D. COMPETITION UNDER THE JOA

Because of independent price-setting, there has in fact been economic competition between Hearst and CPC. As the eventual termination of the JOA has come closer, this competition has intensified in other ways. Seeing the end of the JOA as inevitable and imminent, Hearst determined in the late 1990s that it would move The Examiner to the morning to compete against The Chronicle at the end of the JOA, if not before. Realizing that they would be locked in a newspaper "war" after the JOA expired, both Hearst and CPC sought to position themselves so that they would have a competitive advantage in their head-to-head competition. They also maneuvered to try to avoid this eventual competition, with various proposals for closing The Examiner and sharing profits from The Chronicle. Hearst intended in any event to stay and compete in San Francisco after the JOA, at one point even accusing CPC of violating the antitrust laws by hamstringing The Examiner so that it would not be able to compete in the future. (PX 124 ("MISSION STATEMENT: The San Francisco JOA terminates in 2005. It is the intention of the Hearst Corporation to maintain a newspaper presence, and compete for the marketplace following the demise of the JOA."); PX 86 (Hearst CEO Frank Bennack: "...Hearst’s desire and, indeed, intention is to remain in the San Francisco newspaper market going forward..."); PX 70 (CPC CEO John Sias writing to Bennack, August 11, 1998: "Thank you for your July 9th letter replying to the Chronicle’s request for your terms under which Hearst would consider closing the Examiner. * * * It is the unanimous opinion of the Chronicle Board that we are too far apart on our JOA positions to warrant any further discussion. We will commence the advance planning necessary for the ultimate dissolution of the San Francisco Newspaper Agency in 2005."); PX 71 (Bennack reporting on a discussion with Sias, September 8, 1998: "I told him, however, that we were certainly going to take the steps necessary to prepare ourselves for the resumption of a fully competitive situation in the post-2005 period.").)

On April 15, 1999, chagrined that CPC had directed the Agency to halt a joint subscription program, Timothy White, publisher of The Examiner, wrote to Sias:

The over-arching intent and purpose of the Joint Operating Agreement is to "enable both Chronicle and Hearst to survive as publishers of independent newspapers," and upon termination of the Agreement, in the absence of its renewal or extension, to "...enable each of said parties to engage independently of Printing Company in the newspaper publishing business."

* * *

As indicated in prior letters, we believe this [CPC’s efforts to terminate the joint program] to be in violation of the anti-trust laws and the Agreement. . .

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The stated intent and purpose of the Agreement is now clearly frustrated by requiring the Examiner to remain in the afternoon field. Accordingly, we hereby formally request your concurrence in our moving the Examiner expeditiously to the A.M. cycle, alongside the Chronicle. [PX 72.]

Hearst obviously did not think The Examiner to be enough of a failing company to warrant abandoning the field to The Chronicle. Indeed, under the JOA, The Examiner was not a failing company, and was flush with profits, accumulating at the rate of $25 million per year, enough to provide a war chest to fund direct competition against The Chronicle after the JOA. (PX 91, PX 93; Comanor trial testimony.)