSIBILITY OF A
25 VIABLE PAPER WHICH WOULD BE COMPETITIVE TO THE 598
CLANCY - DIRECT / SHULMAN
1 CHRONICLE."
2 I'M GOING TO STOP THERE. WAS THAT YOUR OPINION?
3 A. YES.
4 Q. AND WHAT WAS THE BASIS FOR THAT OPINION?
5 A. AT THE MARCH 25TH MEETING I WAS GIVEN COPIES OF THE
6 INVESTMENT BANKERS THAT HEARST UTILIZED TO -- AT LEAST I
7 UNDERSTOOD THAT THEY WERE ON THE VERONIS SUHLER REPORT. I DID
8 NOT HAVE THE COMPLETE REPORT, BUT WHAT I DID HAVE, AND I DON'T
9 HAVE THOSE IN FRONT OF ME NOW, BUT I BELIEVE THEY ARE PART OF
10 MY DEPOSITION, THEY DEALT WITH, FIRST OF ALL, AN OPERATING
11 REVENUE AND EXPENSES BY HEARST AND IT ALSO INCLUDED A
12 CIRCULATION REVENUE THAT HEARST HAD DETERMINED FROM A
13 MANAGEMENT SOURCE. I DON'T KNOW WHAT THE MANAGEMENT SOURCE
14 WAS, BUT IT WAS INCLUDED IN THE VERONIS SUHLER REPORT.
15 WHAT WAS NOT INCLUDED, AS I PERCEIVED THAT FINANCIAL
16 INFORMATION, WERE THE OPERATING COSTS TO PRODUCE THE PAPER AND
17 DISTRIBUTE IT LET ALONE MARKETING COSTS.
18 I BELIEVE THAT THE VERONIS SUHLER REPORT USED A
19 NUMBER OF $92 MILLION, IF I'M NOT MISTAKEN, 92 OR 98 WORKING
20 FROM MEMORY HERE. AND THEN WHAT IT DID IS IT DEDUCTED
21 ESSENTIALLY WHAT WERE THE EXPENSES OF THE EDITORIAL DEPARTMENT
22 AND THEN PUT FORTH A BOTTOM LINE.
23 UNDER THAT BOTTOM LINE I DID NOT SEE INCLUDED ANY OF
24 THE CAPITAL EXPENSES THAT WOULD BE NECESSARY FOR A PUBLISHER TO
25 PUT OUT A PAPER; NAMELY, EITHER THE CAPITAL COSTS THEMSELVES OR 599
CLANCY - DIRECT / SHULMAN
1 THE COST OF CAPITALIZING ON A LEASE ARRANGEMENT THAT OBVIOUSLY
2 WOULD BE REQUIRED TO PRODUCE THE NEWSPAPER. SO IT WAS BASED
3 UPON THAT THAT I MADE THESE CONCLUSIONS.
4 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 600
CLANCY - DIRECT / SHULMAN
1 BY MR. SHULMAN:
2 Q. NOW, YOU CONTINUE. IT SAYS, QUOTE:
3 "IN ORDER TO PRODUCE A VIABLE COMPETITIVE
4 PAPER, ANY BUYER OF THE EXAMINER WOULD NEED A
5 SUBSIDY OF $50 MILLION FOR FIVE YEARS OR A
6 ONE-TIME PAYMENT OF $250 MILLION."
7 DO YOU SEE THAT?
8 A. THAT'S CORRECT.
9 Q. IS THAT YOUR OPINION?
10 A. YES, IT IS.
11 Q. AND WHAT IS THE BASIS FOR THAT OPINION?
12 A. DURING THAT DAY A SIGNIFICANT NUMBER OF THESE NEWSPAPER
13 EXAMINERS COMMENTED ON PRIMARILY THE DISCIPLINE THAT REFLECTED,
14 IF YOU WILL, THE PRODUCTION, FINANCE, CIRCULATION, ADVERTISING
15 AND MARKETING. AND IT WAS THE GENERAL CONSENSUS THAT FROM --
16 FROM THIS GROUP THAT IT WOULD REQUIRE THIS KIND OF SUBSIDY.
17 Q. WHAT LED YOU TO AGREE WITH THE CONSENSUS OF THE GROUP?
18 A. I WILL GO BACK TO THE VERONIS SUHLER REPORT. I DID NOT
19 TRY TO ANALYZE WHAT THE ADDITIONAL COSTS WOULD BE, BUT WHAT I
20 DID WAS I -- I TOOK MY -- IF YOU WILL, MY ASSOCIATES IN THAT
21 ROOM THAT THE COMPUTATION OF 25 TO-- OR THE $250 MILLION WOULD
22 BE NECESSARY TO DO IT. AND I HAD -- AGAIN, I HAD -- I DID NO
23 ANALYZATION PRIOR TO THAT AND ACCEPTED THE OPINIONS OF MY
24 ASSOCIATES.
25 Q. YOU SAY IN PARAGRAPH 5, QUOTE: 601
CLANCY - DIRECT / SHULMAN
1 "I AM INFORMED BY THE PAPERS SUBMITTED BY
2 HEARST IN ITS OPPOSITION MEMORANDUM TO
3 PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION
4 THAT PAN ASIA ANTICIPATES STAFF TURNOVER AT THE
5 EXAMINER ONCE IT ASSUMES RESPONSIBILITY FOR
6 RUNNING THE PAPER."
7 I AM GOING TO STOP THERE.
8 WERE YOU AWARE OF THAT INFORMATION?
9 A. NOT UNTIL THAT DAY, RIGHT.
10 Q. OKAY. YOU LEARNED IT THAT DAY?
11 A. YES.
12 Q. AND IT SAYS, QUOTE:
13 "STAFF TURNOVER AND OTHER CHANGES IN THE
14 CONTINUITY OF THE PAPER WILL INEVITABLY DISTURB
15 READERSHIP AND DISTURB ADVERTISERS, RESULTING IN
16 THE LOSS OF CIRCULATION AND ADVERTISING
17 REVENUE."
18 DO YOU SEE THAT?
19 A. YES, I DO.
20 Q. IS THAT YOUR OPINION?
21 A. YES, IT IS.
22 Q. CAN YOU DESCRIBE, PLEASE, THE BASIS FOR THAT OPINION?
23 A. WELL, MY UNDERSTANDING IS -- AND MAYBE IT HAS CHANGED
24 SINCE THEN. BUT MY UNDERSTANDING IS THAT THERE WOULD BE A
25 100 PERCENT STAFF TURNOVER ON THE EDITORIAL SIDE OF THE 602
CLANCY - DIRECT / SHULMAN
1 NEWSPAPER. AND PAST EXPERIENCE IN CHICAGO WHERE THERE WAS TWO
2 AFTERNOON NEWSPAPERS, CHICAGO DAILY NEWS, WHICH WAS A FIELD
3 PAPER, FIELD ENTERPRISES, AND THE CHICAGO TODAY, WHICH WAS A
4 TRIBUNE COMPANY-OWNED AFTERNOON PAPER. BOTH OF THESE PAPERS
5 WERE AFTERNOON PAPERS.
6 IN THE CASE OF CHICAGO TODAY, THE PAPER WENT FROM A
7 STANDARD SIZE TO A TABLOID SIZE. THE PURPOSE OF THAT WAS
8 THE -- IT WAS EXPERIENCING A SPIRALING DETERIORATION OF
9 CIRCULATION, AND TO TRY AND OFFSET THAT A DECISION WAS MADE TO
10 TURN IT INTO A TABLOID.
11 WHAT WE FOUND OUT FROM RESEARCH WAS THAT ALTHOUGH WE
12 DID PICK UP SOME NEW READERS, THE EXISTING READERS WERE
13 DISTURBED ENOUGH TO DISREGARD THE NEWSPAPER AND THE CIRCULATION
14 DECLINED CONTINUALLY.
15 IN THE CASE OF THE DAILY NEWS, THEY DID NOT CHANGE
16 THEIR FORMAT OF SIZE. WHAT THEY DID WAS THEY CHANGED THE
17 GRAPHICS ON THE PAPER DRAMATICALLY.
18 Q. CHICAGO DAILY NEWS?
19 A. THE CHICAGO DAILY NEWS.
20 Q. YES.
21 A. EXCUSE ME. THEY USED A DESIGN FIRM, FRANK MAGIC, WHICH IS
22 FAIRLY WELL KNOWN, EVEN TODAY.
23 WHAT HAPPENED THERE, THOUGH, WAS THE SAME THING.
24 CIRCULATION CONTINUED TO DETERIORATE AND THE RESEARCH INDICATED
25 THAT THE READERS WERE DISTURBED. AND I AM TALKING ABOUT THEIR 603
CLANCY - DIRECT / SHULMAN
1 EXISTING READERS. AND THE NEW READERS THAT THEY HAD HOPED TO
2 PICK UP DID NOT OFFSET THE LOSSES INCURRED BY THE SIGNIFICANT
3 CHANGES.
4 THE COURT: WHEN WERE THESE EVENTS, MR. CLANCY?
5 THE WITNESS: THEY WERE IN 1970, SIR.
6 THE COURT: 1970?
7 THE WITNESS: IN THE '70'S, EXCUSE ME.
8 THE COURT: IN THE '70'S?
9 THE WITNESS: YES.
10 THE COURT: THANK YOU.
11 THE WITNESS: SO MOVING FORWARD, THEN, I PERCEIVED
12 THAT WITH THE 100 PERCENT CHANGE IN STAFF -- AND THIS IS HOW I
13 DREW MY CONCLUSION -- THAT THE QUALITY OF THE SAN FRANCISCO
14 EXAMINER COULD BE IN JEOPARDY. BUT, SETTING THAT ASIDE --
15 BECAUSE THAT WOULD BE HARD TO DETERMINE -- WITH AN ENTIRELY NEW
16 STAFF ALL OF THOSE NEWS FEATURES, ET CETERA, WOULD BE BEING
17 DONE BY NOT ONLY THE PEOPLE THAT PUT THEM TOGETHER BUT ALSO BY
18 THE PEOPLE THAT WOULD BE EDITING THE PRODUCT.
19 AND, THEREFORE, BASED UPON THAT IT BECOMES A REAL
20 QUESTION ON WHAT WOULD HAPPEN TO THAT READERSHIP, AND BASED
21 UPON PAST EXPERIENCE WITH THE TWO PAPERS IN QUESTION, I BASED
22 MY OPINION THAT THE EXAMINER'S CIRCULATION DETERIORATION, IF
23 YOU WILL, WOULD CONTINUE.
24 ALSO EMBODIED IN THAT -- AND RESEARCH HAS BORNE THIS
25 OUT -- ADVERTISERS HAVE AN EXPECTATION THAT THEY WILL ADVERTISE 604
CLANCY - DIRECT / SHULMAN
1 IN AN ENVIRONMENT THAT IS CONSISTENT WITH THE PRESENTATION OF
2 THEIR PRODUCTS. SO AN ADVERTISER SELECTS A MEDIUM THAT THEY
3 FEEL WILL PROVIDE THEM ADJACENT TO THEIR PRODUCT THE TYPE OF
4 CONTENT THAT THEY FEEL IS APPROPRIATE FOR THEIR ADVERTISING.
5 SO BETWEEN THE DISTURBING THE READER AND THE
6 ADVERTISING BECAUSE OF THE EDITORIAL TURNOVER AND EXPERIENCING
7 THE LOSS OF CIRCULATION IN THE TWO PUBLICATIONS I MENTIONED, I
8 ALSO FELT THAT IT WOULD DISTURB THE ADVERTISERS AND CREATE A --
9 A LOSS OF ADVERTISING.
10 Q. I THINK WHAT YOU SAID, IF I AM CORRECT ABOUT YOUR
11 EXPERIENCE IN CHICAGO, IS THAT CHANGES, DRAMATIC CHANGES, IN
12 THE FORMAT OF THE NEWSPAPER ADVERSELY AFFECTED THE CIRCULATION?
13 MR. HOCKETT: OBJECTION. LEADING.
14 THE COURT: OBJECTION OVERRULED. CLARIFYING.
15 THE WITNESS: COULD YOU RESTATE THE QUESTION,
16 PLEASE? I'M SORRY.
17 BY MR. SHULMAN:
18 Q. OKAY. IN CHICAGO DID THE CHANGES IN THE FORMAT OF THE
19 PAPER ADVERSELY AFFECT THE CIRCULATION?
20 A. WELL, A FORMAT CHANGE ON THE CHICAGO TODAY, WHICH WENT
21 FROM A STANDARD TO TAB, YES. AND IN THE CASE OF THE DAILY
22 NEWS, IT WAS A PRESENTATION CHANGE. THEY CHANGED -- THEY
23 ENTIRELY CHANGED THE GRAPHICS PACKAGE.
24 SO, IN OTHER WORDS, WHEN THE READER LOOKED AT
25 TODAY'S PAPER AND WERE TOLD A NEW PAPER WAS COMING THE NEXT DAY 605
CLANCY - DIRECT / SHULMAN
1 AND SAW THAT THE GRAPHICS WERE SIGNIFICANTLY DIFFERENT THAN
2 WHAT THEY WERE ACCUSTOMED TO READING THROUGH, THE LOSS IN
3 CIRCULATION WAS GREATER THAN THE NEW CIRCULATION THAT THE DAILY
4 NEWS PICKED UP. SO ON ONE HAND THEY WERE PICKING UP
5 CIRCULATION, YET ON THE OTHER HAND THEY WERE LOSING MORE.
6 SO THE POINT THAT I AM TRYING TO MAKE IS THE
7 DISTURBING OF THE READER BY SIGNIFICANT CHANGES IN THE HABIT
8 THAT THEY HAVE IN READING THEIR PUBLICATION.
9 THE COURT: IS THAT --
10 THE WITNESS: EXCUSE ME, YOUR HONOR.
11 THE COURT: GO AHEAD.
12 THE WITNESS: I WAS JUST GOING TO SAY IT HAS BEEN
13 DEMONSTRATED BY RESEARCH THAT THE INFORMATION PROVIDED BY THEIR
14 FAVORITE NEWSPAPER, IN ADDITION TO PROVIDING THE INFORMATION,
15 IS ALSO A HABIT.
16 THE COURT: WAS THAT EXPERIENCE TRUE WITH REGARD TO
17 BOTH THE CHICAGO DAILY NEWS AND CHICAGO TODAY?
18 THE WITNESS: YES, SIR. BUT THE DISTURBANCES WERE
19 DIFFERENT. ONE WAS A FORMAT CHANGE, SHRINKING THE SIZE OF THE
20 PAPER.
21 THE COURT: RIGHT, CHICAGO TODAY.
22 THE WITNESS: CHICAGO TODAY, YES, SIR.
23 AND THE OTHER WAS A GRAPHICS CHANGE SO THAT THE --
24 IT WOULD -- THIS IS PROBABLY A VERY COARSE EXAMPLE SO BEAR WITH
25 ME. IT WOULD BE, LIKE, IF YOU WERE READING TODAY THE NEW YORK 606
CLANCY - DIRECT / SHULMAN
1 TIMES AND THEN ALL OF A SUDDEN SOMEBODY PRESENTED THE WALL
2 STREET JOURNAL TO YOU AS THE NEW YORK TIMES. IT WOULD LOOK
3 ENTIRELY DIFFERENT. THAT'S PROBABLY A VERY COARSE EXAMPLE TO
4 USE BUT IT JUST WASN'T THERE. IT JUST DIDN'T LOOK LIKE WHAT I
5 USUALLY READ.
6 THE COURT: OKAY.
7 BY MR. SHULMAN:
8 Q. AND IT IS ALSO YOUR OPINION THAT TURNOVER IN STAFF WOULD
9 HAVE AN ADVERSE EFFECT ON ADVERTISERS?
10 A. YES. BASED UPON THE -- MY UNDERSTANDING OF THIS
11 TRANSACTION, WHICH I AM BASING MY OPINION RIGHT NOW, THAT THE
12 CONTENT OF THE NEWSPAPER PRESENTED TO THE READER AND WHAT THE
13 ADVERTISER HAD BEEN BUYING PRIOR TO THAT WOULD BE PERCEIVED AS
14 DIFFERENT BECAUSE IT'S AN ENTIRELY NEW GROUP THAT'S DEALING
15 WITH THAT PUBLICATION. AND THAT IS MY UNDERSTANDING OF WHAT
16 THE CONDITIONS OF THE SALE WERE.
17 Q. WELL, IS THAT GOOD OR BAD, THAT THERE IS A NEW GROUP
18 DEALING WITH THE ADVERTISERS?
19 A. WELL, I AM DRAWING MY CONCLUSION THAT IT WOULD BE BAD FROM
20 A CIRCULATION STANDPOINT AND ADVERTISING STANDPOINT BECAUSE IT
21 WOULD DISTURB THOSE TWO BASES AND THE SPIRAL WOULD CONTINUE ON
22 LOSS OF CIRCULATION AND IT WOULD START A QUESTION BY
23 ADVERTISERS ON WHETHER THEY WOULD WANT TO ADVERTISE IN THE NEW
24 PAPER.
25 Q. NOW, YOU SAY IN THE LAST SENTENCE OF THAT PARAGRAPH: 607
CLANCY - DIRECT / SHULMAN
1 "BASED UPON THE INFORMATION AVAILABLE TO ME
2 ABOUT THE AGREEMENT BETWEEN HEARST AND PAN ASIA,
3 THE EXAMINER WILL FOLD ITS TENT AND BE GONE
4 WITHIN THREE YEARS."
5 IS THAT YOUR OPINION?
6 A. AGAIN, THAT'S -- YES, IT IS.
7 Q. AND IS THAT BASED UPON WHAT YOU'VE ALREADY TOLD US?
8 A. IT'S BASED UPON WHAT I TOLD YOU, UTILIZING EXPERIENCE AND
9 THE SUBSIDY THAT WOULD BE PROVIDED OVER THE COURSE OF THREE
10 YEARS, AND THEN AFTER THAT THE QUESTION REALLY BECOMES WHAT
11 KIND OF AN ENTERPRISE IS LEFT.
12 MR. SHULMAN: THANK YOU. I HAVE NO FURTHER
13 QUESTIONS.
14 THE COURT: VERY WELL. MR. HOCKETT, ARE YOU
15 CROSS-EXAMINING THIS WITNESS?
16 MR. HOCKETT: YES, I AM, YOUR HONOR.
17 (PAUSE IN THE PROCEEDINGS.)
18 THE COURT: PERHAPS ONE OF YOUR COLLEAGUES CAN
19 MANIPULATE THE ELMO MACHINE WHILE YOU FORMULATE YOUR QUESTIONS.
20 MR. HOCKETT: EVEN BETTER THAN I CAN, YOU THINK,
21 YOUR HONOR?
22 THE COURT: WELL . . .
23 MR. HOCKETT: I THINK I AM DONE.
24 THE COURT: ALL RIGHT.
25 //// 608
CLANCY - CROSS / HOCKETT
1 CROSS-EXAMINATION
2 BY MR. HOCKETT:
3 Q. GOOD AFTERNOON, MR. CLANCY. I AM CHRIS HOCKETT AND I
4 REPRESENT EXIN LLC.
5 A. GOOD AFTERNOON.
6 Q. I WANTED TO TALK TO YOU ABOUT YOUR DECLARATION THAT YOU
7 HAVE JUST BEEN THROUGH WITH MR. SHULMAN.
8 WOULD YOU GET THAT IN FRONT OF YOU, PLEASE?
9 A. I HAVE THAT IN FRONT OF ME.
10 Q. THANK YOU.
11 ON WHAT DATE DID YOU SIGN PLAINTIFF'S EXHIBIT 55?
12 A. BEAR WITH ME AND I WILL LOOK.
13 I BELIEVE IT WAS MARCH 25TH. YES, MARCH 25TH.
14 Q. THAT'S THE SAME DAY THAT YOU HAD A MEETING IN MR. ALIOTO'S
15 OFFICE WITH ALL THE OTHER EXPERTS?
16 A. THAT'S CORRECT.
17 Q. OKAY. AND BEFORE YOU SIGNED IT DID YOU READ IT OVER
18 CAREFULLY TO MAKE SURE THAT IT EXPRESSED YOUR OPINIONS IN JUST
19 THE WAY THAT YOU WANTED IT TO?
20 A. YES, I HOPE SO.
21 Q. I WANT TO TURN TO THE HEART OF YOUR OPINION WHICH IS IN
22 PARAGRAPH 4 ON THE NEXT PAGE. THIS IS THE PARAGRAPH THAT SAYS:
23 "BASED UPON THOSE FACTS AND MY EXPERIENCE IN
24 THE INDUSTRY, THE PRESENT SUBSIDY BY HEARST WILL
25 NOT UNDER ANY CIRCUMSTANCES BE ABLE TO SUPPORT 609
CLANCY - CROSS / HOCKETT
1 THE PROBABILITY OR EVEN THE POSSIBILITY OF A
2 VIABLE PAPER WHICH WOULD BE COMPETITIVE WITH THE
3 CHRONICLE. IN ORDER TO PRODUCE A VIABLE
4 COMPETITIVE PAPER, A BUYER OF THE EXAMINER WOULD
5 NEED A SUBSIDY OF 50 MILLION FOR FIVE YEARS OR A
6 ONE-TIME PAYMENT OF 250 MILLION."
7 IS THAT THERE IN YOUR DECLARATION, SIR?
8 A. YES, IT IS.
9 Q. AND THAT'S A STATEMENT YOU -- YOU DECIDED TO INCLUDE? ARE
10 THOSE YOUR WORDS?
11 A. ESSENTIALLY, YES.
12 Q. I THINK THAT YOU -- YOU MAY KNOW THAT SOME OF THE OTHER
13 EXPERTS SIGNED THEIR OWN DECLARATIONS AT THE SAME MEETING.
14 I AM GOING TO HAND YOU UP COPIES -- BECAUSE I THINK
15 IT WILL BE EASY FOR YOU -- OF PLAINTIFF'S EXHIBITS 55 THROUGH
16 60.
17 MAY I APPROACH THE WITNESS, PLEASE?
18 THE COURT: YES, YOU MAY.
19 BY MR. HOCKETT:
20 Q. (INDICATING).
21 A. THANK YOU.
22 Q. TAKE A LOOK AT PLAINTIFF'S EXHIBIT 56, PLEASE.
23 DO YOU SEE THE HIGHLIGHTED PORTION OF PARAGRAPH 4?
24 A. YES.
25 Q. THAT'S MR. FLOOD'S DECLARATION, CORRECT, ONE OF THE OTHER 610
CLANCY - CROSS / HOCKETT
1 PLAINTIFF'S EXPERTS?
2 A. YES.
3 Q. AND WILL YOU READ TO YOURSELF PARAGRAPH 4? AND LET ME
4 KNOW WHETHER THAT STATEMENT VARIES IN ONE WORD FROM THE SAME
5 PART OF YOUR DECLARATION THAT YOU SAY WAS YOUR VIEW.
6 A. NO. THEY ARE IDENTICAL.
7 Q. THE WORDS ARE EXACTLY THE SAME, AREN'T THEY?
8 A. THAT'S CORRECT.
9 Q. PLEASE TURN TO PLAINTIFF'S EXHIBIT 57, MR. INGRAM'S
10 DECLARATION.
11 DO YOU SEE THE HIGHLIGHTED PORTION OF PARAGRAPH 4 OF
12 MR. INGRAM'S DECLARATION?
13 A. YES, I DO.
14 Q. DOES IT VARY IN ONE WORD FROM THE CORRESPONDING PART OF
15 YOUR DECLARATION, SIR?
16 A. NO.
17 Q. PLEASE TURN TO PLAINTIFF'S EXHIBIT 58, MR. OSBORN'S
18 DECLARATION.
19 DO YOU SEE THE HIGHLIGHTED PARAGRAPH 4?
20 A. YES.
21 Q. DOES MR. OSBORN'S STATEMENT VARY IN ONE WORD FROM THE
22 STATEMENT INCLUDED IN YOUR DECLARATION?
23 A. NO.
24 Q. AND PLAINTIFF'S EXHIBIT 59, WOULD YOU GET THAT IN FRONT OF
25 YOU, PLEASE, MR. PAGE'S DECLARATION? 611
CLANCY - CROSS / HOCKETT
1 DO YOU SEE PARAGRAPH 4 OF MR. PAGE'S DECLARATION?
2 A. YES.
3 Q. DOES IT VARY IN ONE WORD FROM THE CORRESPONDING PART OF
4 YOUR DECLARATION?
5 A. NO.
6 Q. FINALLY, PLAINTIFF'S EXHIBIT 60, MR. WEAVER'S DECLARATION.
7 THE SAME QUESTION.
8 A. THE SAME ANSWER, NO.
9 Q. IT'S PRETTY AMAZING, ISN'T IT, THAT ALL OF MR. REILLY'S
10 EXPERTS INDEPENDENTLY CAME TO EXACTLY THE SAME CONCLUSION ABOUT
11 THE ADEQUACY OF THE SUBSIDY AND THE MINIMUM SUBSIDY THAT WOULD
12 BE REQUIRED, ISN'T IT, AND THAT THEY CHOSE TO EXPRESS THAT
13 CONCLUSION IN EXACTLY THE SAME WORDS?
14 THE COURT: ISN'T THAT ARGUMENTATIVE, MR. HOCKETT?
15 MR. HOCKETT: I WILL WITHDRAW IT, YOUR HONOR.
16 BY MR. HOCKETT:
17 Q. IT'S REALLY NOT A COINCIDENCE, IS IT, MR. CLANCY -- ISN'T
18 IT A FACT THAT MR. ALIOTO WAS THE ONE WHO SUGGESTED THOSE
19 50 MILLION AND 250 MILLION NUMBERS TO THE GROUP?
20 A. I BELIEVE I TESTIFIED IN MY DEPOSITION THAT IT WAS A
21 CONSENSUS OF THE EXPERTS THAT WERE THERE. THE ORIGINATION OF
22 WHICH INDIVIDUAL EXPERT CAME UP WITH THAT NUMBER, I WOULD BE
23 HARD PRESSED TO TELL YOU. I DON'T KNOW.
24 Q. IT'S --
25 A. BUT IT WAS A CONSENSUS AND THERE WAS A ROOM FULL OF 612
CLANCY - CROSS / HOCKETT
1 NEWSPAPER -- FORMER NEWSPAPER EXECUTIVES AND EXISTING NEWSPAPER
2 EXECUTIVES.
3 Q. WOULD IT SURPRISE YOU TO LEARN THAT MR. WEAVER IDENTIFIED
4 MR. ALIOTO AS THE SOURCE OF THOSE TWO NUMBERS?
5 A. NO.
6 Q. NOW, THE PURPOSE OF THE MEETING WAS TO DISCUSS THIS
7 LITIGATION AND WHAT WOULD GO INTO EVERYBODY'S DECLARATIONS,
8 CORRECT?
9 A. I THINK OUT OF THE MEETING CAME THE DECLARATIONS. I THINK
10 THE MEETING ESSENTIALLY WAS FOR A DISCUSSION BY THE NEWSPAPER
11 EXECUTIVES TO GET THEIR OPINIONS AND THEN OUT OF THAT THE
12 DECLARATIONS CAME.
13 Q. ALL OF THE INFORMATION ABOUT THIS CASE ON WHICH YOU BASED
14 THE OPINIONS IN YOUR DECLARATION CAME FROM THAT MARCH 25TH
15 MEETING; IS THAT CORRECT?
16 A. THE CONCLUSIONS THAT I CAME TO WERE -- WERE -- WERE BASED
17 UPON THE VERONIS SUHLER REPORT AND MY OWN EXPERIENCES IN THE
18 INDUSTRY.
19 Q. ALL OF THE INFORMATION ABOUT THIS CASE THAT YOU HAD CAME
20 OUT OF THAT MEETING, CORRECT?
21 A. YES, SIR.
22 Q. AND YOU HAD DONE NO ANALYSIS OR HOMEWORK PRIOR TO THE
23 MEETING; NO MATERIALS WERE REVIEWED PRIOR TO THE MEETING; IS
24 THAT CORRECT?
25 A. THAT'S CORRECT. 613
CLANCY - CROSS / HOCKETT
1 Q. NOW, YOU USED TO WORK FOR THE SAN FRANCISCO NEWSPAPER
2 ASSOCIATION?
3 A. THE AGENCY.
4 Q. THE AGENCY?
5 A. YES.
6 Q. AND YOU SIGNED A TERMINATION AGREEMENT WITH THEM IN 1993?
7 A. THAT'S CORRECT.
8 Q. HAVE YOU TESTIFIED IN COURT BEFORE, MR. CLANCY?
9 A. YES, I HAVE.
10 Q. AND WHAT WAS THE OCCASION FOR YOUR TESTIMONY?
11 A. THE LAST OCCASION WAS THE SAN FRANCISCO INDEPENDENT CASE
12 AGAINST THE SAN FRANCISCO EXAMINER OVER --
13 Q. YOU TESTIFIED -- I'M SORRY.
14 A. YES, OVER CLASSIFIED LEGAL ADVERTISING.
15 Q. AND YOU TESTIFIED AGAINST THE FANG FAMILY INTERESTS IN
16 THAT CASE, CORRECT?
17 A. I TESTIFIED FOR THE EXAMINER.
18 Q. WHO -- WHOM THE FANG FAMILY HAD SUED, CORRECT?
19 A. YES.
20 Q. AM I RIGHT THAT YOU HAVE NO EXPERIENCE ON THE EDITORIAL
21 SIDE OF RUNNING A NEWSPAPER?
22 A. CORRECT.
23 Q. AND YOU HAVE NO EXPERIENCE ON THE PRODUCTION SIDE OF
24 RUNNING A NEWSPAPER, SUCH AS PRINTING OR LABOR, CORRECT?
25 A. LABOR EXPERIENCE RELATIVE TO THE EMPLOYEES THAT DISTRIBUTE 614
CLANCY - CROSS / HOCKETT
1 THE PAPER.
2 Q. EXCLUDING THAT NO EXPERIENCE ON THE PRODUCTION SIDE OF
3 RUNNING A PAPER?
4 A. ON THE PRODUCTION SIDE, NO.
5 Q. AND, I TAKE IT, THAT WITH THE EXCEPTION YOU JUST
6 MENTIONED, YOU HAVE NO EXPERIENCE ON THE HUMAN RESOURCES SIDE
7 OF RUNNING A NEWSPAPER?
8 A. AS A DISCRETE DEPARTMENT, NO.
9 Q. YOU DO HAVE SOME EXPERIENCE, AS WE HAVE HEARD, ON THE
10 ADVERTISING AND REVENUE SIDE OF THE NEWSPAPER BUSINESS; IS THAT
11 CORRECT?
12 A. YES.
13 Q. AND, AS PART OF YOUR WORK THAT DAY, MARCH 25TH, YOU TRIED
14 TO ESTIMATE THE REVENUE FOR A STAND-ALONE EXAMINER IF THE
15 HEARST PURCHASE OF THE CHRONICLE WERE TO GO THROUGH, DID YOU
16 NOT?
17 A. NO.
18 Q. I REMEMBER SOME NOTES FROM YOUR DEPOSITION -- AND PERHAPS
19 YOU CAN PUT THEM IN FRONT OF YOU. IT'S CHRONICLE EXHIBIT 325
20 IS WHERE I WANT TO START. PERHAPS THAT WILL REFRESH YOUR
21 RECOLLECTION.
22 CAN YOU TURN TO THE LAST PAGE OF THE CHRONICLE
23 EXHIBIT 325, PLEASE?
24 A. YES.
25 Q. IS THAT YOUR HANDWRITING, SIR? 615
CLANCY - CROSS / HOCKETT
1 A. YES.
2 Q. AND WASN'T THAT AN EFFORT BY YOU TO MAKE SOME ESTIMATES
3 REGARDING THE REVENUE FOR A -- THE EXAMINER OUTSIDE THE JOA?
4 A. THAT'S CORRECT, BUT IT WAS DONE THE DAY BEFORE MY
5 DEPOSITION AND NOT AT THE MARCH 25TH MEETING.
6 Q. THANK YOU.
7 NOW, I WANT TO GO THROUGH THE CATEGORIES OF COSTS
8 THAT YOU COVER IN THESE NOTES BECAUSE THEY ARE A LITTLE BIT
9 OBSCURE -- I'M SORRY, THE CATEGORIES OF REVENUE.
10 THE FIRST LINE OF HANDWRITING SAYS 11,882,000; IS
11 THAT CORRECT?
12 A. THAT'S ON THE LAST PAGE YOU ARE REFERRING TO?
13 Q. YES.
14 A. YES, THAT'S 11,882,000.
15 Q. AND THAT REPRESENTS YOUR ESTIMATE OF THE TOTAL RETAIL
16 ADVERTISING DISPLAY REVENUE?
17 A. YES.
18 Q. THE NEXT NUMBER IS 39,000. WE CAN IGNORE THAT.
19 THE NEXT NUMBER OF SIGNIFICANCE IS 15,052,000.
20 A. YES.
21 Q. AND THAT REPRESENTS YOUR ESTIMATE OF THE TOTAL NATIONAL
22 ADVERTISING REVENUE FOR A SEPARATELY OPERATED EXAMINER,
23 CORRECT?
24 A. YES.
25 Q. THE NEXT LINE DOWN IS $1,135,000. DO YOU SEE THAT? 616
CLANCY - CROSS / HOCKETT
1 A. YES.
2 Q. AND THAT REPRESENTS YOUR ESTIMATE OF THE TOTAL CLASSIFIED
3 ADVERTISING REVENUE OF AN INDEPENDENTLY OPERATED SAN FRANCISCO
4 EXAMINER; IS THAT CORRECT?
5 A. YES.
6 Q. WHICH BRINGS A TOTAL, WHICH IS INDICATED ON THIS PAGE, OF
7 $28,108,000 OF ADVERTISING REVENUE FOR THE INDEPENDENTLY
8 OPERATED SAN FRANCISCO EXAMINER; IS THAT CORRECT?
9 A. YES.
10 Q. YOU ALSO GAVE AN ESTIMATE OF CIRCULATION REVENUE OF
11 $7.4 MILLION; IS THAT CORRECT?
12 A. YES.
13 Q. TAKE A LOOK, IF YOU WOULD, AT CHRONICLE EXHIBIT 323,
14 PLEASE.
15 IS THAT YOUR HANDWRITING IN THE UPPER RIGHT-HAND
16 CORNER OF THE FIRST PAGE?
17 A. YES.
18 Q. AND DOES THIS REFLECT YOUR CALCULATION OF YOUR BEST
19 ESTIMATE OF THE TOTAL REVENUE THAT WOULD BE EARNED BY A
20 STAND-ALONE EXAMINER, INCLUDING BOTH ADVERTISING AND
21 CIRCULATION?
22 A. YES.
23 Q. WOULD YOU READ THE NUMBER FOR US, PLEASE?
24 A. $35,508,000.
25 Q. NOW, YOU TESTIFIED THAT YOU DID NOT ATTEMPT TO PREPARE A 617
CLANCY - CROSS / HOCKETT
1 SIMILAR ANALYSIS OF THE EXPECTED EXPENSES OF A STAND-ALONE
2 EXAMINER, DID YOU?
3 A. THAT'S CORRECT.
4 Q. AND YOU DON'T KNOW WHAT THOSE WOULD BE, DO YOU?
5 A. NO.
6 Q. YOUR ANALYSIS WAS CONFINED ONLY TO REVENUE. CORRECT?
7 A. YES.
8 Q. NOW, YOU TESTIFIED THAT THE MAIN REASON FOR BELIEVING THAT
9 A $50 MILLION PER YEAR OR $250 MILLION LUMP SUM SUBSIDY WAS
10 NECESSARY IS CAPITAL COSTS AND OPERATING COSTS; IS THAT
11 CORRECT?
12 A. YES, THAT WAS THE GENERAL CONSENSUS AT THE MEETING, THAT
13 THAT'S WHAT IT WOULD TAKE.
14 Q. AND WITH RESPECT TO CAPITAL COSTS, THE ISSUE IS THAT YOU
15 HAVE TO HAVE SOME PLACE TO PRINT THE PAPER, CORRECT?
16 A. YES.
17 Q. AND YOU HAVE TO HAVE PRINTING PRESSES, CORRECT?
18 A. YES.
19 Q. MR. CLANCY, DO YOU KNOW WHAT THE FANG FAMILY'S PRINTING
20 ASSETS OR CAPABILITIES ARE OR THEIR OPTIONS FOR OUTSOURCING
21 PRINTING?
22 A. NO.
23 Q. LET'S TALK ABOUT OPERATING COSTS, THE OTHER FACTOR.
24 DO YOU KNOW ANYTHING ABOUT THE FANG FAMILY'S
25 OPERATING COSTS FOR THE INDEPENDENT OR ANY OF THEIR OTHER 618
CLANCY - CROSS / HOCKETT
1 PUBLICATIONS?
2 A. NO.
3 Q. DO YOU KNOW WHO THEY PLAN TO HIRE?
4 A. NO.
5 Q. DO YOU KNOW WHAT KIND OF PRODUCT THEY INTEND TO PUT OUT?
6 A. NO.
7 Q. DO YOU KNOW ANYTHING ABOUT THEIR COST STRUCTURE OR PLANS
8 FOR OPERATING THE EXAMINER?
9 A. NO.
10 MR. HOCKETT: I HAVE NO FURTHER QUESTIONS.
11 THE COURT: ALL RIGHT. VERY WELL. ANY OTHER
12 DEFENDANTS WISH TO CROSS-EXAMINE THIS WITNESS?
13 ON BEHALF OF THE CHRONICLE?
14 MR. HUSTON: YES, YOUR HONOR, PETER HUSTON ON BEHALF
15 OF THE CHRONICLE. IF IT PLEASE THE COURT.
16 CROSS-EXAMINATION
17 BY MR. HUSTON:
18 Q. MR. CLANCY, YOU HAVE TALKED ABOUT THE MEETING THAT WAS
19 HELD ON MARCH 25TH. THAT WAS A SATURDAY, WAS IT NOT?
20 A. YES.
21 Q. IT WAS AN ALL-DAY MEETING?
22 A. YES.
23 Q. AND YOU HAVE TESTIFIED TO THE OTHER NEWSPAPER EXPERTS THAT
24 WERE AT THAT MEETING, EACH OF WHICH HAS EXTENSIVE EXPERIENCE IN
25 THE NEWSPAPER INDUSTRY, CORRECT? 619
CLANCY - CROSS / HUSTON
1 A. YES.
2 Q. AND IT WAS THE CONSENSUS OF THAT GROUP OF PEOPLE THAT THE
3 EXAMINER, AS IT CURRENTLY STANDS, IS LOSING MONEY; ISN'T THAT
4 RIGHT?
5 A. THE EXAMINER WOULD BE LOSING MONEY IF IT WERE OUTSIDE OF
6 THE JOA.
7 Q. AND THAT'S YOUR OPINION, AS WELL?
8 A. YES.
9 Q. AND, IN FACT, THE EXHIBIT WE JUST LOOKED AT, WHICH IS
10 EXHIBIT 323, SHOWS A LOSS OF $38 MILLION AND SOME CHANGE,
11 CORRECT?
12 A. THAT'S CORRECT.
13 Q. AND THAT'S YOUR ESTIMATE OF WHAT THE EXAMINER IS CURRENTLY
14 LOSING?
15 A. THAT WOULD BE MY ESTIMATE BASED UPON THE CURRENT EXPENSES
16 THAT WERE PROVIDED ON THAT SHEET.
17 Q. AND YOU WILL ALSO NOTICE SOME HANDWRITING OVER HERE IN THE
18 LOWER LEFT-HAND CORNER?
19 A. I WASN'T FINISHED, IF I COULD.
20 Q. I'M SORRY. GO RIGHT AHEAD.
21 A. THAT'S QUITE ALL RIGHT.
22 THIS GAVE THE CURRENT EXPENSE STRAIN. TO TRY AND
23 MAKE A DETERMINATION OF WHAT THE FUTURE EXAMINER WOULD FACE
24 RELATIVE TO ITS OPERATING EXPENSES AND REVENUE EXPENSES, AN
25 ESTIMATE WAS MADE OF THE CURRENT EXPENSE STRAIN, AND I ADDED TO 620
CLANCY - CROSS / HUSTON
1 THAT MY ESTIMATE OF WHAT THE REVENUE WOULD BE IF THE EXAMINER
2 WERE FREESTANDING, WHICH IT'S NOT. SO IN A SENSE IT'S
3 HYPOTHETICAL.
4 SO WE LOOK DOWN AT THE BOTTOM, AND WHAT YOU SEE
5 THERE IS IN MY HANDWRITING ON THE RIGHT WAS THE $38,190,000.
6 IN NO WAY DO I WISH TO REPRESENT THAT AS BEING WHAT ACTUALLY
7 EXISTS TODAY. IT'S A HYPOTHETICAL CASE WHERE THE EXAMINER IS
8 STANDING ALONE AND IS NOT PART OWNER OF THE SAN FRANCISCO
9 NEWSPAPER AGENCY AND ENJOINED IN THAT EXCESS THAT'S THROWN OFF.
10 Q. UNDERSTOOD.
11 IT'S YOUR BEST ESTIMATE BASED ON THE DATA THAT YOU
12 HAVE AVAILABLE TO YOU?
13 A. YES, OF A HYPOTHETICAL, FREE-STANDING EXAMINER, NOT PART
14 OF THE JOA.
15 Q. THANK YOU.
16 AND YOU BELIEVE THAT ABSENT THE JOINT OPERATING
17 AGREEMENT, THE CHRONICLE WOULD SURVIVE BUT THE EXAMINER WOULD
18 FAIL?
19 A. THAT OPINION IS BASED UPON MY UNDERSTANDING OF THE
20 TRANSACTION THAT WAS TO TAKE PLACE, YES.
21 Q. BUT THAT IS YOUR OPINION?
22 A. YES, IT IS.
23 Q. AND WE HAVE TALKED ABOUT THE SUBSIDY -- TWO DIFFERENT
24 SUBSIDIES WE HAVE TALKED ABOUT, ONE THAT YOU UNDERSTAND IS
25 BEING PROVIDED TO THE FANGS AND ALSO ONE THAT YOU BELIEVE WOULD 621
CLANCY - CROSS / HUSTON
1 BE NECESSARY FOR THE EXAMINER TO SURVIVE.
2 AND IT WAS THE CONSENSUS OF THE GROUP, AS YOU'VE
3 TESTIFIED, THAT $250 MILLION SPREAD OVER FIVE YEARS WOULD BE
4 REQUIRED FOR THE EXAMINER TO SURVIVE; IS THAT CORRECT?
5 A. THAT WAS THE FIGURE THAT WAS DERIVED AT IN THE CONSENSUS,
6 YES.
7 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25 622
CLANCY - CROSS / HUSTON
1 Q. AND YOU AGREE WITH THAT; ISN'T THAT RIGHT?
2 A. YES.
3 Q. AND THAT SUBSIDY WOULD JUST COVER THE COSTS OF PRODUCING
4 THE PAPER AND YOU WOULD BE SKEPTICAL THAT THAT WOULD INCLUDE
5 ANY PROFIT; ISN'T THAT RIGHT?
6 A. THAT WAS MY BELIEF, YES.
7 Q. NOW, YOU WOULD AGREE, WOULDN'T YOU, THAT A NEWSPAPER'S
8 ABILITY TO GENERATE REVENUE IS DEPENDENT ON ITS CIRCULATION?
9 A. THAT WOULD BE THE PRIMARY ASSET THAT THE NEWSPAPER HAD.
10 THE SECONDARY ASSET WOULD BE THE QUALITY OF THE PRODUCT THAT
11 WAS PRODUCED.
12 Q. AND CIRCULATION IS A FUNCTION OF COMPETITION THAT A
13 NEWSPAPER FACES; IS IT NOT?
14 A. YES.
15 Q. AND AS A SOURCE OF NEWS AND EDITORIAL COMMENTARY, THE
16 EXAMINER AND THE CHRONICLE COMPETE WITH OTHER BAY AREA
17 NEWSPAPERS; CORRECT?
18 A. YES, THEY DO.
19 Q. THAT WOULD INCLUDE THE SAN JOSE MERCURY NEWS; CORRECT?
20 A. YES.
21 Q. AND OTHER PAPERS IN THE BAY AREA, INCLUDING THE CONTRA
22 COSTA TIMES?
23 A. YES.
24 Q. AND THE SAN FRANCISCO CHRONICLE AND THE SAN FRANCISCO
25 EXAMINER COMPETE AS WELL WITH NATIONAL PAPERS; WOULDN'T YOU 623
CLANCY - CROSS / HALLING
1 AGREE?
2 A. ON A CIRCULATION BASIS.
3 Q. AND ON A CIRCULATION BASIS YOU WOULD AGREE THAT THEY
4 COMPETE WITH THE INTERNET; WOULDN'T YOU? AT LEAST --
5 A. I HAVE SEEN NO REAL RESEARCH THAT SAYS THERE'S COMPETITION
6 THERE. I HAVE SEEN NO HARD NUMBERS ON WHO IS USING THE
7 INTERNET. MY EXPERIENCE SUGGESTS THAT INFORMATION FROM THE
8 INTERNET AT SOME POINT WILL BE EXTREMELY IMPORTANT BUT RIGHT
9 NOW MY UNDERSTANDING IS THAT IT HASN'T REACHED THE CRITICAL
10 MASS THAT WOULD BE PERCEIVED AS SIGNIFICANT COMPETITION OR
11 COMPETITION.
12 Q. AND YOU WOULD AGREE THAT THE EXAMINER AND THE CHRONICLE
13 COMPETE WITH LOCAL RADIO?
14 A. YES.
15 Q. AND LOCAL TV AS WELL?
16 A. YES, ON THE ADVERTISING DOLLAR SIDE.
17 Q. AND THEY WOULD ALSO COMPETE WITH WEEKLY NEWSPAPERS; ISN'T
18 THAT CORRECT?
19 A. TO A LESSER DEGREE, BUT STILL ON THE ADVERTISING DOLLAR
20 SIDE.
21 MR. HUSTON: NOTHING FURTHER.
22 THE COURT: MR. HALLING?
23 CROSS-EXAMINATION
24 BY MR. HALLING:
25 Q. MR. CLANCY, YOU SAID THAT CHANGES IN THE FORMAT AND 624
CLANCY - CROSS / HALLING
1 CONTENT OF A NEWSPAPER CAN HAVE AN ADVERSE EFFECT ON THAT
2 PAPER; IS THAT CORRECT?
3 A. YES. IT DISTURBS THE READERSHIP AND DISTURBS THE
4 ADVERTISERS.
5 Q. SO CONTINUITY IS IMPORTANT IN THIS BUSINESS?
6 A. ABSOLUTELY.
7 Q. NOW, THE DAILY CHRONICLE -- STRIKE THAT.
8 NOW, DAILY CHRONICLE SUBSCRIBERS ON SUNDAY, THEY GET
9 A DIFFERENT CONTENT AND FORMAT, DON'T THEY, THAN THE DAILY
10 PAPER?
11 A. YES, THEY DO.
12 Q. AND THAT'S BECAUSE THE EXAMINER DOES THE EDITING ON SUNDAY
13 BUT THE CHRONICLE SUBSCRIBERS HAVE THE CHRONICLE EDITORS DURING
14 THE WEEK?
15 A. THAT'S CORRECT.
16 Q. THAT'S A PROBLEM FOR THE AGENCY; ISN'T IT?
17 A. WELL, FOR THE PAST 20 YEARS THAT PROBLEM WAS ADJUSTED BY
18 THE READERS; AND I THINK THAT IF YOU WERE TO LOOK AT MOST
19 METROPOLITAN NEWSPAPERS, THAT THEIR SUNDAY CIRCULATION FAR
20 EXCEEDS THEIR DAILY CIRCULATION.
21 AND IN THE CASE OF THE CHRONICLE/EXAMINER HYBRID ON
22 SUNDAY, IT IS SUBSTANTIALLY LOWER, IF YOU WILL ALLOW ME, THAN
23 WHAT OTHER METROPOLITAN NEWSPAPERS ENJOY IN THEIR RELATIONSHIP
24 BETWEEN DAILY AND SUNDAY. AND SO I'LL DRAW THE CONCLUSION THAT
25 PART OF THAT IS THE CONFUSION THAT'S RAISED BY THIS 625
CLANCY - REDIRECT / SHULMAN
1 HYBRID-INDUCED PAPER BECAUSE THE CHRONICLE READERS DO NOT KNOW
2 WHAT THEY'RE GETTING ON SUNDAY. SOME OF THEM THINK IT'S A
3 CHRONICLE, SOME OF THEM THINK IT'S AN EXAMINER; AND THIS IS
4 BORNE OUT BY RESEARCH THAT WAS CONDUCTED BY THE AGENCY.
5 MR. HALLING: THANK YOU.
6 THE COURT: REDIRECT, MR. SHULMAN?
7 MR. SHULMAN: YES, VERY BRIEF, YOUR HONOR.
8 REDIRECT EXAMINATION
9 BY MR. SHULMAN:
10 Q. SUNDAY IS AN IMPORTANT PAPER FOR THE NEWSPAPER AGENCY?
11 A. THERE'S NO QUESTION ABOUT IT, YES.
12 Q. WE'VE HAD EVIDENCE IN THIS TRIAL THAT 40 PERCENT OF THE
13 NEWSPAPER REVENUE, THE ADVERTISING REVENUE, COMES VIA THE
14 SUNDAY PAPER.
15 A. IN THE CASE OF THE -- IN THE CASE OF THE CHRONICLE AND
16 EXAMINER, YES.
17 Q. OKAY. IN THIS TRANSACTION WITH THE FANGS, ARE THE FANGS
18 GETTING ANYTHING, ANY RIGHT TO THE SUNDAY PAPER?
19 A. TO MY UNDERSTANDING, NO.
20 MR. SHULMAN: THANK YOU.
21 THE COURT: MR. CLANCY --
22 THE WITNESS: YES, YOUR HONOR.
23 THE COURT: -- ARE THERE NEWSPAPER FIRMS THAT
24 PUBLISH BOTH A MORNING AND EVENING EDITION EITHER OF THE SAME
25 NEWSPAPER OR OF DIFFERENT NEWSPAPERS, DIFFERENT TITLES? I'M 626
CLANCY - REDIRECT / SHULMAN
1 NOT TALKING ABOUT A JOINT OPERATING AGREEMENT WITH TWO
2 OWNERSHIPS AND A JOINT PUBLISHING ARRANGEMENT, PUBLISHING AN
3 A.M. PAPER AND A P.M. PAPER, BUT ONE FIRM THAT PUBLISHES A
4 DAILY IN THE A.M. CYCLE AND ONE IN THE P.M. CYCLE.
5 THE WITNESS: ON THE SAME MASTHEAD, YOUR HONOR?
6 THE COURT: WELL, NO -- LET'S BREAK IT DOWN. ON THE
7 SAME MASTHEAD AND THEN ON DIFFERENT MASTHEADS.
8 THE WITNESS: MOST OF THE MAJORS HAVE AN EDITION
9 THAT CARRIES THE NEXT DAY'S DATE BUT ESSENTIALLY GOES TO PRESS
10 ANYWHERE FROM 9:00 O'CLOCK IN THE EVENING THROUGH TO 11:30 IN
11 THE EVENING. I DON'T KNOW IF I'M BELABORING THE POINT.
12 THE COURT: NO, YOU'RE --
13 THE WITNESS: AND THEN THE NEXT DAY THE BALANCE OF
14 THE CIRCULATION IS IN THE MORNING, THE EARLY MORNING STARTING
15 AT MIDNIGHT ON. AND THOSE PAPERS ARE REFERRED TO AS DIFFERENT
16 EDITIONS OF THE SAME PAPER, SO I --
17 THE COURT: NO, I WAS THINKING OF THE SITUATION THAT
18 YOU REFERRED TO IN CHICAGO. YOU SAID THAT THE TRIBUNE COMPANY
19 PUBLISHED THE TRIBUNE IN THE MORNING AND THEN IT PUBLISHED
20 CHICAGO TODAY IN THE AFTERNOON AND THE FIELD COMPANY PUBLISHED
21 THE SUN TIMES IN THE MORNING AND THE DAILY NEWS IN THE
22 AFTERNOON.
23 THE WITNESS: CORRECT.
24 THE COURT: ALL RIGHT. NOW, THAT WAS IN THE '70'S
25 OR SOME YEARS AGO. THAT IS NO LONGER THE CASE? 627
CLANCY - REDIRECT / SHULMAN
1 THE WITNESS: YES.
2 THE COURT: CHICAGO IS NOW DOWN TO TWO MORNING
3 NEWSPAPERS?
4 THE WITNESS: YES, SIR.
5 THE COURT: ALL RIGHT. THAT'S WHAT I UNDERSTOOD
6 YOUR TESTIMONY TO BE.
7 NOW, WHAT I'M ASKING YOU, ARE THERE ANY CITIES WHICH
8 REMAIN WITH ONE FIRM PUBLISHING A MORNING PAPER AND AN
9 AFTERNOON PAPER?
10 THE WITNESS: YOUR HONOR, I CAN'T THINK OF ANY RIGHT
11 NOW.
12 THE COURT: IS PHILADELPHIA ONE, THE ENQUIRER AND
13 THE DAILY NEWS OR DID THE DAILY NEWS BITE THE DUST?
14 THE WITNESS: I WOULD DEFER YOU TO SOMEONE THAT
15 COULD ANSWER THAT. I THINK THAT -- I'M SPECULATING. I DON'T
16 WANT TO DO THAT.
17 THE COURT: ALL RIGHT. YOU'RE NOT AWARE OF ANY SUCH
18 SITUATION ANYWHERE IN THE COUNTRY?
19 THE WITNESS: NOT AT THE PRESENT TIME, NO.
20 THE COURT: ALL RIGHT. FINE. THANK YOU,
21 MR. CLANCY, FOR YOUR TESTIMONY. YOU MAY STEP DOWN. YOU'RE
22 EXCUSED.
23 THE WITNESS: THANK YOU, YOUR HONOR.
24 (WITNESS EXCUSED.)
25 THE COURT: MR. SHULMAN OR MR. ALIOTO, WHO'S THE 628
CLANCY - REDIRECT / SHULMAN
1 NEXT WITNESS?
2 MR. SHULMAN: MR. PAGE, YOUR HONOR, ROBERT PAGE.
3 THE COURT: HOW LONG IS MR. PAGE GOING TO TAKE.
4 MR. SHULMAN: HE WILL BE ABOUT THE SAME LENGTH AS
5 THIS WITNESS IN TERMS OF TIME.
6 THE COURT: THIS WITNESS WAS, WHAT, ABOUT AN HOUR?
7 MR. SHULMAN: OR A LITTLE LESS. I'M NOT SURE.
8 THE COURT: WELL, I LEAVE IT TO YOU, COUNSEL. SHALL
9 WE PROCEED WITH MR. PAGE OR SHALL WE CALL IT A DAY?
10 MR. HOCKETT: YOUR HONOR, PERHAPS THERE'S BEEN A
11 BREAKDOWN OF COMMUNICATIONS, BUT I HAD UNDERSTOOD THE ORDER OF
12 WITNESSES TO HAVE MR. ASHER BE NEXT INSTEAD OF MR. PAGE.
13 MR. SHULMAN: MAYBE THERE HAS BEEN A BREAKDOWN IN
14 COMMUNICATIONS. I TOLD COUNSEL FOR HEARST AT THE RECESS THAT
15 WE WOULD NOT START MR. ASHER THIS AFTERNOON BECAUSE WE'D HAVE
16 TO INTERRUPT HIM FOR THE WITNESS TOMORROW MORNING THAT THE
17 CHRONICLE IS BRINGING THAT WE'VE AGREED TO HAVE OUT OF ORDER.
18 SO I DID ADVISE THEM OF MR. PAGE. I'M SORRY IF YOU DIDN'T GET
19 THAT INFORMATION.
20 MR. HOCKETT: WELL, DESPITE THE FACT THAT WE HAVE TO
21 SIT WITH THEM BECAUSE THERE ARE ONLY TWO TABLES, WE ARE NOT THE
22 SAME PARTY.
23 THE COURT: ALL RIGHT. WELL, THE QUESTION IS
24 WHETHER WE PUT ON MR. PAGE THIS AFTERNOON. IS THAT A PROBLEM
25 IF MR. PAGE IS THE NEXT WITNESS? 629
CLANCY - REDIRECT / SHULMAN
1 MR. HOCKETT: YOUR HONOR, WE WERE PREPARED TO DO
2 ASHER. IF YOU GIVE ME A MOMENT AND LET ME JUST CHECK AND SEE
3 WHERE WE ARE WITH MR. PAGE.
4 THE COURT: ALL RIGHT. I TAKE IT YOU'RE CARRYING
5 THE LABORING OAR ON CROSS-EXAMINATION OF MR. PAGE?
6 MR. HOCKETT: YES, I AM, YOUR HONOR.
7 THE COURT: ALL RIGHT.
8 (PAUSE IN PROCEEDINGS.)
9 MR. HOCKETT: IF THE COURT WISHES TO PROCEED, I
10 THINK WE CAN PROCEED WITH MR. PAGE IF THAT'S WHAT YOU WISH.
11 THE COURT: VERY WELL. IF THAT IS AGREEABLE TO
12 COUNSEL, LET'S PUT MR. PAGE ON. WE'LL COMPLETE HIM TODAY AND
13 THEN WE'LL BE ABLE TO START WITH THE CHRONICLE WITNESS TOMORROW
14 MORNING.
15 MR. LINDSTROM: THAT'S RIGHT, YOUR HONOR. SHE'LL BE
16 HERE FROM BOSTON TO BEGIN AT 8:30.
17 THE COURT: THIS IS?
18 MR. LINDSTROM: MS. GREENTHAL, THE INVESTMENT BANKER
19 FROM THE DOJ.
20 THE COURT: MR. SIAS TALKED ABOUT HER YESTERDAY.
21 MR. LINDSTROM: HE DID INDEED.
22 THE COURT: SORRY?
23 MR. LINDSTROM: HE DID INDEED SPEAK OF HER.
24 THE COURT: ALL RIGHT. THIS IS MR. PAGE, I GATHER.
25 THE WITNESS: IT IS. 630
PAGE - DIRECT / SHULMAN
1 ROBERT E. PAGE,
2 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,
3 TESTIFIED AS FOLLOWS:
4 THE CLERK: THANK YOU. PLEASE BE SEATED.
5 PLEASE STATE YOUR FULL NAME FOR THE RECORD AND SPELL
6 YOUR LAST NAME.
7 THE WITNESS: MY NAME IS ROBERT E. PAGE, P-A-G-E.
8 THE COURT: YOU MAY PROCEED.
9 MR. SHULMAN: MAY IT PLEASE THE COURT.
10 DIRECT EXAMINATION
11 BY MR. SHULMAN:
12 Q. MR. PAGE, WOULD YOU PLEASE TELL THE COURT YOUR ADDRESS?
13 A. MY ADDRESS IS 7302 GREEK DRIVE, ALCOSTA, CALIFORNIA.
14 Q. AND WHAT IS YOUR AGE, MR. PAGE?
15 A. 64.
16 Q. WOULD YOU SUMMARIZE BRIEFLY YOUR EDUCATIONAL BACKGROUND?
17 A. I HAVE AN UNDERGRADUATE DEGREE FROM MY ALMA MATER,
18 ILLINOIS WESLEYAN UNIVERSITY IN POLITICAL SCIENCE.
19 MR. SHULMAN: OKAY. MAY I APPROACH THE WITNESS,
20 YOUR HONOR?
21 THE COURT: YES, YOU MAY.
22 BY MR. SHULMAN:
23 Q. MR. PAGE, I HAVE PLACED IN FRONT OF YOU WHAT IS
24 PLAINTIFF'S EXHIBIT 59 IN EVIDENCE.
25 MR. HUSTON: YOUR HONOR, I DON'T BELIEVE THAT IS IN 631
PAGE - DIRECT / SHULMAN
1 EVIDENCE.
2 MR. SHULMAN: OH.
3 MR. HUSTON: WE ONLY HAVE AN OBJECTION WITH ONE
4 PARAGRAPH OF THAT DECLARATION, BUT THAT'S A RELEVANCE
5 OBJECTION. ASIDE FROM THAT, WE DON'T HAVE AN OBJECTION; BUT IF
6 THAT PARAGRAPH COULD BE EITHER STRICKEN OR NOT --
7 THE COURT: WHAT PARAGRAPH ARE YOU SPEAKING OF,
8 MR. HUSTON?
9 MR. SHULMAN: PARAGRAPH 5, YOUR HONOR. I DO NOT
10 INTEND TO -- HANG ON A SECOND IF I COULD.
11 (PAUSE IN PROCEEDINGS.)
12 MR. SHULMAN: I TAKE THAT BACK. I DO INTEND TO
13 QUESTION THIS WITNESS ABOUT THAT PARAGRAPH.
14 THE COURT: WELL, THIS IS A DECLARATION THAT WAS
15 FILED WITH THE COURT IN CONNECTION WITH THE PRELIMINARY
16 INJUNCTION MOTION; IS THAT NOT TRUE?
17 MR. HUSTON: THAT IS TRUE.
18 THE COURT: AND YOU'RE OBJECTING TO ITS ADMISSION
19 INTO EVIDENCE FOR THESE PROCEEDINGS?
20 MR. HUSTON: YOUR HONOR, I'M OBJECTING TO PARAGRAPH
21 5 BECAUSE IT ENCOMPASSES SUBJECT MATTER THAT'S WHOLLY
22 IRRELEVANT TO THESE PROCEEDINGS.
23 THE COURT: WELL, CAN'T WE ADMIT THE EXHIBIT? AFTER
24 ALL, THE COURT CAN TAKE COGNIZANCE OF IT AND YOU CAN ARGUE
25 WHETHER OR NOT PARAGRAPH 5 IS RELEVANT AND IF IT IS RELEVANT 632
PAGE - DIRECT / SHULMAN
1 WHAT THE COURT SHOULD MAKE OF IT.
2 MR. HUSTON: YOUR HONOR, THAT'S FINE. I JUST WANTED
3 THE RECORD TO REFLECT OUR OBJECTION.
4 THE COURT: ALL RIGHT. THE RECORD WILL SO REFLECT.
5 OBJECTION 59 WILL BE ADMITTED.
6 MR. SHULMAN: THANK YOU.
7 (PLAINTIFF'S EXHIBIT 59
8 RECEIVED IN EVIDENCE)
9 BY MR. SHULMAN:
10 Q. EXHIBIT 59 IS ENTITLED "DECLARATION OF ROBERT PAGE IN
11 SUPPORT OF PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION." DO
12 YOU RECOGNIZE THIS AS A DECLARATION THAT YOU SIGNED IN THIS
13 CASE?
14 A. I DO.
15 Q. OKAY. NOW, THIS PARAGRAPH 1, WHICH I'LL GET INTO IN A
16 LITTLE BIT OF DETAIL, RECITES SOME OF YOUR JOB EXPERIENCE AND
17 THE EARLIEST REFERENCE HERE IS 1975. DO YOU SEE THAT? THAT'S
18 ON LINE 20 -- LINE 25 ON THE FIRST PAGE.
19 A. YES, SIR.
20 Q. OKAY. HOW LONG HAVE YOU -- WHEN DID YOU FIRST ENTER THE
21 NEWSPAPER BUSINESS?
22 A. WHEN I WAS 16.
23 Q. SO YOU HAD SOME EXPERIENCE. AND HOW MANY YEARS WERE YOU
24 IN THE NEWSPAPER BUSINESS?
25 A. WELL, I GUESS 64 MINUS 16 IS 48. THAT'S A LONG TIME. 633
PAGE - DIRECT / SHULMAN
1 Q. YOU'RE STILL IN THAT BUSINESS?
2 A. STILL IN THE BUSINESS.
3 Q. OKAY. WHAT IS YOUR CURRENT EMPLOYMENT?
4 A. I OWN THREE COMMUNITY NEWSPAPERS IN SAN DIEGO.
5 Q. AND HOW LONG HAVE YOU DONE THAT?
6 A. THE LAST NINE YEARS.
7 Q. WHAT ARE THE NAMES OF THE NEWSPAPERS?
8 A. THE RANCHO SANTA FE REVIEW, THE DEL MAR VILLAGE VOICE AND
9 THE CARMEL VALLEY NEWS.
10 Q. AND WHAT IS YOUR POSITION WITH THOSE PAPERS? WHAT'S YOUR
11 TITLE?
12 A. WELL, I COULD TELL YOU I'M THE OWNER; BUT WHEN YOU'RE THE
13 OWNER OF COMMUNITY NEWSPAPERS, YOU DO EVERYTHING.
14 Q. CAN YOU GIVE US A BRIEF HISTORY, A THUMBNAIL HISTORY OF
15 YOUR CAREER IN THE NEWSPAPER BUSINESS FROM THE TIME YOU STARTED
16 AT THE AGE OF 16 UNTIL 1975, WHICH WILL BRING US UP TO UNITED
17 PRESS INTERNATIONAL?
18 A. WELL, AT 16 IN HIGH SCHOOL I BECAME A SPORTS WRITER FOR
19 THE ILLINOIS STATE JOURNAL IN SPRINGFIELD, ILLINOIS, WHICH WAS
20 THEN AND STILL IS TODAY OWNED BY THE COPLEY NEWSPAPERS IN SAN
21 DIEGO.
22 I WORKED FOR COPLEY DURING MY HIGH SCHOOL AND
23 COLLEGE YEARS IN THE SPORTS DEPARTMENT OF THE JOURNAL; AND UPON
24 GRADUATION OF FINISHING MY TERM IN THE UNITED STATES ARMY, I
25 WENT TO WORK FOR UNITED PRESS INTERNATIONAL IN DES MOINES AS A 634
PAGE - DIRECT / SHULMAN
1 REPORTER. THAT WAS 1960.
2 AND UPI PLAYED A GAME CALLED "CHASE THE CHECK."
3 EVERY SIX TO NINE MONTHS THEY SEEMED TO TRANSFER ME, AND I WENT
4 FROM DES MOINES TO DETROIT, GRAND RAPIDS TO INDIANAPOLIS TO
5 CHICAGO TO NEW YORK TO LONDON TO BOSTON TO HONG KONG AND BACK
6 TO NEW YORK. AND WHEN I RESIGNED IN 1980, I WAS THE VICE
7 PRESIDENT, GENERAL MANAGER AND CHIEF OPERATING OFFICER.
8 Q. OKAY. THIS SAYS ON LINE 25:
9 "FROM 1975 TO 1980 I WAS THE CHIEF OPERATING
10 OFFICER OF THE UNITED PRESS INTERNATIONAL, UPI."
11 WHAT WAS UPI?
12 A. YOU'RE RIGHT, WHAT WAS UPI. UNITED PRESS INTERNATIONAL
13 UNTIL UNFORTUNATELY D.W. SCRIPPS COMPANY SOLD IT IN 1982, WAS A
14 FULLY-COMPETITIVE, WORLDWIDE NEWS SERVICE, FULLY COMPETITIVE TO
15 THE ASSOCIATED PRESS. WE HAD BUREAUS AROUND THE WORLD. I
16 DON'T RECALL EXACTLY HOW MANY EMPLOYEES WE HAD.
17 BUT PRIOR TO 1975, 1972-1975, I WAS OUR VICE
18 PRESIDENT IN HONG KONG IN CHARGE OF, AMONG OTHER THINGS, OUR
19 VIETNAM COVERAGE. AT ONE POINT WE HAD 33 PEOPLE IN THE SAIGON
20 BUREAU.
21 AND I LEFT UPI IN 1980 TO JOIN HEARST. BUT AS
22 GENERAL MANAGER AND CHIEF OPERATING OFFICER I WAS BASICALLY THE
23 NUMBER TWO MAN IN CHARGE OF THE COMPANY.
24 Q. OKAY. FROM 1975 TO 1980 YOU WERE THE CHIEF OPERATING
25 OFFICER; RIGHT? 635
PAGE - DIRECT / SHULMAN
1 A. CORRECT.
2 Q. AND THAT'S WHAT YOU REFER TO AS THE NUMBER TWO PERSON IN
3 THE COMPANY?
4 A. YES, SIR. I WORKED FOR THE PRESIDENT OF THE COMPANY. HE
5 WAS THE CEO.
6 Q. NOW, WHAT WERE YOUR DUTIES AND RESPONSIBILITIES AS CHIEF
7 OPERATING OFFICER OF UNITED PRESS INTERNATIONAL?
8 A. WELL, I WAS BASICALLY IN CHARGE OF EVERYTHING BUT THE
9 EDITORIAL OPERATIONS. ALTHOUGH LIKE ALL OF US AT UPI, WE GREW
10 UP ON THE NEWS SIDE AS REPORTERS AND EDITORS; BUT AT THAT TIME
11 WE HAD AN EDITOR AND I WAS IN CHARGE OF PERSONNEL, LABOR,
12 SALES, MARKETING, HUMAN RESOURCES, JUST ABOUT EVERYTHING BUT
13 THE ACTUAL NEWS COVERAGE, WHICH WAS UNDER THE DIRECTION OF THE
14 EDITOR.
15 Q. THEN IF WE GO UP TO LINE 24, IT SAYS:
16 "BETWEEN 1980 AND 1981, I WAS THE EDITOR AND
17 ASSOCIATE PUBLISHER OF THE SAN ANTONIO LIGHT."
18 DO YOU SEE THAT?
19 A. YES, SIR.
20 Q. NOW, YOU MAKE REFERENCE OF GOING TO WORK FOR HEARST. IS
21 THAT WHAT YOU'RE --
22 A. I WENT TO WORK FOR THE HEARST NEWSPAPER IN SAN ANTONIO IN
23 AUGUST OF 1980.
24 Q. AND WHAT WERE YOUR DUTIES AND RESPONSIBILITIES AS EDITOR
25 AND ASSOCIATE PUBLISHER OF THE SAN ANTONIO LIGHT? 636
PAGE - DIRECT / SHULMAN
1 A. WELL, AS THE EDITOR, I WAS THE CHIEF EDITOR OF THE
2 NEWSPAPER; AND AS ASSOCIATE PUBLISHER, I WAS INVOLVED IN ALL OF
3 THE OTHER OPERATIONS, BUT I DIDN'T HAVE DIRECT LINE AUTHORITY
4 FOR THEM, BUT I WAS SORT OF LIKE THE ASSISTANT TO THE
5 PUBLISHER. AND WE DEALT WITH MARKETING, CIRCULATION,
6 PRODUCTION AND ALL THOSE THINGS. THAT WAS SORT OF MY FIRST
7 REAL EXPERIENCE ON THE NEWSPAPER SIDE HAVING LEFT THE WIRE
8 SERVICE.
9 Q. NOW, IF WE GO UP TO LINE 22, IT SAYS, "IN 19" -- I'M
10 SORRY. YEAH.
11 "IN 1982 I WAS THE VICE PRESIDENT OF NEWS
12 AMERICA PUBLISHING, WHICH IS OWNED BY RUPERT
13 MURDOCH."
14 WHAT WAS NEWS AMERICA PUBLISHING?
15 A. NEWS AMERICA PUBLISHING IS THE UNITED STATES HOLDING
16 COMPANY FOR MR. MURDOCH'S OPERATIONS IN THE U.S.A. WELL, MAYBE
17 THEY'VE OBVIOUSLY CHANGED NOW BECAUSE THAT'S 18 YEARS AGO. BUT
18 AT THE TIME NEWS AMERICA PUBLISHING WAS THE PARENT COMPANY FOR
19 THE STAR MAGAZINE, THE NEW YORK POST, THE SAN ANTONIO EXPRESS
20 NEWS AND NEW YORK MAGAZINE.
21 Q. AND WHAT WERE YOUR DUTIES AND RESPONSIBILITIES AS VICE
22 PRESIDENT?
23 A. PRINCIPALLY I WAS THE VICE PRESIDENT WITHOUT A SPECIFIC
24 PORTFOLIO, BUT ONE OF THE THINGS THAT MR. MURDOCH HAD ME DO WAS
25 LOOK INTO ACQUISITIONS FOR NEWSPAPERS. 637
PAGE - DIRECT / SHULMAN
1 Q. SO DID YOU WORK CLOSELY WITH MR. MURDOCH?
2 A. I DID.
3 Q. AND YOU MENTIONED ONE OF THE NEWSPAPERS WAS IN SAN
4 ANTONIO.
5 A. YES, SIR, SAN ANTONIO EXPRESS NEWS.
6 Q. WAS THAT IN COMPETITION WITH THE HEARST PAPER?
7 A. INDEED IT WAS.
8 Q. WHAT HAPPENED?
9 A. WELL, MR. MURDOCH RECRUITED ME AND ASKED ME TO LEAVE THE
10 SAN ANTONIO LIGHT AND JOIN THE EXPRESS NEWS, WHICH I DID IN THE
11 SPRING OF 1981. AND I WAS GENERAL MANAGER THERE, I BELIEVE,
12 UNTIL SOMETIME DURING THE SUMMER OF 1982 WHEN HE BROUGHT ME TO
13 NEW YORK AND MADE ME A VICE PRESIDENT OF THE PARENT COMPANY AND
14 I SAID, AMONG OTHER THINGS, HE ESSENTIALLY HAD ME LOOKING FOR
15 NEWSPAPERS TO BUY.
16 Q. ONE OF THE NEWSPAPERS THAT MR. MURDOCH OWNED WAS THE NEW
17 YORK DAILY NEWS?
18 A. NO. THE NEW YORK POST.
19 Q. SORRY, THE NEW YORK POST.
20 AND DID YOU HAVE ANY DUTIES AND RESPONSIBILITIES
21 INVOLVING THAT PAPER?
22 A. NO, SIR, I DID NOT.
23 Q. OKAY. NOW, IN LINE 22 IT SAYS:
24 "IN 1983 I WAS THE PRESIDENT AND PUBLISHER
25 OF THE BOSTON HERALD." 638
PAGE - DIRECT / SHULMAN
1 CAN YOU TELL US ABOUT THAT?
2 A. YES. ONE OF THE DUTIES I HAD IN LOOKING FOR NEWSPAPERS TO
3 BUY -- MANY OF YOU MAY NOT KNOW MR. MURDOCH PERSONALLY, BUT THE
4 BEST WAY TO DESCRIBE HIM IS THAT HE'S A GREAT COMPETITOR AND HE
5 LOVES TO COMPETE.
6 AND ONE OF THE FIRST NEWSPAPERS WE IDENTIFIED WHICH
7 WAS FOR SALE WAS THE BUFFALO COURIER EXPRESS. WE WENT TO
8 BUFFALO. WE WERE TRYING TO BUY THE NEWSPAPER FROM THE COWLES
9 ORGANIZATION AND IN OUR INABILITY TO NEGOTIATE PROPER LABOR
10 CONTRACTS WITH THE 12 OR 13 UNIONS WHICH WERE IN THE COURIER
11 EXPRESS, THE DEAL WAS NOT CONSUMMATED AND WE RETURNED HOME TO
12 NEW YORK AND THE COWLES PEOPLE CLOSED THE NEWSPAPER.
13 A FEW WEEKS LATER MR. MURDOCH SAID TO ME, "LET'S
14 START A NEWSPAPER IN BOSTON." AND I SAID TO HIM, I SAID,
15 "WELL, THERE'S ALREADY THE BOSTON HERALD AMERICAN THE HEARST
16 FOLKS OWNED AND THE BOSTON GLOBE." AND HE SAID, "WELL, SO
17 WHAT? LET'S START A THIRD NEWSPAPER." AND HE SAID, "GO TO
18 BOSTON, FIND OURSELVES A PRINTING FACILITY, FIND A PLACE --
19 LEASE SOME OFFICE SPACE. LET'S THINK ABOUT RECRUITING PEOPLE.
20 WE'VE GOT ENOUGH PEOPLE IN OUR OTHER ORGANIZATIONS WE CAN BRING
21 INTO BOSTON, AND WE'LL START A NEWSPAPER."
22 AND SHORTLY THEREAFTER THE HEARST ORGANIZATION
23 GOT -- WELL, THEY BECAME FAMILIAR OF MY ROAMING AROUND BOSTON,
24 AND THEY CALLED ME AND SUGGESTED THAT RATHER THAN OUR STARTING
25 A THIRD COMPETITIVE NEWSPAPER IN BOSTON, THAT WHY DIDN'T 639
PAGE - DIRECT / SHULMAN
1 MR. MURDOCH BUY THE HERALD AMERICAN FROM THEM.
2 AT THAT POINT MR. MURDOCH MET WITH MR. BENNACK.
3 THERE WAS AN AGREEMENT MADE BETWEEN THE TWO OF THEM THAT
4 SUBJECT TO OUR ABILITY TO NEGOTIATE SUCCESSFULLY THE 12 TO 13
5 LABOR CONTRACTS WITHIN A 15-DAY PERIOD, WE WOULD BE ABLE TO
6 ACQUIRE THE HERALD.
7 AND IN ABOUT 15 DAYS, THOSE CONTRACTS WERE
8 NEGOTIATED. THERE WAS SOME INTERESTING AND AMUSING EVENTS YOU
9 CAN IMAGINE 13 LABOR CONTRACTS IN 15 DAYS. BUT WE FINALLY
10 SETTLED THE LAST UNION I BELIEVE WERE THE MAILERS ABOUT 4:00
11 O'CLOCK IN THE MORNING AND THE DEAL CLOSED TWO WEEKS LATER.
12 AND WE CHANGED THE NAME OF THE PAPER FROM THE HERALD AMERICAN
13 TO THE HERALD.
14 Q. SO YOU WERE THE PRESIDENT AND PUBLISHER OF THAT NEWSPAPER,
15 THEN, IN 1983?
16 A. YEAH. THAT WAS MY REWARD.
17 Q. OKAY. WHAT WERE YOUR DUTIES AND RESPONSIBILITIES AS
18 PRESIDENT AND PUBLISHER OF THE BOSTON HERALD?
19 A. WELL, I WAS THE CEO OF THE NEWSPAPER. THE HERALD -- THE
20 HEARST ORGANIZATION HAD DONE A VERY SMART THING. THEY HAD AT
21 LEAST CONVERTED IT TO A TABLOID THE YEAR PRIOR TO OUR
22 ACQUISITION OF IT, SO AT LEAST WE HAD A DIFFERENT IDENTITY IN
23 THE MARKETPLACE.
24 WE WENT IN THEN AND CHANGED THE PAPER SIGNIFICANTLY
25 IN EDITORIAL. WE HAD TO PUT $14 MILLION IN CAPITAL 640
PAGE - DIRECT / SHULMAN
1 IMPROVEMENTS IN THE FIRST YEAR WE OWNED IT. THE PAPER HAD
2 LITERALLY BEEN LEFT FOR DEAD, AND IT TOOK AN ORGANIZATION OF
3 MR. MURDOCH'S FINANCIAL WHEREWITHAL TO BE ABLE TO PUT IT BACK
4 TOGETHER AGAIN.
5 AND AFTER THE FIRST YEAR -- I THINK, AS I RECALL
6 WHEN WE TOOK IT OVER THE PRIOR YEAR UNDER HEARST, I BELIEVE IT
7 LOST SOMEWHERE IN THE NEIGHBORHOOD OF 12 TO $14 MILLION A YEAR;
8 AND AFTER ONE YEAR, WE HAD REDUCED THE LOSS TO 4 MILLION. AND
9 AT THAT POINT MR. MURDOCH WAS IN THE PROCESS OF BUYING THE
10 CHICAGO SUN TIMES.
11 Q. OKAY. SO THAT'S LINE 21 OF YOUR DECLARATION. IT SAYS:
12 "I CO-OWNED THE CHICAGO SUN TIMES FROM 1986
13 TO 1989."
14 CAN YOU -- WELL, IT SAYS ACTUALLY IN LINE 1:
15 "I AM THE FORMER PRESIDENT, PUBLISHER AND
16 OWNER OF THE CHICAGO SUN TIMES. I SERVED AS
17 PRESIDENT AND PUBLISHER FROM 1984 TO 1989. I
18 CO-OWNED THE CHICAGO SUN TIMES FROM 1986 TO
19 1989."
20 SO AT THE TIME YOU LEFT BOSTON, THERE WERE TWO
21 NEWSPAPERS IN COMPETITION; RIGHT?
22 A. CORRECT. THE HERALD AND THE GLOBE.
23 Q. WITHOUT A JOA?
24 A. WITHOUT A JOA.
25 Q. ALL RIGHT. SO TELL US HOW YOU ENDED UP IN CHICAGO. 641
PAGE - DIRECT / SHULMAN
1 A. MR. MURDOCH TOLD ME TO GO TO CHICAGO. HE BOUGHT THE SUN
2 TIMES FROM THE FIELD ENTERPRISE ORGANIZATION OWNED BY MARSHALL
3 FIELD. AGAIN MR. MURDOCH WAS THE ULTIMATE COMPETITOR. HE WAS
4 TRYING TO EXPAND HIS COMPANY IN THE UNITED STATES.
5 THE SUN TIMES WAS FOR SALE. THE PUBLISHER OF THE
6 SUN TIMES ANNOUNCED THE DAY IT WAS FOR SALE THAT THEY WOULD
7 SELL TO ANYBODY BUT MR. MURDOCH. THEY SOLD TO MR. MURDOCH.
8 THEY SOLD IT TO HIM FOR $90 MILLION AND TWO AND A HALF YEARS
9 OUR INVESTMENT BANKERS DECIDED THE PAPER WAS WORTH
10 $145 MILLION, AND THAT'S WHAT WE PAID MR. MURDOCH TO BUY IT IN
11 1986.
12 Q. YOU BOUGHT IT WITH SOMEBODY ELSE?
13 A. SOMEBODY ELSE'S MONEY. YEAH, WE PUT A GROUP TOGETHER. WE
14 HAD A GROUP OF INVESTMENT BANKERS, EQUITABLE WAS IN THE DEAL,
15 CITICORP WAS IN THE DEAL, ADLER & SHAYKEN INVESTMENT FIRM,
16 PEERS & CO. AND MYSELF.
17 Q. AND AS THE PRESIDENT AND PUBLISHER OF THE CHICAGO SUN
18 TIMES, WHAT DID YOU DO?
19 A. WELL, I WAS THE CEO. YOU KNOW, I WAS THE CHIEF EXECUTIVE
20 OFFICER IN CHARGE OF THE COMPANY.
21 Q. WHAT WAS THE CIRCULATION OF THE PAPER WHEN YOU LEFT?
22 A. WELL, MY RECOLLECTION IT WAS SOMEWHERE IN THE NEIGHBORHOOD
23 OF 630, 635,000 DAILY AND ROUGHLY THE SAME, MAYBE A FEW
24 THOUSAND MORE ON SUNDAY, MAYBE 640, 645 SUNDAY. OUR
25 CIRCULATIONS IN CHICAGO SEVEN DAYS WERE ROUGHLY COMPARABLE 642
PAGE - DIRECT / SHULMAN
1 EVERY DAY.
2 Q. WERE YOU IN COMPETITION WITH ANOTHER DAILY NEWSPAPER?
3 A. THE CHICAGO TRIBUNE.
4 Q. AND WAS THERE ANY JOA IN EFFECT?
5 A. THERE WAS NOT.
6 Q. OKAY. NOW, AT SOME POINT YOU WERE RETAINED IN CONNECTION
7 WITH THIS CASE; WERE YOU NOT?
8 A. YES, SIR.
9 Q. HOW DID YOU COME TO BE RETAINED?
10 A. BY MR. JOSEPH BARLETTA WHO CALLED ME ON BEHALF OF
11 MR. REILLY.
12 Q. WOULD YOU IDENTIFY WHO MR. BARLETTA IS?
13 A. YES. MR. BARLETTA IS THE FORMER PRESIDENT AND CHIEF
14 EXECUTIVE OFFICER OF THE SAN FRANCISCO NEWSPAPER AGENCY. HE'S
15 A FORMER EXECUTIVE OF THE CHICAGO TRIBUNE, DOW JONES, HE WAS
16 THE PUBLISHER AND PRESIDENT OF THE TV GUIDE, HE WAS CHIEF
17 OPERATING OFFICER OF FREEDOM NEWSPAPERS.
18 Q. SOMEBODY THAT YOU HAD KNOWN FOR SOME PERIOD OF TIME?
19 A. I MET MR. BARLETTA INITIALLY WHEN I WAS GENERAL MANAGER OF
20 UNITED PRESS INTERNATIONAL AND HE WAS THE GENERAL MANAGER OF
21 THE NEW YORK DAILY NEWS.
22 Q. OKAY. AND YOU CAME TO SAN FRANCISCO TO LOOK AT THE
23 PROPOSED TRANSACTION BETWEEN HEARST AND THE FANG FAMILY?
24 A. YES. MR. BARLETTA CALLED ME I BELIEVE ON WEDNESDAY, MARCH
25 22ND, AND SAID THAT THERE WOULD BE A MEETING IN MR. ALIOTO'S 643
PAGE - DIRECT / SHULMAN
1 OFFICE ON SATURDAY MORNING, THE 25TH, AND HE ASKED ME IF I
2 WOULD PLEASE COME UP FROM SAN DIEGO AND ATTEND THE MEETING.
3 Q. NOW -- AND IS THAT THE MEETING -- WERE YOU HERE FOR
4 MR. CLANCY'S TESTIMONY?
5 A. YES, SIR.
6 Q. AND IS THAT THE MEETING THAT HE DESCRIBED?
7 A. YES, SIR, IT WAS.
8 Q. OKAY. IF YOU LOOK AT THE SECOND PAGE OF YOUR AFFIDAVIT --
9 YOUR DECLARATION, PARAGRAPHS 2 AND 3, THEY RECITE -- WELL,
10 PARAGRAPH 2 SAYS, QUOTE:
11 "I AM AWARE OF THE REPORTED TRANSACTION
12 BETWEEN THE HEARST CORPORATION AND AN AFFILIATE
13 OF PAN-ASIA VENTURE CAPITAL, EXIN, FOR THE SALE
14 OF THE EXAMINER. I AM INFORMED THAT PAN-ASIA
15 INTENDS TO OBTAIN FROM HEARST THE EXAMINER
16 NAME," ET CETERA.
17 THAT WAS INFORMATION THAT YOU RECEIVED IN CONNECTION
18 WITH THIS MEETING?
19 A. YES, SIR, THAT DAY.
20 Q. OKAY. AND THEN PARAGRAPH 3 RECITES THE VARIOUS TERMS OF
21 THE AGREEMENT INCLUDING THE SUBSIDIES OF 16 MILLION IN THE
22 FIRST YEAR AND 25 MILLION EACH IN THE SECOND AND THIRD YEARS.
23 DO YOU SEE THAT?
24 A. YES, SIR.
25 Q. THAT WAS INFORMATION THAT YOU RECEIVED? 644
PAGE - DIRECT / SHULMAN
1 A. AGAIN, THAT DAY.
2 Q. OKAY. PARAGRAPH 4 SAYS:
3 "BASED UPON THOSE FACTS AND MY EXPERIENCE IN
4 THE INDUSTRY, THE PRESENT SUBSIDY BY HEARST WILL
5 NOT UNDER ANY CIRCUMSTANCES BE ABLE TO SUPPORT
6 THE PROBABILITY OR EVEN THE POSSIBILITY OF A
7 VIABLE PAPER WHICH WOULD BE COMPETITIVE TO THE
8 CHRONICLE."
9 I'M GOING TO STOP THERE. WAS THAT YOUR OPINION?
10 A. YES, SIR.
11 Q. AND WHAT WAS THE BASIS FOR THAT OPINION?
12 A. WELL, MY BASIS FOR THE OPINION HAS NOTHING TO DO WITH THE
13 FANG FAMILY BUT RATHER WITH THE HEARST -- THE AMOUNT OF THE
14 HEARST SUBSIDY. THERE WERE SOME MODELS FLYING AROUND AT
15 MR. ALIOTO'S OFFICE THAT MORNING. I DON'T KNOW IF THERE WERE
16 AS MANY AS MR. SIAS REFERRED TO IN HIS OFFICE YESTERDAY, BUT
17 THERE WERE A NUMBER OF MODELS WHICH SOME OF THE OTHER GENTLEMEN
18 WHO WERE THERE HAD PREPARED THAT HAD BEEN RETAINED BY
19 MR. REILLY APPARENTLY SOMETIME BEFORE I CAME IN ON THE SCENE
20 THAT SATURDAY.
21 AND WHEN YOU LOOKED AT THE NUMBERS, IT WAS PRETTY
22 CLEAR THAT THE AMOUNT OF THE SUBSIDY, AS IT WAS GIVEN TO US
23 THAT DAY, WOULD NOT ENABLE MR. FANG IN MY JUDGMENT TO RUN A
24 COMPETITIVE NEWSPAPER ON A STAND-ALONE BASIS AGAINST THE MORE
25 SUCCESSFUL CHRONICLE. 645
PAGE - DIRECT / SHULMAN
1 Q. YOU SAY, QUOTE:
2 "IN ORDER TO PRODUCE A VIABLE COMPETITIVE
3 PAPER, A BUYER OF THE EXAMINER WOULD NEED A
4 SUBSIDY OF $50 MILLION FOR FIVE YEARS OR A
5 ONE-TIME PAYMENT OF $250 MILLION."
6 DO YOU SEE THAT?
7 A. I DO.
8 Q. WAS THAT YOUR OPINION?
9 A. YES, SIR, THAT IS MY OPINION.
10 Q. AND WHAT IS THE BASIS FOR THAT OPINION?
11 A. THE BASIS OF MY OPINION IS WHEN YOU -- THE MODELS THAT
12 WERE PASSED OUT TOWARD THE END OF THE -- THE END OF THAT
13 SATURDAY MORNING, ALL DAY SATURDAY MEETING AT MR. ALIOTO'S
14 OFFICE, I BELIEVE ONE MODEL SUGGESTED THAT THE EXPENSES -- THE
15 LABOR EXPENSES FOR A STAND-ALONE EXAMINER WOULD BE SOMEWHERE IN
16 THE NEIGHBORHOOD OF $21 MILLION; THE PRINTING COSTS,
17 ACQUISITION OF NEWSPRINT, WOULD BE SOMEWHERE IN THE
18 NEIGHBORHOOD OF FOUR OR $5 MILLION.
19 AND I SEEN ANOTHER FIGURE, IF YOU LOOK AT JOHN
20 MORTON, WHO IS A NEWSPAPER EXPERT AND WHO PROBABLY DOES A MAJOR
21 AMOUNT OF CONSULTING AROUND THE COUNTRY, JOHN MORTON HAS BEEN
22 QUOTED AT ONE POINT AS SUGGESTING THAT THE EXAMINER WOULD HAVE
23 TO -- STAND-ALONE EXAMINER WOULD HAVE TO SPEND IN THE
24 NEIGHBORHOOD OF $20 MILLION A YEAR FOR NEWSPRINT ALONE IF IT
25 WERE PUBLISHED IN ITS CURRENT -- I THINK HE SAID -- HE REFERRED 646
PAGE - DIRECT / SHULMAN
1 TO 70 PAGES A DAY, MAYBE 72, OR IF IT WERE HALF ITS CURRENT
2 SIZE, IT WOULD NEED AT LEAST $12 MILLION.
3 WELL, YOU BEGIN TO ADD 12 MILLION AND MAYBE
4 20 MILLION FOR LABOR, AND I WOULD THINK AT THAT POINT THAT THE
5 AMOUNT OF THE SUBSIDY, THE PROPER AMOUNT OF THE SUBSIDY WAS
6 MORE LIKE I HEARD WHAT MR. REILLY HAD SUGGESTED IN HIS
7 NEGOTIATIONS WITH HEARST, I BELIEVE I READ THAT ON THE INTERNET
8 LAST WEEKEND, WAS AROUND $200 MILLION. AND I THOUGHT 200 TO
9 250 CERTAINLY IS A PROPER NUMBER.
10 Q. NOW, THE NEXT SENTENCE SAYS, QUOTE:
11 "WITHOUT SUCH A SUBSIDY, ANY BUYER WHO DOES
12 NOT POSSESS EXTRAORDINARY FINANCIAL RESOURCES,
13 SUCH AS A KNIGHT RIDDER OR RUPERT MURDOCH, WILL
14 FAIL UNDER THE TERMS OF THE DEAL TO PRODUCE A
15 VIABLE DAILY NEWSPAPER."
16 DO YOU SEE THAT?
17 A. I DO.
18 Q. IS THAT YOUR OPINION?
19 A. IT IS, INDEED.
20 Q. WHAT IS THE BASIS FOR THAT OPINION?
21 A. WELL, HAVING WORKED FOR MR. MURDOCH IN AN ORGANIZATION
22 WHICH HAS TREMENDOUS FINANCIAL RESOURCES, AS CERTAINLY THE
23 HEARST CORPORATION DOES AND CERTAINLY THE CHRONICLE PUBLISHING,
24 BOSTON WAS A CLASSIC CASE, AS I SAID, WE INHERITED THE
25 NEWSPAPER LOSING 12 TO $14 MILLION A YEAR; AND HAD ANYONE 647
PAGE - DIRECT / SHULMAN
1 ELSE -- OTHER PERSON GONE INTO BOSTON TO BUY THE HERALD WITHOUT
2 THE KIND OF FINANCIAL CAPABILITIES THAT THE NEWS CORPORATION
3 HAD, I THINK IT WOULD HAVE BEEN AN EXTREMELY CHALLENGING -- YOU
4 KNOW, A TASK FORCE.
5 REMEMBER, WE DID NOT GET A SUBSIDY FROM HEARST WHEN
6 WE BOUGHT THE HERALD. AS I RECALL, MR. MURDOCH PAID HEARST
7 $1 MILLION AND $7 MILLION DOWN THE ROAD. I DON'T KNOW THAT
8 THAT WAS EVER PAID; BUT THE REALITY OF IT WAS, IS THAT FROM THE
9 DAY THAT TRANSACTION CLOSED, WE WERE GOING TO HAVE TO FLY ON
10 OUR OWN AND WE WERE FLYING UNDER THE BANNER OF A NEWS
11 CORPORATION. SO WE WERE ABLE TO DO THAT.
12 Q. YOU SAY IN THE NEXT SENTENCE, QUOTE:
13 "IN FACT, I AM AWARE OF AT LEAST FOUR OTHER
14 EXAMPLES FROM ACROSS THE COUNTRY WHERE HEARST
15 HAS MADE ARRANGEMENTS RESULTING IN THE FAILURE
16 THREE TIMES OR THE NEAR FAILURE ONE TIME OF A
17 DAILY NEWSPAPER: THE BALTIMORE NEWS AMERICAN,
18 THE SAN ANTONIO LIGHT, THE LOS ANGELES HERALD
19 EXAMINER AND THE BOSTON HERALD," END OF QUOTE.
20 WOULD YOU TELL US ABOUT THOSE, PLEASE?
21 A. WELL, I THINK IN THE CASE OF BALTIMORE AND LOS ANGELES, I
22 CAN'T SPEAK TO BALTIMORE DIRECTLY. I KNOW THE PAPER IS NO
23 LONGER IN BUSINESS AND IT WAS FOLDED. WHETHER OR NOT THEY
24 WERE -- I THINK THE HEARST CORPORATION -- AT LEAST THE
25 NEWSPAPER DIVISION IN MY JUDGMENT DOESN'T SEEM TO HAVE THE 648
PAGE - DIRECT / SHULMAN
1 INTESTINAL FORTITUDE TO WANT TO COMPETE.
2 AND IN BALTIMORE THEY PROBABLY SOUGHT A JOA WITH THE
3 BALTIMORE SUN I SUSPECT. WHETHER THAT CONVERSATION EVER TOOK
4 PLACE OR NOT, I WOULDN'T KNOW, BUT IT DIDN'T TAKE PLACE.
5 MR. CONNELL: YOUR HONOR, I WONDER IF I COULD MOVE
6 TO STRIKE THE HEARSAY THAT'S ROLLING INTO THE RECORD HERE FROM
7 MR. PAGE.
8 THE COURT: NO SPEAKING OBJECTIONS.
9 MR. CONNELL: THANK YOU, SIR.
10 THE COURT: I'LL SUSTAIN THE HEARSAY OBJECTION.
11 START OVER, MR. SHULMAN.
12 MR. SHULMAN: OKAY.
13 Q. YOU HAVE FIRSTHAND KNOWLEDGE OF THE BOSTON HERALD; RIGHT?
14 A. YES, SIR.
15 Q. AND YOU'VE TOLD US ABOUT THAT?
16 A. YES, SIR.
17 Q. OKAY. YOU HAVE SOME FIRSTHAND KNOWLEDGE OF SAN ANTONIO?
18 A. YES, SIR.
19 Q. YOU LEFT A HEALTHY PAPER?
20 A. WELL, WHEN I LEFT THE LIGHT, THE LIGHT WAS PROFITABLE. I
21 DON'T RECALL THE EXACT NUMBERS; BUT AFTER HAVING WORKED FOR THE
22 UNPROFITABLE UNITED PRESS INTERNATIONAL, IT WAS A THRILL TO
23 WORK FOR A COMPANY THAT WAS ACTUALLY MAKING MONEY, WHICH THE
24 SAN ANTONIO LIGHT INDEED WAS. AND THEN OF COURSE WHEN I WENT
25 TO WORK FOR THE HERALD, THE EXPRESS NEWS ACROSS THE STREET, IT 649
PAGE - DIRECT / SHULMAN
1 WAS EVEN MORE SUCCESSFUL.
2 Q. ALL RIGHT. NOW, IN PARAGRAPH 5 YOU SAY, QUOTE:
3 "I AM AWARE OF THE REPORTED TRANSACTION
4 BETWEEN HEARST AND THE CHRONICLE PUBLISHING
5 COMPANY FOR THE SALE OF THE CHRONICLE FOR
6 $660 MILLION. BASED UPON MY EXPERIENCE AND
7 RELYING UPON WELL-ESTABLISHED FORMULAS FOR THE
8 VALUATION OF DAILY NEWSPAPERS AND THE TWO RECENT
9 PURCHASERS OF THE LOS ANGELES TIMES AND THE
10 MINNEAPOLIS STAR TRIBUNE, I WOULD VALUE THE
11 CHRONICLE AT NO LESS THAN $1 BILLION," END OF
12 QUOTE.
13 DO YOU SEE THAT?
14 A. YES, SIR.
15 Q. IS THAT YOUR OPINION?
16 A. YES, IT IS.
17 MR. HUSTON: OBJECTION, YOUR HONOR, RELEVANCE AND
18 FOUNDATION.
19 THE COURT: WHAT'S THE FOUNDATION?
20 MR. HUSTON: FOUNDATION HAS TO DO WITH A QUESTION
21 THAT WAS ASKED AT HIS DEPOSITION. HE WAS ASKED IF HE WAS AN
22 EXPERT ON VALUING NEWSPAPERS. HE RESPONDED NO.
23 THE COURT: THE OBJECTION WILL BE OVERRULED. THE
24 WITNESS HAS LAID A FOUNDATION OF HIS EXPERIENCE FIRSTHAND IN
25 THE NEWSPAPER BUSINESS, BOTH AS AN OWNER AS WELL AS AN 650
PAGE - DIRECT / SHULMAN
1 EXECUTIVE OF VARIOUS NEWSPAPER COMPANIES, AND I THINK THAT LAYS
2 A SUFFICIENT FOUNDATION FOR THIS OPINION TESTIMONY.
3 AND I WONDER IF MR. CONNELL DIDN'T INCORRECTLY
4 PERSUADE ME. THE WITNESS IS TESTIFYING AS AN OPINION WITNESS;
5 ISN'T HE?
6 MR. SHULMAN: YES, YOUR HONOR.
7 THE COURT: HE CAN RELY ON HEARSAY.
8 MR. SHULMAN: I THINK SO, YOUR HONOR.
9 THE COURT: I'LL CHANGE MY RULING AND OVERRULE
10 MR. CONNELL'S OBJECTION.
11 MR. SHULMAN: ALL RIGHT. LET'S BACK UP FOR A
12 SECOND.
13 Q. TELL US WHAT YOU KNOW ABOUT THE FAILURES OF THE BALTIMORE
14 AMERICAN NEWS -- NEWS AMERICAN, SAN ANTONIO LIGHT AND LOS
15 ANGELES HERALD EXAMINER AND THE NEAR FAILURE OF THE BOSTON
16 HERALD.
17 A. WELL, I'LL START WITH THE LOS ANGELES. AT ONE POINT, I
18 BELIEVE IT WAS 1989, I COULD BE -- I THINK IT WAS 1989, I DID
19 HAVE A MEETING IN NEW YORK WITH MR. DANZIG TO DISCUSS THE
20 POSSIBILITY OF MY ACQUIRING THE LOS ANGELES HERALD EXAMINER.
21 Q. WHO'S MR. DANZIG?
22 A. HE WAS THEN, I BELIEVE, THE PRESIDENT OF THE NEWSPAPER
23 DIVISION OF THE HEARST CORPORATION.
24 Q. GO AHEAD.
25 A. IN BOSTON, PRIOR TO OUR BUYING THE HERALD FROM THE HEARST 651
PAGE - DIRECT / SHULMAN
1 CORPORATION, I KNOW THAT THERE WERE CONVERSATIONS HELD, BECAUSE
2 THE HEARST ORGANIZATION TOLD US SO, WITH THE BOSTON GLOBE IN AN
3 EFFORT TO CREATE A JOINT OPERATING AGENCY WITH THE GLOBE; AND
4 APPARENTLY THE GLOBE DECIDED NOT TO ENTER INTO A JOA.
5 I SAID I HAVE NO DIRECT KNOWLEDGE OF BALTIMORE.
6 IN SAN ANTONIO IT WAS INDEED A PROFITABLE NEWSPAPER,
7 AT LEAST WHILE I WAS THERE; AND WHEN THE HEARST CORPORATION
8 BOUGHT THE EXPRESS NEWS FROM MR. MURDOCH AND THEN SHUT THE
9 LIGHT DOWN I GUESS AFTER TRYING TO SELL IT, MY PRESUMPTION
10 WOULD BE THAT HEARST DECIDED THAT THE HERALD -- THAT THE
11 EXPRESS NEWS WOULD BE A MUCH BETTER NEWSPAPER TO OWN IN SAN
12 ANTONIO THAN THE LIGHT.
13 Q. NOW, LET'S TAKE THE OPINION YOU HAVE ABOUT THE VALUE OF
14 THE CHRONICLE BEING A BILLION DOLLARS. YOU HAVE HAD SOME
15 EXPERIENCE BUYING AND SELLING NEWSPAPERS?
16 A. YES, SIR.
17 Q. OKAY. WOULD YOU PLEASE STATE THE BASIS FOR YOUR OPINION
18 THAT THE VALUE OF THE HERALD IS NO LESS THAN -- THE VALUE OF
19 THE CHRONICLE IS NO LESS THAN $1 BILLION?
20 A. WELL, I THINK THE BASIS OF MY OPINION IS THAT IF YOU HAD A
21 STAND-ALONE CHRONICLE AND IT WERE NOT INVOLVED IN A JOINT
22 OPERATING AGENCY, AND IF YOU LOOK AT -- THE INVESTMENT BANKERS
23 AND NEWSPAPER BROKERS ESSENTIALLY USE THREE FORMULAS IN
24 DETERMINING THE VALUE OF A NEWSPAPER. I HEARD ONE IS CALLED
25 THE 2,000, $3,000 PER SUBSCRIBER. I THINK THE MORE APPROPRIATE 652
PAGE - DIRECT / SHULMAN
1 ONES THAT ARE USED ARE THE ONES THAT ARE MULTIPLE OF REVENUE OR
2 MULTIPLE OF CASH FLOW.
3 AND, AGAIN, WITH THE FEW PIECES OF PAPER I SAW THAT
4 SATURDAY MORNING IN MR. ALIOTO'S OFFICE, IT WAS CLEAR THAT WHEN
5 YOU BACKED OUT WHAT LITTLE REVENUE WAS IDENTIFIABLE TO THE
6 EXAMINER ONLY AND YOU BACKED OUT THE CIRCULATION REVENUE WHICH
7 APPEARED TO BE IDENTIFIABLE EXCLUSIVE TO THE EXAMINER, THAT
8 MOST OF THE REVENUE IN THE AGENCY WAS EITHER EXCLUSIVE
9 CHRONICLE OR CERTAINLY THE SUNDAY PAPER WHICH APPARENTLY THE
10 HEARST ORGANIZATION, IF THIS DEAL IS COMPLETED, WILL HAVE THE
11 SUNDAY PAPER AS WELL AS THE MORNING CHRONICLE.
12 AND I THINK IF YOU LOOK AT IT -- IN ADDITION YOU
13 HAVE SAN FRANCISCO AS A TROPHY MARKET. I BELIEVE THAT THE
14 MINNEAPOLIS STAR TRIBUNE, MR. SHULMAN, YOU WOULD HAVE MORE
15 KNOWLEDGE OF THIS THAN I, BUT I THINK IT WAS SOLD FOR A BILLION
16 DOLLARS. THE CHICAGO TRIBUNE COMPANY JUST PAID 6.3 BILLION TO
17 ACQUIRE THE TIMES MIRROR.
18 AND IF YOU LOOK AT -- THERE'S A NEWSPAPER INVESTOR
19 NEWSLETTER CALLED CAGAN, AND WHEN CAGAN IDENTIFIED THE
20 IDENTIFIABLE CASH FLOW OF FIVE OR SIX MAJOR NEWSPAPER PUBLIC
21 COMPANIES, I THINK THEY CAME TO AN AVERAGE CASH FLOW OF LIKE
22 26.3 PERCENT. SO IF YOU TAKE A CASH FLOW OF 26.3 PERCENT AS AN
23 AVERAGE, I'M SURE THAT OWNING THE ONLY NEWSPAPER IN SAN
24 FRANCISCO, YOU'D SURE BE ABLE TO SELL IT FOR A BILLION DOLLARS.
25 Q. YOU SAID SAN FRANCISCO WAS A TROPHY MARKET? 653
PAGE - CROSS / HOCKETT
1 A. YES, SIR.
2 Q. WHAT'S A TROPHY MARKET?
3 A. HIGHLY-SOUGHT-AFTER MARKET. I CAN'T IMAGINE THAT IF THERE
4 WERE NOT, AS I UNDERSTAND, THE RIGHT OF FIRST REFUSAL FOR THE
5 HEARST CORPORATION IN THE JOINT OPERATING AGENCY, THAT YOU
6 WOULD NOT HAVE MR. MURDOCH, KNIGHT-RIDDER, GANNETT OR ANYONE --
7 ANY OF THE OTHER MAJOR ORGANIZATIONS IN HERE, CERTAINLY THE
8 CHICAGO TRIBUNE WHO JUST PAID OVER 6 BILLION TO BUY THE L.A.
9 TIMES AND IT'S ASSOCIATED TO OTHER NEWSPAPERS, I'M SURE THAT
10 THE OWNERS OF THE CHRONICLE PUBLISHING COMPANY WOULD BE WALKING
11 AWAY WITH HUGE AMOUNTS OF MONEY.
12 MR. SHULMAN: THANK YOU. I HAVE NO FURTHER
13 QUESTIONS.
14 THE COURT: MR. HOCKETT?
15 CROSS-EXAMINATION
16 BY MR. HOCKETT:
17 Q. GOOD AFTERNOON, MR. PAGE.
18 A. GOOD AFTERNOON.
19 Q. MY NAME IS CHRIS HOCKETT. I REPRESENT EXIN LLC, AS YOU
20 PROBABLY KNOW FROM HAVING SAT IN THE GALLERY.
21 YOU OWN AND PUBLISH THREE COMMUNITY NEWSPAPERS IN
22 SAN DIEGO; DON'T YOU?
23 A. YES, SIR.
24 Q. AND YOUR PAPERS ARE DISTRIBUTED FREE OF CHARGE TO YOUR
25 READERS? 654
PAGE - CROSS / HOCKETT
1 A. YES, SIR, THEY ARE.
2 Q. THAT'S JUST LIKE THE INDEPENDENT HERE IN SAN FRANCISCO;
3 CORRECT?
4 A. CORRECT.
5 Q. NOW, IN MR. REILLY'S TRIAL BRIEF HE REFERS TO THE SAN
6 FRANCISCO INDEPENDENT AS A THROW-AWAY PAPER. NOW, I GUESS IN
7 SOME SENSE ALL NEWSPAPERS ARE THROW-AWAY PAPERS BECAUSE WE
8 DON'T KEEP THEM AS KEEPSAKES OR HEIRLOOMS, BUT DO YOU REGARD
9 YOUR FREE NEWSPAPERS AS THROW-AWAY PAPERS JUST BECAUSE YOU
10 DON'T CHARGE FOR THEM?
11 A. NO, ABSOLUTELY NOT. BUT IN REFERENCE TO YOUR COMMENT, I
12 WILL TELL YOU THAT WHEN MR. MURDOCH BOUGHT THE CHICAGO SUN
13 TIMES, MR. MIKE ROYKO, WHO'S A COLUMNIST, SAID, "NO
14 SELF-RESPECTING FISH WOULD BE WRAPPED IN A MURDOCH NEWSPAPER."
15 (LAUGHTER)
16 A. I DON'T KNOW HOW YOU WOULD LIKE ME TO RESPOND TO THAT;
17 BUT, YOU KNOW, YOUR QUESTION IS ARE OUR NEWSPAPERS THROW-AWAY.
18 ARE ALL NEWSPAPERS THROW-AWAY? AT SOME POINT, YES, BUT WE
19 CONSIDER OURS CONTROLLED DISTRIBUTION.
20 Q. JUST BECAUSE A NEWSPAPER IS FREE, DOESN'T MAKE IT A
21 THROW-AWAY PAPER IN YOUR MIND?
22 A. NOT AT ALL.
23 Q. IN YOUR EXPERIENCE IN THE LAST NINE YEARS OF OPERATING THE
24 THREE COMMUNITY NEWSPAPERS THAT YOU MENTIONED, YOU BELIEVE IT'S
25 GIVEN YOU SOME INSIGHT INTO HOW THE EXAMINER MIGHT BE PROPERLY 655
PAGE - CROSS / HOCKETT
1 RUN; IS THAT CORRECT?
2 A. I HAVE AN OPINION.
3 Q. NOW, LET'S TAKE A LOOK AT PLAINTIFF'S EXHIBIT 59. THIS IS
4 YOUR DECLARATION THAT MR. SHULMAN COVERED WITH YOU. DO YOU
5 HAVE THAT?
6 A. YES, SIR.
7 Q. THIS DECLARATION WAS SOMETHING THAT YOU READ BEFORE YOU
8 SIGNED IT, I ASSUME?
9 A. I DID.
10 Q. AND IT WAS SIGNED ON MARCH 25TH AT THE MEETING WITH ALL
11 THE OTHER REILLY EXPERTS AT MR. ALIOTO'S OFFICE THAT WE HEARD
12 ABOUT?
13 A. THAT'S CORRECT.
14 Q. OKAY. YOUR PARAGRAPH 4 IS THE SAME AS EVERYBODY ELSE'S
15 PARAGRAPH. IT SAYS THAT THE PAYMENT BY HEARST TO THE FANGS
16 ISN'T ENOUGH AND THAT YOU NEED TO HAVE $50 MILLION A YEAR OR A
17 TOTAL ONE-TIME SUBSIDY OF 250; CORRECT?
18 A. CORRECT.
19 Q. AND YOU TESTIFIED AT YOUR DEPOSITION THAT WHEN YOU SIGNED
20 PLAINTIFF'S EXHIBIT 59, NOBODY HELPED YOU DERIVE THAT
21 250 MILLION-DOLLAR FIGURE; IS THAT CORRECT?
22 A. THAT'S CORRECT.
23 Q. AND ALL YOU'VE DONE SO FAR IN THIS CASE IS ATTEND THAT
24 MEETING ON MARCH 25TH?
25 A. YES, SIR. 656
PAGE - CROSS / HOCKETT
1 Q. YOU SIGNED YOUR DECLARATION?
2 A. YES, SIR.
3 Q. HAD YOUR DEPOSITION TAKEN AND NOW YOU'RE HERE?
4 A. CORRECT.
5 Q. AND EVERYBODY AT THAT MEETING CAME UP WITH THE SAME
6 OPINION ABOUT THE SUBSIDY; DIDN'T THEY?
7 A. THEY DID.
8 Q. YOU HEARD MR. CLANCY TESTIFY EARLIER TODAY; IS THAT
9 CORRECT?
10 A. YES, SIR.
11 Q. YOUR IDEAS ABOUT RUNNING THE EXAMINER YOU TESTIFIED AT
12 YOUR DEPOSITION WERE YOU'D CHANGE IT INTO A TABLOID; WOULDN'T
13 YOU?
14 A. I WOULD.
15 Q. AND YOU WOULD DISTRIBUTE IT ONLY IN RACKS RATHER THAN
16 HAVING HOME DELIVERY; IS THAT CORRECT?
17 A. WELL, NOT ONLY RACKS BUT CERTAINLY, YOU KNOW, THAT WOULD
18 BE THE PRINCIPAL MODE OF DISTRIBUTION.
19 Q. NO HOME DELIVERY?
20 A. NO HOME DELIVERY.
21 Q. AND YOU WOULD NOT CHARGE FOR THE EXAMINER?
22 A. I WOULD NOT.
23 Q. YOU HEARD MR. CLANCY SAY THAT IF YOU MAKE CHANGES LIKE
24 THAT, IT'S DEVASTATING TO A NEWSPAPER; DIDN'T YOU?
25 A. WOULD YOU LIKE ME TO COMMENT ON THAT? 657
PAGE - CROSS / HOCKETT
1 (LAUGHTER)
2 Q. WELL, ONLY TO OBSERVE THAT'S A LOT DIFFERENT FROM WHAT YOU
3 RECOMMEND; ISN'T IT?
4 A. WELL, YOU HAVE TO UNDERSTAND THAT, AS I WAS SAYING TO
5 MR. CLANCY AND THE GENTLEMEN LAST NIGHT, THAT I'VE SPENT A
6 CAREER WORKING FOR CHALLENGERS MAINLY NOT THE CHALLENGED; AND
7 WHEN YOU'RE A CHALLENGER, YOU HAVE TO DO THINGS A LITTLE BIT
8 DIFFERENTLY. SO I DON'T HAVE THE EXPERIENCE, YOU KNOW, WORKING
9 FOR AN INORDINATELY LARGE SUCCESSFUL PUBLISHING COMPANY WITH
10 MR. MURDOCH BEING THE EXCEPTION.
11 Q. IT'S FAIR TO SAY THAT THE STRATEGIES THAT YOU WOULD
12 RECOMMEND FOR THE EXAMINER ARE A LOT DIFFERENT FROM THOSE THAT
13 MR. CLANCY WOULD RECOMMEND; CORRECT?
14 A. YES.
15 Q. AND YET YOU CAME UP WITH THE SAME 50 MILLION-DOLLAR
16 SUBSIDY; DIDN'T YOU?
17 A. WELL, I CAME UP WITH THE NUMBER, SO YOU'LL HAVE TO TAG
18 THAT ONE ON ME.
19 Q. NOW, DO YOU KNOW OR HAVE YOU ESTIMATED THE ADVERTISING
20 REVENUE FOR THE NEW EXAMINER?
21 A. NO, I HAVE NOT.
22 Q. HAVE YOU ESTIMATED THE ADVERTISING RATES FOR THE NEW
23 EXAMINER?
24 A. I HAVE NOT.
25 Q. HAVE YOU ESTIMATED HOW MANY EMPLOYEES THE NEW EXAMINER 658
PAGE - CROSS / HOCKETT
1 SHOULD HAVE?
2 A. NO.
3 Q. HAVE YOU ESTIMATED THE COST OF NEWSPRINT FOR THE NEW
4 EXAMINER?
5 A. WELL, AGAIN, I ONLY -- NO, I HAVE NOT. I ONLY GO ON WHAT
6 WAS DISCUSSED WITH ME.
7 Q. AND HAVE YOU ESTIMATED THE EDITORIAL COSTS FOR THE NEW
8 EXAMINER?
9 A. SOMEWHERE IN THE NEIGHBORHOOD OF, OH, WE PROBABLY WOULD
10 NEED A HUNDRED, HUNDRED TEN EMPLOYEES MAYBE IN THE NEWSROOM.
11 Q. DID YOU JUST PERFORM THAT ESTIMATE RIGHT NOW?
12 A. NO. I'VE BEEN THINKING ABOUT THAT FOR SEVERAL DAYS.
13 (LAUGHTER)
14 Q. HAVE YOU ESTIMATED THE MARKETING COSTS NECESSARY FOR THE
15 NEW EXAMINER, SIR?
16 A. NO, BUT I CAN TELL YOU THAT IT'S GOING TO BE SUBSTANTIAL.
17 Q. AND HAVE YOU MADE ANY EFFORT TO EVALUATE THE ECONOMIES
18 THAT MIGHT BE ENJOYED BY THE FANGS AS INCUMBENT PUBLISHERS OF A
19 NEWSPAPER HERE IN SAN FRANCISCO?
20 A. NO.
21 Q. AND YOU DON'T KNOW WHAT THE FANGS' PLANS ARE AS PUBLISHERS
22 OF THE EXAMINER?
23 A. ONE OF THE LAWYERS WAS QUOTED THE OTHER DAY AS SAYING THAT
24 THEY WERE GOING TO BE A FULL-SERVICE NEWSPAPER WITH NATIONAL
25 AND INTERNATIONAL NEWS. 659
PAGE - CROSS / HOCKETT
1 Q. HAVE YOU ESTIMATED WHAT THEIR COSTS OR REVENUES WOULD BE
2 IN ANY OF THE CATEGORIES WE'VE DISCUSSED?
3 A. NO.
4 Q. OKAY. AND YOUR STATEMENT ABOUT THE INADEQUACY OF THE
5 66 MILLION-DOLLAR SUBSIDY TO THE FANGS IS NOT BASED ON ANY
6 KNOWLEDGE THAT YOU HAVE THAT'S SPECIFIC TO THE FANGS OR THE WAY
7 THEY OPERATE THEIR BUSINESS; CORRECT?
8 A. NO, SIR.
9 Q. AND, IN FACT, YOU TESTIFIED AT YOUR DEPOSITION THAT YOU
10 BELIEVE THAT THE 50 MILLION-DOLLAR PER YEAR SUBSIDY IS
11 SOMETHING THAT YOU WOULD HOPE WOULD NOT BE NECESSARY FOR A
12 BUYER TO ACTUALLY SUCCEED WITH AN INDEPENDENT EXAMINER;
13 CORRECT?
14 A. YES, I DID SAY THAT; BUT I THINK I ALSO ADDED THAT IT
15 WOULD BE NICE TO KNOW, IF YOU WERE THE BUYER, WHETHER YOU'RE
16 MR. REILLY OR MR. FANG, THAT YOU KNEW IN YOUR ARRANGEMENT WITH
17 THE HEARST CORPORATION THAT MONEY COULD BE AVAILABLE IF YOU
18 NEEDED TO CALL ON IT, THAT IN THE DEAL YOU WOULD NEGOTIATE THAT
19 WITH THEM.
20 Q. IT WOULD SURE BE NICE TO KNOW; WOULDN'T IT?
21 A. IT CERTAINLY WOULD.
22 Q. BUT YOU HOPE AN OPERATOR WOULDN'T NEED THAT MUCH; WOULD
23 YOU?
24 A. A GOOD OPERATOR.
25 MR. HOCKETT: THANK YOU, YOUR HONOR. NOTHING 660
PAGE - CROSS / HUSTON
1 FURTHER.
2 THE COURT: MR. HUSTON?
3 MR. HUSTON: YES. MAY IT PLEASE THE COURT.
4 CROSS-EXAMINATION
5 BY MR. HUSTON:
6 Q. MR. PAGE, YOU INDICATED THAT THERE WAS A CONSENSUS AT THE
7 MARCH 25TH MEETING THAT IN ORDER TO SURVIVE, THE PAPER WOULD
8 REQUIRE THIS 250 MILLION-DOLLAR SUBSIDY; CORRECT?
9 A. YES.
10 Q. AND YOU TESTIFIED, I BELIEVE, THAT IN REACHING THAT
11 FIGURE, AND IN FACT YOU WERE THE ONE WHO CAME UP WITH THAT
12 FIGURE, THAT YOU RELIED ON NUMBERS THAT YOU SAW PASSED OUT
13 DURING THAT MEETING; IS THAT CORRECT?
14 A. THAT'S CORRECT.
15 Q. AND DO YOU RECALL WHAT THOSE NUMBERS WERE?
16 A. WELL, THE NUMBERS THAT I RECALL SEEING, AND I THINK THE
17 FIRST NUMBER WAS FROM VERONIS, THE VERONIS REPORT INDICATED
18 THAT THE IDENTIFIABLE CIRCULATION OF REVENUE OF THE EXAMINER
19 WAS I BELIEVE IT WAS 7.4 MILLION.
20 AND THE IDENTIFIABLE REVENUE NUMBER, AT LEAST THE
21 ONLY ONE THAT I SAW, INDICATED THAT -- AND, AGAIN, I THINK THAT
22 ONE -- THE GENTLEMAN WHO WAS THERE AT THE MEETING PULLED THESE
23 NUMBERS FROM THE VERONIS REPORT, I DID NOT SEE THE FULL VERONIS
24 REPORT, INDICATED THAT THE IDENTIFIABLE ADVERTISING REVENUE IS
25 SOMEWHERE IN THE NEIGHBORHOOD OF 275,000 OF WHICH HALF IS 661
PAGE - CROSS / HUSTON
1 ROUGHLY NATIONAL ADVERTISING.
2 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
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PAGE - CROSS / HUSTON
1 BY MR. HUSTON:
2 Q. DO YOU RECALL SEEING ANY NUMBERS THAT WERE PREPARED BY
3 MR. MIKE WEAVER?
4 A. YES, I BELIEVE THAT WAS MR. WEAVER HAD ONE OF THE REPORT
5 THAT WAS IN THE ROOM THAT DAY.
6 MR. HUSTON: YOUR HONOR, CAN I APPROACH THE WITNESS?
7 THE COURT: VERY WELL. WHILE YOU DO THAT, YOU SAID
8 275,000?
9 THE WITNESS: THOUSAND. THAT'S WHAT I SAW, YOUR
10 HONOR.
11 BY MR. HUSTON:
12 Q. MR. PAGE, I AM SHOWING YOU WHAT HAS BEEN ALREADY ADMITTED
13 INTO EVIDENCE AS PLAINTIFF'S EXHIBIT 46.
14 DO YOU REMEMBER THIS BEING PASSED OUT AT THAT
15 MARCH 25TH MEETING?
16 A. YES, SIR, I DO.
17 Q. AND WERE THESE SOME OF THE NUMBERS THAT YOU WERE RELYING
18 ON IN COMING UP WITH YOUR ESTIMATE OF $250 MILLION SUBSIDY?
19 A. YES, SIR.
20 Q. THE ONLY REASON THAT THE EXAMINER COULD NOT SURVIVE UNDER
21 SUCH A SUBSIDY IS THE COMPETITIVE ENVIRONMENT THAT IT EXISTS
22 IN, CORRECT?
23 A. YES.
24 Q. AND THAT COMPETITIVE ENVIRONMENT INCLUDES THE CONTRA COSTA
25 TIMES AND THE SAN JOSE MERCURY NEWS, CORRECT? 663
PAGE - CROSS / HUSTON
1 A. WELL, CERTAINLY FOR READERSHIP. I AM NOT SO CERTAIN ABOUT
2 ADVERTISING DOLLARS IN THE CITY OF SAN FRANCISCO BUT CERTAINLY
3 FOR READERS.
4 Q. ARE YOU SAYING THAT THOSE PAPERS DO NOT COMPETE FOR
5 ADVERTISING?
6 A. WELL, NOT -- CERTAINLY -- I DOUBT THAT THEY COMPETE FOR
7 THE SMALL SAN FRANCISCO RETAILERS.
8 Q. DO THEY COMPETE FOR ANY ADVERTISING?
9 A. WELL, THEY COMPETE FOR NATIONAL. THEY COMPETE FOR
10 CLASSIFIED. SOME OF THOSE RATES WERE LAID OUT THIS MORNING IN
11 EARLIER TESTIMONY.
12 Q. AND DID YOU TESTIFY THAT THEY WERE DIRECT COMPETITORS FOR
13 ADVERTISING AT YOUR DEPOSITION?
14 A. I BELIEVE WHEN I -- I DID SAY THAT.
15 Q. AND THE COMPETITIVE ENVIRONMENT WOULD ALSO INCLUDE OTHER
16 PAPERS IN THE BAY AREA, CORRECT?
17 A. CERTAINLY FOR READERSHIP.
18 Q. NOW, YOU MENTIONED IN REACHING THE ESTIMATE FOR WHAT THE
19 CHRONICLE WOULD BE WORTH THERE ARE VARIOUS WAYS OF COMING TO AN
20 ESTIMATE, AND ONE OF THEM, YOU MENTIONED, WAS $2,000 TO $3,000
21 PER SUBSCRIBER, CORRECT?
22 A. YES.
23 Q. DO YOU BELIEVE THAT THE EXAMINER COULD BE VALUED IN THAT
24 WAY?
25 A. NOT -- NOT CURRENTLY. 664
PAGE - CROSS / HUSTON
1 Q. YOUR ASSUMPTION OR YOUR CONCLUSION, THAT THE CHRONICLE IS
2 WORTH A BILLION DOLLARS, IS BASED ON THE ASSUMPTION THAT THE
3 CHRONICLE IS THE ONLY NEWSPAPER IN TOWN; ISN'T THAT CORRECT?
4 A. I THINK YOU COULD PROBABLY -- I THINK YOU COULD PROBABLY
5 ARRIVE AT A BILLION DOLLARS, SOMEWHERE BETWEEN 900 MILLION AND
6 A BILLION, EVEN IF IN THE CURRENT STATE AS A MEMBER OF THE JOA
7 IF -- IF ALL THE OTHER MAJOR NEWSPAPER COMPANIES COULD HAVE
8 COME IN HERE AND COMPETED WITHOUT HAVING A RIGHT OF FIRST
9 REFUSAL, AS I UNDERSTAND THE HEARST CORPORATION HAS.
10 Q. SO IF I HAVE YOUR OPINION CORRECT, EVEN WITHIN THE JOA,
11 YOU -- IT'S YOUR TESTIMONY THAT THE CHRONICLE IS WORTH A
12 BILLION DOLLARS?
13 A. I WOULD THINK IT WOULD BE CLOSE TO IT.
14 MR. HUSTON: I HAVE NOTHING FURTHER, YOUR HONOR.
15 THE COURT: MR. CONNELL?
16 MR. CONNELL: YES, SIR.
17 CROSS-EXAMINATION
18 BY MR. CONNELL:
19 Q. MR. PAGE, I AM JERRY CONNELL. I REPRESENT THE HEARST.
20 A. YES.
21 Q. ON THAT LAST POINT, YOU UNDERSTAND THAT THE JOA IN
22 PROVIDING HEARST A RIGHT OF FIRST REFUSAL ALSO PROVIDES
23 CHRONICLE IF IT'S DISSATISFIED WITH THE PRICE OFFERED BY HEARST
24 THE OPPORTUNITY TO GO SEEK BIDS FROM OTHER PEOPLE?
25 A. YES. 665
PAGE - CROSS / CONNELL
1 Q. AND HAD THEY DONE THAT, YOU ARE SAYING THAT THEY WOULD
2 HAVE GOTTEN A BILLION DOLLAR OFFER FROM SOMEBODY; IS THAT
3 RIGHT?
4 A. WELL, I WOULD -- I WOULD HAVE THOUGHT THAT THEY COULD HAVE
5 ACHIEVED THAT.
6 Q. THAT'S WHAT YOU ARE SAYING?
7 A. YES, SIR.
8 Q. WHICH HEARST, THEN, WOULD HAVE HAD TO MATCH?
9 A. I BELIEVE SO.
10 Q. IF THEY WANTED TO BUY IT?
11 A. I BELIEVE THAT WOULD BE THE CASE.
12 Q. IN OTHER WORDS, CHRONICLE OR THEIR REPRESENTATIVES DID A
13 POOR JOB?
14 A. I DIDN'T SAY THAT.
15 Q. WELL, IF THEY GOT 660 AND THEY SHOULD HAVE GOTTEN A
16 BILLION, IS THAT A DEFINITION OF A POOR JOB?
17 A. YOU ARE NOT GOING TO LIE AND PUT THOSE WORDS IN MY MOUTH.
18 I DIDN'T SAY THAT, COUNSEL.
19 Q. WELL, WOULDN'T YOU AGREE THAT IF YOU ARE CORRECT THAT THEY
20 COULD HAVE GOTTEN A BILLION AND ONLY GOT 660, THEY DID A POOR
21 JOB?
22 A. NO. WHAT I AGREE IS THAT THAT -- NO, I AM NOT GOING TO
23 SAY THEY DID A POOR JOB. THOSE ARE YOUR WORDS, NOT MINE.
24 Q. I AM ASKING YOU IF YOU AGREE.
25 A. I DON'T AGREE THAT IT'S A POOR JOB. 666
PAGE - CROSS / CONNELL
1 Q. BUT YOU DO THINK THEY SHOULD HAVE GOTTEN A BILLION,
2 CORRECT?
3 A. I AM SUGGESTING TO YOU I THINK THE NEWSPAPER COULD BE
4 WORTH THAT MUCH.
5 Q. YOU ARE SUGGESTING THAT YOU THINK IT IS WORTH THAT MUCH.
6 A. I DO.
7 Q. AND YOU ARE AWARE THAT THEY -- THAT THE ACTUAL PRICE TO BE
8 PAID IS 660.
9 A. I AM.
10 MR. CONNELL: I WILL LEAVE IT RIGHT THERE. THANK
11 YOU, SIR.
12 THE COURT: MR. SHULMAN, REDIRECT?
13 MR. SHULMAN: YES, YOUR HONOR. JUST ONE QUICK
14 POINT.
15 REDIRECT EXAMINATION
16 BY MR. SHULMAN:
17 Q. ARE YOU AWARE THAT THE -- UNDER THE JOA THERE IS NO --
18 THAT NO COMPETITOR WITHIN A 60-MILE RADIUS CAN BUY EITHER ONE
19 OF THE PAPERS?
20 A. YOU KNOW, I DID HEAR THAT, YES, SIR, BUT I WASN'T QUITE
21 CERTAIN BECAUSE I HAVE NOT SEEN THE JOA AGREEMENT. BUT IF
22 THAT'S IN THERE, I WOULD ASSUME THAT WOULD CERTAINLY WORK AS A
23 DETRIMENT TO OFFER THE NEWSPAPER FOR SALE TO ANYONE ELSE.
24 MR. SHULMAN: THANK YOU.
25 THE COURT: ONE OTHER POINT, MR. PAGE, THAT YOU WERE 667
PAGE - REDIRECT / SHULMAN
1 DISCUSSING WITH MR. CONNELL AND EARLIER WITH MR. HUSTON, ISN'T
2 HEARST PAYING A BILLION DOLLARS, IN EFFECT, FOR THE CHRONICLE?
3 THE WITNESS: YOUR HONOR, ARE YOU ADDING THE
4 66 MILLION?
5 THE COURT: WHAT I AM DOING IS TAKING 660 MILLION,
6 ADDING 64 MILLION AS THE SUBSIDY FOR THE FANG GROUP FOR A TOTAL
7 OF 724 MILLION PRESENT VALUE, GO OUT FOUR AND A HALF YEARS,
8 EVEN AT A LOW INTEREST RATE, EIGHT PERCENT, THAT GIVES YOU A
9 VALUE OF A BILLION $24 MILLION, DOESN'T IT?
10 THE WITNESS: IT DOES. BUT 66 MILLION OR
11 64 MILLION, YOUR HONOR, IS NOT GOING TO THE SHAREHOLDERS OF THE
12 CHRONICLE CORPORATION.
13 THE COURT: WELL, BUT THEY WILL HAVE THE USE OF THE
14 MONEY BETWEEN NOW AND 2005. THEY WILL HAVE THE USE OF
15 660 MILLION.
16 THE WITNESS: THAT'S TRUE, YES.
17 THE COURT: AND THE FANGS, OF COURSE, WILL HAVE THE
18 USE OF WHATEVER THEY ARE RECEIVING IN SUBSIDY.
19 THE WITNESS: YES, YOUR HONOR.
20 THE COURT: BETWEEN NOW AND 2005.
21 THE WITNESS: YES.
22 THE COURT: SO WOULD YOU AGREE THAT HEARST IS PAYING
23 A BILLION DOLLARS IN EFFECT FOR THE CHRONICLE?
24 THE WITNESS: I WOULD SUGGEST THAT THE WAY YOU DID
25 YOUR CALCULATIONS, FOR WHICH I WOULD DISAGREE, THAT YOU ARE 668
PAGE - REDIRECT / SHULMAN
1 CORRECT.
2 BUT, ON THE OTHER HAND, I THINK I CAN SAY TO YOU,
3 YOUR HONOR, THAT IT WOULD BE A BILLION-PLUS IF THIS HAD BEEN AN
4 OPEN BIDDING MARKETPLACE FOR THIS NEWSPAPER.
5 THE COURT: A BILLION PLUS TODAY?
6 THE WITNESS: TODAY.
7 THE COURT: ALL RIGHT. OKAY.
8 VERY WELL, COUNSEL. I THINK THAT CONCLUDES THE
9 TESTIMONY FOR TODAY. WE WILL RESUME TOMORROW MORNING AT 8:30.
10 MR. BALABANIAN: THANK YOU.
11 YOUR HONOR, WILL TOMORROW BE A FULL DAY OR A HALF
12 DAY?
13 THE COURT: WE WILL GO UNTIL ABOUT 1:00 O'CLOCK OR
14 THEREABOUTS.
15 MR. PAGE?
16 (OFF THE RECORD DISCUSSION.)
17 (PROCEEDINGS ADJOURNED FOR THE DAY AT 5:40 P.M.)
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