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
         17
         18
         19
         20
         21
         22
         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
         15
         16
         17
         18
         19
         20
         21
         22
         23
         24
         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
         11
         12
         13
         14
         15
         16
         17
         18
         19
         20
         21
         22
         23
         24
         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.)
          3
          4
          5
          6
          7
          8
          9
         10
         11
         12
         13
         14
         15
         16
         17
         18
         19
         20
         21
         22
         23
         24
         25 662
                                    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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