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VOLUME 11
PAGES 2295 - 2473
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 31, 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
ANGELINA ALIOTO-GRACE
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
2296
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 THOMAS S. HIXSON
ATTORNEYS AT LAW
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OPENING ARGUMENT BY MR. ALIOTO 2300 11
6 CLOSING ARGUMENT BY MR. ROSCH 2381 11
CLOSING ARGUMENT BY MR. HALLING 2416 11
7 CLOSING ARGUMENT BY MR. CONNELL 2436 11
CLOSING ARGUMENT BY MR. BALABANIAN 2447 11
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2298
1 WEDNESDAY - MAY 31, 2000 9:35 A.M.
2
3 THE CLERK: CALLING CIVIL 2000-119, CLINTON REILLY
4 VERSUS THE HEARST CORPORATION, THE CHRONICLE PUBLISHING COMPANY
5 AND EXIN.
6 COUNSEL, YOUR APPEARANCES FOR THE RECORD, PLEASE.
7 MR. ALIOTO: JOSEPH M. ALIOTO, YOUR HONOR, DANIEL
8 SHULMAN AND ANGELINA ALIOTO-GRACE FOR THE PLAINTIFF.
9 MR. HALLING: GARY HALLING AND JERRY CONNELL, TOM
10 NEVIN FOR DEFENDANT THE HEARST CORPORATION.
11 MR. ROSCH: GOOD MORNING, YOUR HONOR. TOM ROSCH
12 TOGETHER WITH GREGORY LINDSTROM AND PETER HUSTON FOR CHRONICLE
13 PUBLISHING COMPANY.
14 MR. BALABANIAN: GOOD MORNING, YOUR HONOR. DAVID
15 BALABANIAN, CHRISTOPHER HOCKETT, FOR INTERVENOR EXIN LLC.
16 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
17 COUNSEL, I DON'T KNOW IF YOU HAD ANY DISCUSSIONS
18 AMONGST YOURSELVES WITH RESPECT TO HOW YOU WISH TO PROCEED.
19 HAVE YOU?
20 MR. ALIOTO: NO, YOUR HONOR.
21 THE COURT: ALL RIGHT. WELL, THEN, WHY DON'T WE
22 JUST PROCEED IN THE USUAL FASHION. WE'LL LET THE PLAINTIFF
23 LEAD OFF FIRST. I'VE GOT SOME QUESTIONS THAT I'D LIKE TO HAVE
24 ANSWERS TO, BUT I THINK PROBABLY THOSE ARE BEST ADDRESSED IN
25 THE COURSE OF ARGUMENT. I KNOW THAT YOU EACH HAVE
2299
OPENING ARGUMENT \ ALIOTO
1 PRESENTATIONS THAT YOU'D LIKE TO MAKE AND I DON'T WANT TO
2 INTERFERE WITH THAT.
3 AND I SEE WE HAVE SOME DEMONSTRATIVES IN THE
4 COURTROOM. I ASSUME WE'RE GOING TO HAVE SOME OF THESE SHOWN
5 DURING THE COURSE OF THE ARGUMENTS. WHOSE ARE THESE?
6 MR. ALIOTO: THEY ARE THE PLAINTIFF'S, YOUR HONOR.
7 THE COURT: AH HA, ALL RIGHT. WELL, THAT'S FINE. I
8 WOULDN'T WANT TO INTERFERE WITH THIS PRESENTATION, SO LET ME
9 ASK YOU TO LEAD OFF.
10 MR. ALIOTO: THANK YOU, YOUR HONOR.
11 OPENING ARGUMENT
12 MR. ALIOTO: MAY IT PLEASE THE COURT.
13 FIRST OF ALL, I WOULD LIKE TO SAY ON BEHALF OF MY
14 COLLEAGUES AND MYSELF, MR. SHULMAN, MR. HILBERT,
15 MS. ALIOTO-GRACE AND MYSELF, THAT WE CONSIDER IT TO HAVE BEEN
16 AN HONOR AND A PLEASURE, A SPECIAL PRIVILEGE EVEN, TO PRESENT
17 THIS IMPORTANT CASE OF FIRST IMPRESSION TO YOUR HONOR, AND WE
18 FEEL THAT WE HAVE BEEN TREATED VERY FAIRLY AND HAVE HAD EVERY
19 OPPORTUNITY TO PRESENT THE EVIDENCE THAT WE THOUGHT WAS GERMANE
20 TO THE ISSUES.
21 WE BELIEVE THAT THIS PARTICULAR CASE HAS SOME VERY
22 STRONG SIGNIFICANCE OBVIOUSLY IN A VERY IMPORTANT AREA OF OUR
23 COUNTRY, VERY IMPORTANT INDUSTRY OF OUR COUNTRY, AND THAT THIS
24 COURT, I THINK, IS THE FIRST TO BE ABLE TO EVER LOOK AT IT IN
25 TERMS OF A TERMINATION OF A JOINT OPERATING AGREEMENT.
2300
OPENING ARGUMENT \ ALIOTO
1 IT WAS MY PROPOSAL OR BELIEF, YOUR HONOR, THAT WHAT
2 I WOULD LIKE TO DO IS I WOULD LIKE TO PROCEED, IF IT IS
3 CONVENIENT TO THE COURT, I WOULD LIKE TO PROCEED ON THE FACTUAL
4 GROUNDS IN A CHRONOLOGICAL ORDER AND ATTEMPT TO DEVELOP OUR
5 ARGUMENTS ON THAT BASIS OR TO SKIP AROUND AS THE COURT --
6 HOWEVER THE COURT PLEASES.
7 AS THE COURT IS AWARE, THERE ARE TWO THINGS I WANT
8 TO MENTION AND IT'S KIND OF UNUSUAL IN ADDRESSING JUST THE
9 COURT RATHER THAN THE JURY, BUT OF COURSE THE STANDARD OF PROOF
10 IS THE PREPONDERANCE OF THE EVIDENCE. WE BELIEVE THAT IN
11 WEIGHING THE EVIDENCE, EACH OF THE ELEMENTS ARE NOT ONLY
12 SATISFIED BUT SATISFIED ALMOST TO AN ABSOLUTE.
13 WE ALSO WANT TO EMPHASIZE THAT THE COURT BEING THE
14 TRIER OF FACT, THAT A VERY IMPORTANT PART OF THE CASE WILL ALSO
15 BE THE CREDIBILITY OF THE WITNESSES; THAT THE CREDIBILITY OF
16 THE WITNESSES AND THE DECISION BY THE TRIER OF FACT WITH REGARD
17 TO THE CREDIBILITY OF THE WITNESSES IS, OF COURSE, NOT
18 REVIEWABLE. IT IS THE FUNCTION OF THE TRIER OF FACT TO
19 DETERMINE THE CREDIBILITY OF THE WITNESS AND ONLY THE TRIER OF
20 FACT.
21 WE'D LIKE TO GET INTO THE CASE THE VERY BEGINNING,
22 EVEN BEFORE THE LAW BEGAN TO CHANGE, YOUR HONOR. THAT WAS THE
23 JOA IN THIS VERY CASE, AND THAT IS THE -- THAT WAS MARKED AS
24 EXHIBIT 1 IN OUR CASE, AND IT IS THE JOA WHICH WAS DATED
25 OCTOBER 23RD, 1964, AND IT HAD THE EFFECTIVE DATE OF JANUARY
2301
OPENING ARGUMENT \ ALIOTO
1 THE 1ST, 1965.
2 NOW, I THINK IT IS EXTREMELY IMPORTANT TO RECOGNIZE
3 IMMEDIATELY THAT THIS WAS A TOTAL VOLUNTARY AGREEMENT BETWEEN
4 TWO VIABLE COMPETITORS AT THE TIME, BOTH WHO HAD NEWSPAPERS IN
5 THE MORNING. BUT THERE WAS AN OBVIOUS TREND IN THE INDUSTRY,
6 IN THE NEWSPAPER INDUSTRY ALONE, THAT BEGAN TO -- WHERE THESE
7 DIFFERENT AGREEMENTS BEGAN TO CROP UP, AND THE NEWSPAPERS TOOK
8 IT UPON THEMSELVES TO BEGIN TO ENTER INTO THESE OULD GO OUT OF BUSINESS.
9 BUT IT APPARENTLY WAS NOT THAT DRASTIC. BUT
10 WHATEVER THE CIRCUMSTANCE, BOTH PARTIES AGREED FROM THE VERY
11 BEGINNING.
12 AND WHAT WE'RE GOING TO SHOW, I BELIEVE THAT THE
13 EVIDENCE HAS SHOWN IN THIS CASE, IS THAT IF THERE WERE EVER A
14 SITUATION IN WHICH AN INDUSTRY TOOK ADVANTAGE OF A PARTICULAR
15 PRIVILEGE, IT IS THIS INDUSTRY AND THAT THESE PAPERS,
16 ESPECIALLY AS STATED BY THE EVIDENCE HERE, ARE USING THE JOA AS
17 A STEPPINGSTONE TO MONOPOLY, PARTICULARLY THIS DEFENDANT, THE
18 HEARST CORPORATION, WHICH SEEMS TO HAVE A PENCHANT FOR DOING
19 THIS VERY KIND OF CONDUCT, A KIND OF REVERSE MIDAS TOUCH THAT
20 THEY HAVE WHERE ANY PAPER THAT THEY TOUCH TURNS INTO ASHES AND
21 THEY IMMEDIATELY INSTEAD OF ALLOWING THE PAPER ITSELF, OR
22 BECAUSE OF THEIR OWN INEPTITUDE, OR FOR WHATEVER REASON, TURN
23 AROUND AND USE MONEY INSTEAD OF INVESTING IN THEIR OWN PAPER,
24 INVESTING IN THE REMAINING PAPER, THE MAJOR PAPER.
25 THE COURT: LET ME ASK YOU IN THAT CONNECTION, HOW
2303
OPENING ARGUMENT \ ALIOTO
1 DOES THE MARCH 16 CONTRACT FIT INTO THIS SCENARIO?
2 MR. ALIOTO: WHICH MARCH 16 CONTRACT?
3 THE COURT: THAT'S THE TRANSFER OF CERTAIN EXAMINER
4 ASSETS AND PAYMENTS TO EXIN CORPORATION.
5 MR. ALIOTO: OH. WELL, THERE'S TWO ITEMS ABOUT
6 THAT. THE FIRST ONE IS, OF COURSE, THAT AS THE COURT I THINK
7 IS AWARE, UNDER THEIR AGREEMENT, THE CHRONICLE AND THE HEARST
8 CORPORATION, THAT THE SALE OF THE EXAMINER IS -- TO THE FANGS
9 IS CONTINGENT UPON THE FIRST CONTRACT.
10 BUT THE FACT OF THE MATTER IS THAT THE SALE OF THE
11 EXAMINER WAS AN EFFORT, THEY SAY, POLITICAL EFFORT, AND WE
12 THINK THE EVIDENCE IS VERY CLEAR THAT THE EVIDENCE IS THAT THEY
13 WERE BASICALLY TOLD THAT THEY WOULD NOT HAVE OPPOSITION IF THEY
14 SOLD THE PAPER TO THE FANG COMPANY. BUT WE BELIEVE THAT UNDER
15 THE ARRANGEMENT THAT THE FANG GROUP HAVE WITH THE HEARST
16 CORPORATION, THAT THAT IS SO CLEAR THAT IT WILL NOT BE A
17 COMPETITIVE NEWSPAPER, AND SO IT WAS A SHAM AND A FARCE.
18 AND I WOULD SAY, YOUR HONOR, WITH REGARD TO THAT,
19 THAT THERE HAVE BEEN AT LEAST FOUR DIFFERENT FACES OF THE
20 SO-CALLED HEARST CORPORATION WITH REGARD TO THAT VERY ISSUE,
21 AND ONE OF THEM WAS RIGHT HERE IN THIS CASE, RIGHT HERE DURING
22 THE TRIAL.
23 ACTUALLY, YOU KNOW, I HAVE A -- I DIDN'T INTEND TO
24 PULL IT OUT NOW, BUT I CAN PULL IT OUT NOW, YOUR HONOR. THIS
25 IS --
2304
OPENING ARGUMENT \ ALIOTO
1 THE COURT: ONE OF THE THREE FACES, IS IT?
2 MR. ALIOTO: THIS IS -- WE'VE GOT NUMBER FOUR. WE
3 HAVEN'T ADDED IT YET, YOUR HONOR. IT'S CLOSE TO THE THREE
4 FACES OF EVE BUT IT'S NOT QUITE.
5 (LAUGHTER)
6 MR. ALIOTO: THE COURT WILL REMEMBER THAT UP TO
7 AUGUST 6, 1999, WHEN THE HEARST CORPORATION AND CHRONICLE
8 ENTERED INTO THEIR AGREEMENT, PRIOR TO THAT TIME -- AGAIN AND
9 AGAIN WE'LL POINT OUT, AND THIS IS A VERY HUGE, IN OUR
10 JUDGMENT, CREDIBILITY ISSUE, AGAIN AND AGAIN THEY SAID THAT
11 THEY WERE GOING TO STAY IN SAN FRANCISCO AFTER 2005. THEY SAID
12 WHAT KIND OF PAPER THEY WERE GOING TO HAVE. THEY SAID THAT
13 THEY WERE GOING TO COMPETE ON THE PRICES. THEY SAID THAT
14 BEFORE AUGUST 6, 1999.
15 AFTER AUGUST 6, WHEN THEY MADE THEIR AGREEMENT WITH
16 THE CHRONICLE, THEY IMMEDIATELY SHIFT AND THEY SAY, "NO ONE CAN
17 REMAIN IN THE MARKET AND THAT THERE'S NO WAY THAT THIS CAN
18 HAPPEN."
19 THEY REPRESENT TO THE DEPARTMENT OF JUSTICE THAT
20 PERSON WOULD BE IRRATIONAL TO EVEN THINK THAT THEY COULD DO IT.
21 AND THEN, OF COURSE, THEY MAKE THE AGREEMENT WITH THE FANG
22 GROUP IN MARCH 16, 2000. AND NOW WHAT DO THEY SAY? THEY SAY,
23 "WELL, THE FANGS NOT ONLY -- THEY WILL BE COMPETITIVE." AND
24 THEY MAKE THIS STATEMENT, AND AGAIN A CREDIBILITY ISSUE, THEY
25 MAKE THE STATEMENT TO THE DEPARTMENT OF JUSTICE.
2305
OPENING ARGUMENT \ ALIOTO
1 THE DEPARTMENT OF JUSTICE COMES IN 14 DAYS LATER,
2 HANDS IN THAT PRESS RELEASE THAT THE COURT REMEMBERS IN WHICH
3 THEY SAY FOR THE FIRST TIME IN 35 YEARS THERE'S GOING TO BE
4 COMPETITION FOR THE SUBSCRIBERS AND THE ADVERTISERS AND THE
5 PEOPLE OF SAN FRANCISCO WITH TWO COMPETING NEWSPAPERS.
6 THE COURT: WELL, LET'S ASSUME I BELIEVE ALL OF THAT
7 AND FIND THAT YOUR RECITATION OF THE FACTS IS CORRECT AND
8 CONSISTENT WITH WHAT OCCURRED HERE. HOW DOES THE SPIN-OFF OF
9 THE EXAMINER ASSETS CONSTITUTE A VIOLATION OF SECTION 1 OR
10 SECTION 2?
11 MR. ALIOTO: BECAUSE, YOUR HONOR, WE HAVE STATED, AS
12 WE STATED IN OUR BRIEFS, THAT WE BELIEVE THAT THE HEARST
13 CORPORATION HAS DONE A NUMBER OF THINGS, BUT ONE OF THEM UNDER
14 SECTION 2 OF THE SHERMAN ACT, UNDER THE ATTEMPT-TO-MONOPOLIZE
15 PHASE, THIS IDEA WAS IN ORDER TO GET THE MONOPOLY, THEY FIRST
16 ARE SHUTTING DOWN THE JOA; AND THEN IN ORDER TO TRY TO DO THAT
17 WHICH THEY SAY FOR POLITICAL REASONS, THEY THEN MAKE THE
18 AGREEMENT WITH THE FANGS.
19 THE COURT: ALL RIGHT. LET'S ASSUME I BELIEVE THAT
20 THERE'S NO BUSINESS JUSTIFICATION WHATEVER FOR THAT SPIN-OFF OF
21 EXAMINER ASSETS TO THE FANGS, THAT IT WAS A PURE POLITICAL PLOY
22 ON HEARST'S PART TO CURRY FAVOR WITH CITY HALL AND WITH THE
23 DEPARTMENT OF JUSTICE. ASSUME I BELIEVE ALL OF THAT. HOW DOES
24 THAT AMOUNT TO A VIOLATION OF EITHER SECTION 1 OR SECTION 2?
25 MR. ALIOTO: BECAUSE IT IS A COMBINATION OF THE TWO
2306
OPENING ARGUMENT \ ALIOTO
1 INDEPENDENT GROUPS FOR THE PURPOSE OF GRANTING TO THE HEARST
2 CORPORATION A MONOPOLY. BOTH SIDES HAVE ADMITTED, YOUR HONOR,
3 INCLUDING MR. ASHER, THE COURT WILL RECALL, THAT AT THE TIME
4 THEY MADE THE AGREEMENT, BECAUSE THIS WOULD BE THE FOURTH FACE
5 OF HEARST, AT THE TIME THEY MADE THE AGREEMENT, NEITHER THE
6 HEARST CORPORATION NOR THE FANGS HAD ANY INTENTION TO HAVE A
7 COMPETING PAPER WITH THE MORNING CHRONICLE.
8 AND I THINK ALSO THE COURT HAS TO UNDERSTAND THAT IN
9 SOME RESPECT HERE THE WHOLE SHUTTING DOWN OF THE JOA IN ORDER
10 TO ACHIEVE A MONOPOLY, ANY ACT THAT'S TAKEN TO FURTHER THE
11 ESTABLISHMENT OF A MONOPOLY, EVEN IF THE ACT IN ITSELF WERE
12 WHOLLY INNOCENT IN ITSELF, IF IT IS ONE OF THE ACTS THAT ARE
13 PUT TOGETHER TO ACHIEVE THE UNLAWFUL OBJECTIVE, THEY ALSO
14 BECOME UNLAWFUL.
15 WE BELIEVE ALSO THAT THE HEARST CORPORATION -- LOOK
16 AT THE CONTRACT OF MARCH 16. THE MARCH 16TH CONTRACT, TO BE
17 KIND, WOULD PROBABLY HAVE TO BE DESCRIBED AS A VERY SUBTLE
18 PERHAPS BUT NONETHELESS DOWN-AND-DIRTY BRIBE. THE WHOLE POINT
19 IS THAT HERE YOU DO NOT MAKE THIS PAPERWORK, AND WE'RE GOING TO
20 REWARD YOU WITH SO MUCH MONEY EVERY YEAR, MORE THAN THEY HAD
21 EVER MADE BEFORE.
22 THAT MEANS THAT THEY JOIN --
23 THE COURT: GO AHEAD.
24 MR. ALIOTO: I DIDN'T MEAN TO INTERRUPT, YOUR HONOR.
25 THAT MEANS THAT THEY JOINED IN ON THE MONOPOLY
2307
OPENING ARGUMENT \ ALIOTO
1 UNDERSTANDING THAT A MONOPOLY WOULD BE CREATED.
2 IF THE FANGS HAD NO INTENTION OF COMPETING AGAINST
3 THE CHRONICLE IN THE SENSE THAT THE OLD EXAMINER WAS AND IF THE
4 EXAMINER HAD THE SAME INTENTION WHEN IT MADE THAT DEAL WITH THE
5 FANGS, THEN WHAT ARE THEY DOING?
6 AND AT THE SAME TIME THEY KNOW THAT THEY'RE
7 REPRESENTING TO THE GOVERNMENT AND TO YOUR HONOR IN THE BRIEFS
8 FILED IN THIS COURT THAT THAT WHOLE DEAL IS REALLY TO BE A
9 COMPETING NEWSPAPER.
10 THE COURT: FULLY COMPETITIVE.
11 MR. ALIOTO: YES, TO THE CHRONICLE.
12 THE COURT: WELL, ALL RIGHT. LET'S ASSUME I BELIEVE
13 THAT THIS WAS A BRIBE OR IMPLICIT BRIBE. IS THAT A VIOLATION
14 OF SECTION 2?
15 BECAUSE WHAT HAS BEEN CREATED OUT OF THAT IS A
16 DIFFERENT NEWSPAPER, AN INDEPENDENTLY AND SEPARATELY-PUBLISHED
17 NEWSPAPER WHICH IS GOING TO PRESUMABLY GO OUT AND COMPETE FOR
18 ADVERTISING AND READERS WITH THE CHRONICLE. HOW DOES THAT
19 TRANSACTION CREATE A MONOPOLY OR HOW DOES IT REPRESENT AN
20 ATTEMPT TO CREATE A MONOPOLY?
21 MR. ALIOTO: BECAUSE IT IS CHANGING A COMPETITIVE
22 PAPER. THE EXAMINER AND THE CHRONICLE UNDER THE JOA ARE
23 COMPETING NEWSPAPERS, BOTH OF THEM MAKING MONEY.
24 THE COURT: ALL RIGHT.
25 MR. ALIOTO: BOTH OF THEM --
2308
OPENING ARGUMENT \ ALIOTO
1 THE COURT: DO I HAVE TO FIND THAT THERE IS
2 COMPETITION NOW BETWEEN THE EXAMINER AND THE CHRONICLE TO
3 SUSTAIN YOUR THEORY?
4 MR. ALIOTO: YOU MEAN IN THE JOA?
5 THE COURT: CORRECT.
6 MR. ALIOTO: NO, I DON'T THINK SO, BUT THERE IS
7 ANYWAY. THERE IS COMPETITION. I DO NOT BELIEVE SO.
8 I BELIEVE UNDER SECTION 7, THE POTENTIAL
9 COMPETITION, WHICH IS ON THIS RECORD, FLATLY BY BOTH THE
10 CHRONICLE AND THE EXAMINER, YOUR HONOR, AND THEY BOTH FLATLY
11 ANTICIPATE OR SAY THAT THEY ANTICIPATE, UNLESS YOU DISBELIEVE
12 THEM, THEY SAY THAT THEY INTEND TO COMPETE IN 2005, THEY SAY,
13 EVEN THE EXAMINER -- REMEMBERING, YOUR HONOR, THE EXAMINER -- I
14 WANT TO SHOW YOU ANOTHER ONE TOO -- BUT THE EXAMINER, REMEMBER,
15 CHARGED THAT IT WAS AN ANTITRUST VIOLATION THEY BELIEVED, THEIR
16 LAWYERS BELIEVED, THEY BELIEVED IT, THAT IT WAS AN ANTITRUST
17 VIOLATION TO IN ANY WAY HARM THE EXAMINER IN ITS PREPARATION AS
18 IT BEGAN TO POSITION TO BE ABLE TO COMPETE IN 2005.
19 I THINK THAT IT IS IMPORTANT TO UNDERSTAND -- MAY I
20 USE THE EASEL, YOUR HONOR?
21 THE COURT: OF COURSE.
22 MR. ALIOTO: YES. LET ME SHOW THE BASIC THRUST OF
23 THAT, OF THE JOA, AND HOW IT CAME ABOUT.
24 UP TO -- THIS IS 1964. THE TWO NEWSPAPERS, THE
25 CHRONICLE AND THE EXAMINER WERE COMPETING AND THEY ARE FULLY
2309
OPENING ARGUMENT \ ALIOTO
1 SUBJECT TO THE ANTITRUST LAWS OF THE UNITED STATES AT THIS
2 TIME.
3 NOW, THE SUPREME COURT HAD NOT RULED IN THE CITIZENS
4 CASE NOR, FOR THAT MATTER, HAD THE UNITED STATES GOVERNMENT
5 RULED IN THE NEWSPAPER PRESERVATION ACT. THEY JOINED --
6 THE COURT: IN FACT, THE DEPARTMENT OF JUSTICE GAVE
7 A GO-AHEAD TO THE PARTIES TO ENTER THE JOA; DID IT NOT?
8 MR. ALIOTO: I DON'T KNOW WHETHER THEY DID OR THEY
9 DIDN'T, YOUR HONOR. BUT I WILL SAY THAT SUBSEQUENTLY, IN LIGHT
10 OF THE NEWSPAPER PRESERVATION ACT, CERTAIN PORTIONS WERE
11 ALLOWED, NOT ALL PORTIONS.
12 BUT I WILL SHOW THAT IN 19 -- SO THEY FORMED -- AND
13 WE'LL MAKE THIS AS THEIR JOINT OPERATING AGREEMENT, A BOX, AND
14 THEY SPLIT THAT 50-50. SO NOW THEY HAVE A 50-50 ARRANGEMENT.
15 AND LET'S SAY THAT THE NEWSPAPER PRESERVATION ACT
16 HAS NOW BEEN PASSED. WHAT HAPPENS WHEN THIS IS OVER? WHEN
17 IT'S OVER, THEY GO BACK TO WHERE THEY WERE BEFORE, COMPETING ON
18 THE MERITS. IT NO LONGER APPLIES ANYMORE. BUT DURING THIS
19 TIME PERIOD, THEY HAVE CERTAIN EXEMPTIONS BECAUSE OF THE
20 NEWSPAPER PRESERVATION ACT.
21 IF IN THE FINAL PART WHEN THEY'RE JOCKEYING FOR
22 POSITION PREPARING THEMSELVES FOR COMPETITION -- AND I HAVE
23 THIS (INDICATING), AND I USE THE HORSES, YOUR HONOR, FOR TWO
24 REASONS. ONE, IT GOES ALONG WITH -- IT'S ONOMATOPOETIC AND THE
25 OTHER REASON IS THAT AT THE TIME WE MADE THEM, IT WAS DURING
2310
OPENING ARGUMENT \ ALIOTO
1 DERBY WEEK.
2 (LAUGHTER)
3 MR. ALIOTO: BUT THE POINT IS, IS THAT DURING THE
4 JOA, DURING THE JOA PART WHERE THEY HAVE IMMUNITIES, THEY ARE
5 GETTING READY, BOTH OF THEM SAY, BOTH OF THEM THREATEN THE
6 OTHER, AS THEY SAY, WITH COMPETITION GETTING READY, GETTING
7 READY TO BEGIN COMPETING IN 2005.
8 NOW, IF ONE OF THESE COMPANIES TAKES ACTION AGAINST
9 THE OTHER, WHICH THE EXAMINER CLAIMED THE CHRONICLE WAS DOING,
10 IF ONE OF THEM TAKES ACTION AGAINST THE OTHER TO TRY TO PREVENT
11 THEM OR SOMEHOW HURT THEM BEFORE THEY GET LINED UP FOR THE
12 RACE, THEN AS THE EXAMINER SAID, THAT'S AN ANTITRUST VIOLATION,
13 AND I BELIEVE IT IS SO. AND SO THERE IS THIS DEGREE OF
14 COMPETITION EVEN POSITIONING AND GETTING READY.
15 SO, FOR EXAMPLE, I THINK YOUR HONOR WILL REMEMBER AT
16 LEAST TWO ITEMS ON THAT. ONE IS THAT THE EXAMINER WANTED TO
17 MOVE ALSO TO THE MORNING, BECAUSE YOUR HONOR MAY RECALL THAT
18 MR. BENNACK SAID FROM THE VERY BEGINNING OF THE JOA THAT RIGHT
19 FROM THE VERY START, NOW THIS IS VOLUNTARY, JUDGE, RIGHT FROM
20 THE VERY START GOING IN THE AFTERNOON WAS NOT GOOD FOR THE
21 EXAMINER, WAS NOT GOOD FOR -- LET ME SEE... I WANT TO --
22 THE COURT: LET ME JUMP AHEAD IF I MIGHT AND SEE IF
23 I UNDERSTAND THE ARGUMENT.
24 MR. ALIOTO: YES.
25 THE COURT: IS YOUR POINT THAT ALTHOUGH THERE MAY
2311
OPENING ARGUMENT \ ALIOTO
1 NOT BE COMPETITION BETWEEN THE EXAMINER AND THE CHRONICLE UNDER
2 THE JOA AS IT PRESENTLY EXISTS, THE JOA HAS A TERMINATION TIME,
3 A TERMINATION DATE?
4 MR. ALIOTO: YES. YES.
5 THE COURT: AND THERE IS COMPETITION AT THE END OF
6 THAT AGREEMENT.
7 MR. ALIOTO: YES. IT HAS TO GO BACK TO WHAT WE USED
8 TO CALL STATUS QUO ANTE.
9 THE COURT: AND WHAT THE HEARST ACQUISITION OF THE
10 CHRONICLE WILL DO WILL SNUFF OUT THE POSSIBILITY OF THAT
11 COMPETITION IN 2005 --
12 MR. ALIOTO: NO QUESTION.
13 THE COURT: -- OR 2015?
14 MR. ALIOTO: NO QUESTION. IT'S GONE.
15 THE COURT: AND THAT IS THE SECTION 2 VIOLATION,
16 THAT IS THE --
17 MR. ALIOTO: AND 7 AND 1 BECAUSE REMEMBER, YOUR
18 HONOR, SECTIONS --
19 THE COURT: HOW IS IT A VIOLATION OF SECTION 1?
20 MR. ALIOTO: SECTION 1 IS THE COMBINATION TO
21 RESTRAIN TRADE. AND YOUR HONOR MAY RECALL, AS WE POINTED OUT
22 IN THE LEXINGTON BANK CASE, THAT WHEN YOU HAVE A SECTION 7 CASE
23 OF A THREATENED INJURY IN THE FUTURE, POTENTIAL, POTENTIAL
24 DESTRUCTION OF COMPETITION, THAT WHEN YOU HAVE THAT, THAT THAT
25 ALSO INVOLVES A SECTION 1 OR IT IS, IN FACT, A SECTION 1 CASE
2312
OPENING ARGUMENT \ ALIOTO
1 TOO.
2 THE COURT MAY RECALL, I THINK WE PUT IT IN OUR
3 BRIEF, AMERICAN TOBACCO WAS VERY CLEAR ABOUT IT, THEY'VE SAID
4 THAT THE PREVENTION OF COMPETITION IS CHEAPER THAN THE CURE.
5 THAT IS THE REASON WHY YOU HAVE TO HAVE SECTION 7 AND SECTION 1
6 RIGHT IN THE BEGINNING WHEN THEY'RE STARTING TO JOCKEY AND TAKE
7 THESE POSITIONS.
8 SUPPOSE, FOR EXAMPLE, THE EXAMINER, YOU KNOW, HITS
9 ONE OF THE -- YOU KNOW, TRIES TO INJURE THE OTHER HORSE, OR
10 SOMETHING LIKE THAT, MAKE IT MORE DIFFICULT, OR THE CHRONICLE
11 DOES, MAKE IT MORE DIFFICULT TO BE ABLE TO COMPETE IN 2005.
12 THAT THEN IS -- THEY'RE TRYING TO JOCKEY AS IT IS.
13 I THINK YOUR HONOR REMEMBERS THAT THE DLJ PEOPLE
14 TOLD THE CHRONICLE THAT WHAT THEY'RE GOING TO HAVE TO DO, IF I
15 COULD SHOW IT AGAIN, BUT BEFORE THEY GOT TO 2005, 2002 AND 2003
16 THEY'RE GOING TO HAVE TO BUY A PLANT AND THEY'RE GOING TO HAVE
17 TO START TO GET READY. AND THE EXAMINER SAYS TO THE CHRONICLE,
18 "WE'VE GOT TO GO IN THE MORNING BECAUSE WE'RE GOING TO GET
19 READY. WE'RE HERE FOR KEEPS. WE WANT YOU TO KNOW THAT."
20 THAT'S WHAT THEY WERE SAYING.
21 OF COURSE, THEY COME INTO THIS COURT CONFRONTED WITH
22 THAT, YOUR HONOR, AND OF COURSE THEY DENY THAT. THEY SAID IT
23 WAS A BIG BLUFF, A BLOWFISH OR SOMETHING LIKE THAT. BUT THEY
24 WERE EVEN TELLING EACH OTHER THAT.
25 AND IF YOU CAN BELIEVE MR. BENNACK WHEN HE HAS TO
2313
OPENING ARGUMENT \ ALIOTO
1 GET ON THE STAND AND SAY -- I SHOWED HIM AN INTERNAL DOCUMENT
2 WHERE THEY MADE THAT STATEMENT THAT THEY HAVE TO GET READY TO
3 COMPETE IN 2005 AND AFTERWARDS, AND I SAID, "YOU WROTE THAT TO
4 YOUR OWN" -- YOU KNOW, HE WROTE IT TO HIS OWN PEOPLE. AND HE
5 SAID, "SOMETIMES YOU HAVE TO PROTECT YOUR OWN PEOPLE." HE SAID
6 THAT WHEN COUNSEL WAS QUESTIONING HIM. PROTECT THEM BY LYING
7 TO THEM.
8 THE COURT: BUT IF THEY CAN ESTABLISH, IF THE
9 PARTIES CAN ESTABLISH THAT ONE OF THESE TWO NEWSPAPERS IS A
10 FAILING NEWSPAPER AND CANNOT EXIST INDEPENDENT OF THE JOINT
11 OPERATING AGREEMENT, THEN PRESUMABLY THEY CAN RENEW THE JOINT
12 OPERATING AGREEMENT FOR SOME ADDITIONAL PERIOD OF TIME; CAN
13 THEY NOT?
14 MR. ALIOTO: THERE'S TWO THINGS. FIRST OF ALL --
15 THE COURT: LET ME JUST FINISH THE POINT.
16 MR. ALIOTO: ALL RIGHT.
17 THE COURT: DON'T YOU HAVE TO SHOW THAT AT THE END
18 OF THE ROAD, AT THE END OF THE JOA, 2005 OR 2015, THAT BOTH OF
19 THESE NEWSPAPERS ARE VIABLE ENTERPRISES?
20 MR. ALIOTO: I DON'T THINK SO, YOUR HONOR, BECAUSE
21 THERE'S --
22 THE COURT: IT SEEMS TO ME YOU'VE PROVEN JUST THE
23 OPPOSITE.
24 MR. ALIOTO: YEAH, I DON'T THINK SO, YOUR HONOR. I
25 THINK THAT -- I THINK TO UNDERSTAND THE REASON FOR THE
2314
OPENING ARGUMENT \ ALIOTO
1 NEWSPAPER PRESERVATION ACT AND THE CASE THAT STARTED IT, THE
2 CITIZENS CASE AND WHAT THEY DID HERE, THEY HAVE GONE IN -- THEY
3 ARE SAYING FROM THE VERY BEGINNING THAT WE CANNOT SURVIVE.
4 THEY SAY HEARST INCURRED DEFICITS WITH RESPECT TO ITS
5 PUBLICATION AND THEY SAY THAT HEARST AND THE CHRONICLE ARE
6 CONVINCED THAT ONLY WITH THE JOA WILL THEY BE ABLE, BOTH OF
7 THEM, LATER TO SURVIVE AS PUBLISHERS.
8 SO THE POINT OF THE NEWSPAPER --
9 THE COURT: I'M SORRY. SAY THAT AGAIN.
10 MR. ALIOTO: ONLY WITH THE JOA, ONLY WITH THE JOA IT
11 WOULD ENABLE, QUOTE, "WILL ENABLE BOTH CHRONICLE AND HEARST TO
12 SURVIVE AS PUBLISHERS OF SEPARATE AND INDEPENDENT NEWSPAPERS."
13 THAT'S THE ONLY WAY IT'S GOING TO HAPPEN.
14 SO WHAT DID THEY DO VOLUNTARILY WHEN THEY JOINED?
15 NOW, REMEMBER ALL OF THIS IS VOLUNTARY. NOBODY IS FORCING
16 ANYBODY TO DO ANYTHING.
17 THE EXAMINER TAKES A SEAT IN THE AFTERNOON ON ITS
18 OWN. THEY'RE COVERING THEIR BASES. NOW, IT MAY HAVE A DEFICIT
19 NOW AND IT MAY GET WORSE, BUT THEY HAVE DECIDED VOLUNTARILY
20 BETWEEN THEM THAT WHAT THEY WANT TO DO IS COVER THE WHOLE AREA.
21 MR. BENNACK AT PAGE 800 EVEN SAYS THAT. HE SAYS --
22 I CAN'T READ WHAT HE SAYS UNLESS I HAVE MY GLASSES, JUDGE. HE
23 SAYS:
24 "WE STARTED THIS JOINT OPERATING AGREEMENT
25 WITH NEWSPAPERS THAT WERE ROUGHLY IN
2315
OPENING ARGUMENT \ ALIOTO
1 EQUIVALENCY."
2 WELL, THAT'S NOT QUITE WHAT WAS SAID IN THE
3 AGREEMENT, BUT THAT'S WHAT HE SAYS.
4 "THE DISPARITY LARGELY HAD COME ABOUT
5 RESULTING FROM THE MORNINGNESS OF THE
6 CHRONICLE."
7 SO HE IS SAYING THAT THEY WERE ABOUT EQUIVALENT.
8 THEY JOINED THE AGREEMENT, THEY REPRESENT TO EVERYBODY THAT
9 THERE'S A DEFICIT, AND THEY VOLUNTARILY SAY TO THE EXAMINER,
10 "GO IN THE AFTERNOON."
11 NOW, THEY COULD AT ANY TIME, IF THE COURT WOULD
12 ACCEPT THEIR ARGUMENT, ANY NEWSPAPER AT ANY TIME WOULD USE THE
13 JOA FOR MONOPOLY BECAUSE THEY COULD ALWAYS HAVE THE OTHER PAPER
14 DO SOMETHING LIKE BE IN THE AFTERNOON OR COVER THIS OR COVER
15 THAT, OR WHATEVER THEY WANTED TO DO, AND THEY COULD AT ANY TIME
16 THEN SAY, "OKAY, WE'RE GOING TO STOP IT RIGHT NOW. YOU'RE A
17 FAILING COMPANY. WE'VE GOT A MONOPOLY."
18 AND THAT IS NOT WHAT THE NEWSPAPER PRESERVATION ACT
19 IS ABOUT, AND THERE'S AN ANSWER TO IT TOO, YOUR HONOR. THIS IS
20 INTERESTING.
21 WHEN THE CITIZENS CASE CAME ABOUT --
22 THE COURT: YOU'RE NOT GOING TO GET ANY ARGUMENT
23 FROM ME ON THAT.
24 MR. ALIOTO: ON WHAT, YOUR HONOR?
25 THE COURT: THAT THIS IS INTERESTING.
2316
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: YES.
2 (LAUGHTER)
3 MR. ALIOTO: THIS IS ESPECIALLY INTERESTING.
4 (LAUGHTER)
5 MR. ALIOTO: WHEN THE SUPREME COURT DECIDED THE
6 CITIZENS PUBLISHING COMPANY CASE, AND AGAIN THIS IS WHERE THEY
7 SAID THAT ALL THE CONDUCT WAS DETERMINED TO BE UNLAWFUL AT THAT
8 TIME, SO HERE'S THE QUESTION THAT THE COURT POSES AT THE TIME:
9 THE CITIZEN PAPER CONTINUED TO BE A SIGNIFICANT THREAT TO THE
10 STAR. THIS IS THE PAPER SO-CALLED THAT'S SUPPOSED TO BE, YOU
11 KNOW --
12 THE COURT: THE CITIZEN WAS THE FAILING PAPER.
13 MR. ALIOTO: YES. I DON'T KNOW. I DON'T LIKE TO
14 USE THAT WORD BUT I'M GOING TO USE IT ANYWAY.
15 -- THE FAILING PAPER BECAUSE THERE'S REALLY STRICT
16 RULES ABOUT WHAT A FAILING PAPER IS.
17 OKAY. BUT LET'S SAY THAT THE CITIZEN IS THE FAILING
18 PAPER. THE CITIZEN -- THIS IS WHAT THE COURT SAID -- NOW, THE
19 CITIZEN BEING THE FAILING PAPER, HOW IS IT THAT THE CITIZEN --
20 HOW IS IT THAT THE OTHER PAPER, THE STAR, EVEN ALLOWED THEM TO
21 GET INTO THE RACE WITH THEM?
22 SO THE SUPREME COURT SAYS:
23 "INDEED, THE CITIZEN CONTINUED TO BE A
24 SIGNIFICANT THREAT TO THE STAR."
25 THIS IS AT 394 U.S. 136 AT 137 RIGHT IN THE
2317
OPENING ARGUMENT \ ALIOTO
1 BEGINNING.
2 "HOW OTHERWISE IS ONE TO EXPLAIN THE STAR'S
3 WILLINGNESS TO ENTER INTO AN AGREEMENT TO SHARE
4 ITS PROFITS WITH CITIZEN? WOULD THAT BE TRUE
5 IF, AS NOW CLAIMED, THE CITIZEN WAS ON THE BRINK
6 OF COLLAPSE?"
7 THAT'S WHAT WE HAVE HERE. FOR WHAT PURPOSE OR
8 REASON WOULD THE CHRONICLE ENTER INTO THIS AGREEMENT WITH
9 HEARST IF HEARST IS IN A DEFICIT? AND FOR WHAT REASON WOULD
10 THE CHRONICLE WANT TO ENTER INTO THAT AGREEMENT IN ORDER TO
11 ENABLE HEARST TO SURVIVE AS A PUBLISHER? WHY DO THEY WANT TO
12 DO THAT? AND THE SUPREME COURT SAID, BECAUSE THERE WAS THIS
13 SO-CALLED THREAT.
14 SO, IF YOU TOOK --
15 THE COURT: AREN'T YOU ARGUING WITH CONGRESS?
16 MR. ALIOTO: PARDON ME?
17 THE COURT: AREN'T YOU ARGUING WITH CONGRESS?
18 MR. ALIOTO: NO. NO. NO.
19 THE COURT: CONGRESS ATTEMPTED TO ABROGATE THIS
20 DECISION.
21 MR. ALIOTO: NO. EXCUSE ME, YOUR HONOR, IF I MIGHT,
22 IF I MIGHT PROCEED ON THAT.
23 THE COURT: ABSOLUTELY.
24 MR. ALIOTO: THE IDEA WAS AFTER CITIZENS, AFTER THE
25 CITIZEN CASE -- AND REMEMBER, IF IT PLEASE YOUR HONOR, THE
2318
OPENING ARGUMENT \ ALIOTO
1 CHARGE THERE WAS PROFIT POOLING AND PRICE FIXING AND WHAT THEY
2 CALLED MARKET CONTROL OR A KIND OF FIRST RIGHT OF REFUSAL. THE
3 SUPREME COURT KNOCKED THEM ALL DOWN AS UNLAWFUL, ALL OF THEM.
4 AND THAT CASE WAS A SECTION 7, SECTION 1 AND SECTION 2.
5 KNOCKED THEM ALL DOWN.
6 OKAY. THE CONGRESS OF THE UNITED STATES THEN PASSES
7 THE SECTION UNDER THE NEWSPAPER PRESERVATION ACT.
8 THE COURT: RIGHT.
9 MR. ALIOTO: NOW, WHAT IS IMPORTANT ABOUT THAT IS
10 THAT --
11 MR. SHULMAN: DO YOU WANT THIS ONE UP?
12 MR. ALIOTO: NO, NOT YET.
13 WHAT IS IMPORTANT ABOUT THAT IS THAT WHAT IS IT THAT
14 THEY ARE GOING TO ALLOW NEWSPAPERS TO DO AND WHEN ARE THEY
15 GOING TO ALLOW THEM TO DO IT?
16 SECTION 1802 IS THE DEFINITIONAL SECTION. SECTION
17 1802(2), ARABIC TWO, STATES WHAT IS GOING TO BE ALLOWED WITH
18 RESPECT TO ANY ONE OR MORE OF THE FOLLOWING. YOU CAN DO IT
19 JOINTLY: PRINTING, TIME, METHOD, FIELD OF PUBLICATION,
20 ALLOCATION OF PRODUCTION FACILITIES, DISTRIBUTION, ADVERTISING
21 SOLICITATION, CIRCULATION SOLICITATION, BUSINESS DEPARTMENT,
22 ESTABLISHMENT OF ADVERTISING RATES -- YOU CAN FIX THE PRICE ON
23 THE RATES -- ESTABLISHMENT OF CIRCULATION RATES -- YOU CAN DO
24 THAT -- AND REVENUE DISTRIBUTION -- YOU CAN SPLIT THE PROFITS.
25 YOU CAN HAVE PROFIT POOLING. ALL CARTEL-TYPE ACTION.
2319
OPENING ARGUMENT \ ALIOTO
1 NOTHING IN THE NEWSPAPER PRESERVATION ACT EXEMPTS
2 ANYTHING LIKE A 60-MILE ANTICOMPETITIVE CLAUSE OR FIRST RIGHT
3 OF REFUSAL.
4 THE COURT: OKAY. HOW IS --
5 MR. ALIOTO: OKAY. NOW -- ALL RIGHT. IF THAT'S
6 SO -- I'M SORRY, YOUR HONOR.
7 THE COURT: GO AHEAD AND FINISH YOUR POINT.
8 MR. ALIOTO: OKAY. IF THAT'S SO, WHAT DID THE
9 SUPREME COURT SAY IN CITIZENS WHAT IT WAS TALKING ABOUT? IT
10 SAID IF IT'S FINISHED, IF THEY FINISH THE JOINT AGREEMENT, THEY
11 HAVE TO START COMPETING AGAIN OR YOU'RE SUPPOSED TO COMPETE
12 AGAIN OBVIOUSLY BECAUSE THE EXEMPTION IS ONLY TO THE TIME THAT
13 YOU AGREE. IT'S VOLUNTARY AGAIN. THEY CHOSE 30 YEARS. THEY
14 ALSO CHOSE WAYS IN WHICH THEY COULD EXTEND IT.
15 NOBODY FORCED THEM ON THAT. NOBODY SAID 30 YEARS.
16 THEY COULD HAVE DONE FIVE YEARS, COULD HAVE DONE 10. THEY
17 COULD HAVE DONE WHATEVER THEY WANTED.
18 IF IN THE MEANTIME THEY WANT TO -- IF SOMEBODY WANTS
19 TO SELL -- SUPPOSE THE CHRONICLE WANTED TO SELL. WELL, IT
20 WOULD SELL ITS INTEREST OBVIOUSLY IN THE JOA IN WHICH THEY'RE
21 MAKING MONEY.
22 IF THE EXAMINER FOR ONE REASON OR ANOTHER WANTED TO
23 SELL, IT WOULD SELL ITS INTEREST, WHATEVER IS REMAINING. WE
24 HAD SOME ESTIMATES IN THE COURSE OF THE TRIAL THAT FROM THIS
25 POINT FORWARD THE STREAM OF REVENUE WOULD BE WORTH ALMOST
2320
OPENING ARGUMENT \ ALIOTO
1 $90 MILLION.
2 THEN WE START GETTING INTO REALLY RATIONAL STUFF,
3 NOT LIKE THE NEGATIVE PRICE SITUATION, BUT THEY COULD DO THAT
4 IF THEY WANTED TO.
5 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2321
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: IF AT THE END, IF AT THE VERY END, THE
2 EXAMINER WANTS TO LEAVE, THEN LET IT GO. IT CAN GO.
3 BUT IF IT WANTS AT THE VERY END THEN -- BECAUSE IF
4 IT THINKS THAT IT'S FAILING, IF IT WANTS TO GO, IF IT'S NOT
5 MAKING ANY MONEY, IF IT HASN'T TAKEN ADVANTAGE OF JOCKEYING FOR
6 POSITION -- IF IT HASN'T DONE ALL THE THINGS THAT THEY SAID IN
7 THE RECORD THAT THEY ARE GOING TO DO, WHICH I WILL HOPE TO GO
8 THROUGH WITH YOUR HONOR -- I MEAN, THESE ARE VERY POSITIVE
9 STATEMENTS AND PRECISE STATEMENTS AS TO WHAT THEY INTEND TO DO.
10 IF THEY DIDN'T DO THAT, THEN THEY COULD -- IF THEY WANT TO
11 LEAVE, THEY CAN LEAVE.
12 BUT THEY COULDN'T BUY THE OTHER ONE BECAUSE THAT
13 WOULD BE A MONOPOLY. THAT WOULD CREATE -- THAT WOULD BE AN
14 ORDINARY -- BECAUSE THE ANTITRUST LAWS APPLY AGAIN, AND THAT
15 WOULD BE JUST A STRAIGHT MONOPOLY.
16 SO WHAT ARE THEY DOING? WHAT ARE A LOT OF THESE
17 PAPERS DOING? THEY ARE USING THIS JOA AS A STEPPING STONE TO
18 MONOPOLY. THEY ARE CUTTING IT SHORT BEFORE THE TIME, AND THEY
19 ARE SAYING ONE OF THE GUYS IS A FAILING COMPANY AND THEY ARE
20 NOT FAILING. THEY'RE MAKING MONEY. THEY'RE MAKING MONEY UNDER
21 THE JOA. BUT THEY'VE USED THIS LEDGER DEMAND, THIS SHELL GAME,
22 IN WHICH IT'S BASICALLY A CON JOB, TO SAY, "OKAY, WELL, ONE OF
23 THEM IS IN BAD SHAPE RIGHT NOW."
24 NOW, WHEN THEY ENTERED INTO THIS, ONE OF THEM HAD TO
25 BE IN BAD SHAPE. THAT'S THE LAW. THE LAW SAID THAT IF YOU
2322
OPENING ARGUMENT \ ALIOTO
1 ESTABLISH THIS IN ANY CITY -- IF YOU ESTABLISH THIS -- NOT MORE
2 THAN ONE OF THE NEWSPAPERS INVOLVED IN THE PERFORMANCE OF SUCH
3 ARRANGEMENT WAS LIKELY TO REMAIN OR BECOME FINANCIALLY SOUND.
4 THAT MEANS THAT ONLY ONE OF THEM COULD BE -- REMAIN.
5 ONLY ONE OF THEM LOOKS LIKE IT WAS GOING TO REMAIN. ONLY ONE
6 OF THEM LOOKS LIKE IT WOULD BECOME FINANCIALLY SOUND. THAT
7 MEANS THAT THE OTHER ONE LOOKED LIKE IT WAS GOING TO TAKE A
8 DIVE.
9 WE'LL LET YOU GO AND DO THIS. NOW, IF AT THAT TIME
10 WHAT WOULD HAPPEN WHEN THEY ENTERED? THE ANTITRUST LAWS ARE
11 APPLYING BEFORE THEY ENTER. OKAY. WHAT WOULD HAPPEN IF ONE OF
12 THEM TRIED TO BUY THE OTHER ONE THAT IS NOT LIKELY TO REMAIN?
13 SECTION 7 WOULD BLOW THEM OUT AND THEY WOULD HAVE NO
14 EXEMPTION, AND THERE WOULD BE NO WAY THEY COULD DO IT. AND
15 THEY WOULD HAVE TO SHOW THAT ANOTHER PAPER OR SOMEONE ELSE
16 WOULD HAVE TO BUY IT, WOULD BE ABLE TO BUY IT.
17 SO WHAT DO THEY DO? EVEN THOUGH ONE IS NOT LIKELY
18 TO REMAIN, THEY JOIN INTO THE JOA. THEY GET TO COVER A LOT OF
19 AREA SO THEY ARE NOW PART OF THE JOA.
20 CERTAINLY, AT ANY TIME THEY COULD TRY TO STOP IT AND
21 SAY, "HOLD IT. HE'S A FAILING COMPANY." AND THAT'S END OF
22 THAT.
23 NOW, THERE IS SOMETHING ELSE THAT'S VERY -- ALSO AT
24 THE CORE OF THIS, TO SHOW THE SCHEME THAT IS IN THE WORKS
25 HERE. AND THAT IS, AS THE SUPREME COURT SAID IN CITIZENS --
2323
OPENING ARGUMENT \ ALIOTO
1 THIS IS VERY CLEAR, TOO, IN MY JUDGMENT -- AT 394 U.S. 138. IN
2 THE FIRST FULL PARAGRAPH, IT STATES:
3 "THE FAILING COMPANY DOCTRINE PLAINLY CANNOT
4 BE APPLIED IN A MERGER OR ANY OTHER" -- "IN ANY
5 OTHER CASE UNLESS IT IS ESTABLISHED THAT THE
6 COMPANY THAT ACQUIRES THE FAILING COMPANY OR
7 BRINGS IT UNDER DOMINION IS THE ONLY AVAILABLE
8 PURCHASER."
9 IT ASSUMES THAT IF THERE IS A FAILING COMPANY, IT'S
10 THE NONFAILING COMPANY THAT'S GOING TO BE DOING THE BUYING.
11 BECAUSE HOW IN THE WORLD COULD THE FAILING COMPANY DO THE
12 BUYING? THEY ARE NOT FAILING. THEY'VE GOT ENOUGH CASH TO BUY
13 THE OTHER GUY. THAT'S WHAT THE SUPREME COURT SAYS.
14 AND SO WHAT DO WE HAVE HERE? THIS IS JUST A -- THIS
15 IS A MAJOR FRAUD. THE EXAMINER, WHAT ARE THEY DOING? THEY'RE
16 GETTING $660 MILLION. WHERE ARE THEY PUTTING IT? IN A
17 NEWSPAPER. WHERE? IN SAN FRANCISCO. WHAT IS THAT ALL ABOUT?
18 ARE THESE THE SAME PEOPLE THAT CLAIM WE'RE FAILING; THEREFORE,
19 WE CAN BUY THE OTHER ONE? IT IS THE REVERSE OF WHAT THE
20 FAILING COMPANY DOCTRINE HAS EVER BEEN.
21 THE COURT: LET'S TALK ABOUT SOME OTHER ANTITRUST
22 PRINCIPLES FOR A MINUTE. SECTION 16, CLAYTON ACT.
23 MR. ALIOTO: YES, YOUR HONOR.
24 THE COURT: WHAT DOES THE PLAINTIFF NEED TO SHOW
25 WITH RESPECT TO INJURY IN FACT OR ANTITRUST INJURY? IS THE
2324
OPENING ARGUMENT \ ALIOTO
1 MOST RECENT PRONOUNCEMENT OF THE SUPREME COURT ON THAT SUBJECT
2 THE CARGO CASE?
3 MR. ALIOTO: WHICH CASE?
4 THE COURT: CARGO.
5 MR. ALIOTO: YES, YOUR HONOR.
6 THE COURT: OR IS THERE SOMETHING IN THE --
7 MR. ALIOTO: THE CARGO CASE WAS --
8 THE COURT: OR CLEAR?
9 MR. ALIOTO: THE CARGO CASE WAS A COMPETITOR CASE.
10 THE COURT: CORRECT.
11 MR. ALIOTO: SO IT WAS THE SECOND COMPETITOR --
12 THE COURT: RIGHT.
13 MR. ALIOTO: -- WHO WAS BRINGING THE CASE. AND
14 THERE THE CLAIM WAS THAT -- AND IN THAT -- AND IN THAT CASE --
15 WELL, I DON'T HAVE TO SAY THAT, BUT IN THAT CASE THE DEPARTMENT
16 OF JUSTICE WAS TRYING TO TAKE THE POSITION THAT ONLY THE
17 DEPARTMENT SHOULD BRING THESE CASES AND THE SUPREME COURT
18 KNOCKED THEM DOWN.
19 BUT THAT CASE IS -- YEAH. THEY DON'T LIKE GUYS
20 FOOLING AROUND, SEE? THIS DEAL WOULD BE A DONE DEAL IF THEY
21 WON THAT CASE, JUDGE. WE WOULDN'T EVEN BE HERE.
22 THE COURT: IT INTERFERES WITH THE FAMILY BUSINESS,
23 DOES IT?
24 MR. ALIOTO: IT DOES.
25 SECTION 16 -- SECTION 16 BEGINS BY SAYING ANY
2325
OPENING ARGUMENT \ ALIOTO
1 PERSON. AND THEY CAN BRING THE ACTION FOR INJUNCTIVE RELIEF,
2 AND IT'S A THREATENED CONDUCT THAT WILL CAUSE LOSS OF DAMAGE.
3 THE COURT: OKAY. I THINK IT'S CLEAR --
4 MR. ALIOTO: OKAY.
5 THE COURT: -- A THREATENED INJURY IS SUFFICIENT TO
6 CREATE STANDING UNDER SECTION 16.
7 MR. ALIOTO: OKAY. NOW, CARGO --
8 THE COURT: LET ME JUST FINISH --
9 MR. ALIOTO: YES.
10 THE COURT: -- WHERE I THINK THE LAW IS AND YOU TELL
11 ME IF I AM INCORRECT AND THEN FILL IN THE REST FOR ME.
12 AND CARGO TELLS US THAT THE PLAINTIFF HAS TO SHOW
13 ANTITRUST INJURY --
14 MR. ALIOTO: YES.
15 THE COURT: -- UNDER SECTION 16. DOES THE PLAINTIFF
16 HAVE TO SHOW INJURY IN FACT? AND, IF SO, WHAT IS THE
17 DIFFERENCE BETWEEN INJURY IN FACT AND INJURY TO TRADE OR
18 BUSINESS, OR PROPERTY OR BUSINESS?
19 MR. ALIOTO: OKAY. IT -- WELL, FIRST OF ALL --
20 THE COURT: WHICH MUST BE SHOWN UNDER SECTION 4?
21 MR. ALIOTO: OKAY. FIRST OF ALL, SECTION 16, THE
22 PLAINTIFF DOES NOT HAVE TO SHOW INJURY IN FACT BECAUSE THE
23 PLAINTIFF IS COMPLAINING AGAINST SOMETHING THAT IS GOING TO
24 OCCUR.
25 THE COURT: WELL, THREATENED INJURY IN FACT.
2326
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: YES.
2 THE COURT: THREATENED INJURY IN FACT.
3 MR. ALIOTO: SO IT'S THREATENED INJURY. OKAY.
4 NOW --
5 THE COURT: BUT DOES HE HAVE TO SHOW THREATENED
6 INJURY IN FACT?
7 MR. ALIOTO: THAT THAT'S GOING TO HAPPEN AS A MATTER
8 OF FACT?
9 THE COURT: THAT HE IS GOING TO BE INJURED.
10 MR. ALIOTO: YES, AS A MATTER OF THE PREPONDERANCE
11 OF THE EVIDENCE. WHAT IS THE EVIDENCE ABOUT IT?
12 IN CARGO YOU MAY RECALL THAT THERE WAS AN INCREASE
13 IN COMPETITION; THEREFORE, THEY COULDN'T SHOW THAT. BECAUSE
14 THE ALLEGATION WAS THAT THE COMBINERS WERE GOING TO LOWER THE
15 PRICE AND SO THE COMPETITOR WAS SAYING, "WE'RE GOING TO LOSE
16 MONEY," AND THE SUPREME COURT SAID, "YEAH, YOU'RE GOING TO LOSE
17 MONEY BECAUSE THEY'RE GOING TO COMPETE BECAUSE THEIR PRICES ARE
18 GOING TO GO LOWER AND YOU ARE GOING TO HAVE TO COMPETE. YOU
19 ARE NOT IN HERE ON AN ANTITRUST INJURY. THAT'S WHAT ANTITRUST
20 LAWS ARE SUPPOSED TO DO."
21 OKAY. HERE WHAT HAPPENS? HERE BOTH OF THEM HAVE
22 ALREADY PROGNOSTICATED, BOTH OF THEM, THAT THEY ARE GOING TO
23 BEGIN TO COMPETE AFTER 2005 AND THEY ARE GOING TO LOWER THE
24 PRICES.
25 THE COURT: LET'S FOCUS ON THE FANG TRANSACTION. DO
2327
OPENING ARGUMENT \ ALIOTO
1 YOU CONCEDE THAT THE PLAINTIFF MUST SHOW THREATENED INJURY IN
2 FACT?
3 MR. ALIOTO: YES.
4 THE COURT: YOU DO CONCEDE THAT?
5 MR. ALIOTO: YES.
6 THE COURT: OKAY. WHAT IS REILLY'S INJURY FROM
7 COMPLETION OF THE HEARST/FANG TRANSACTION?
8 MR. ALIOTO: A MONOPOLY WOULD BE CREATED.
9 THE COURT: WELL, HOW IS HE INJURED?
10 MR. ALIOTO: A MONOPOLY WOULD BE CREATED BECAUSE --
11 THE COURT: HE HAS -- AS I UNDERSTAND HIS -- THERE
12 CAN BE TWO POSSIBLE WAYS THAT A PLAINTIFF COULD OBTAIN STANDING
13 HERE, EITHER AS A CONSUMER OF NEWSPAPERS OR AS AN ADVERTISER OF
14 NEWSPAPERS OR PRESUMABLY A COMPETITOR COULD BRING AN ACTION,
15 ALTHOUGH THAT MIGHT RUN UP AGAINST THE CARGO REASONING THAT YOU
16 WERE JUST DESCRIBING. BUT HOW IS REILLY INJURED IN FACT OR
17 THREATENED TO BE INJURED IN FACT BY THE FANG TRANSACTION?
18 MR. ALIOTO: OKAY.
19 THE COURT: AS A CONSUMER OF NEWSPAPERS HE GETS TWO
20 NEWSPAPERS, DOESN'T HE? HE GETS THE CHRONICLE AND HE GETS THE
21 EXAMINER. SO HE IS CERTAINLY NOT INJURED AS A CONSUMER OF
22 NEWSPAPERS. HE IS NOT AN ADVERTISER, IS HE?
23 MR. ALIOTO: THE VERY FIRST THING, YOUR HONOR, IS
24 THAT WE KNOW FROM THIS RECORD AS DOCUMENTS IN THEIR OWN FILES
25 TWO THINGS AT LEAST.
2328
OPENING ARGUMENT \ ALIOTO
1 FIRST YOU WILL RECALL THAT BOTH THE CHRONICLE AND
2 THE EXAMINER, HEARST CORPORATION, HAD MADE BUSINESS JUDGMENTS
3 AND STATEMENTS THAT BEGINNING IN 2005, AT LEAST, THEY WILL
4 BEGIN TO COMPETE, AND ONE OF THE FIRST THINGS BOTH OF THEM WILL
5 DO IS LOWER THE PRICES FOR NEWSPAPERS.
6 THE COURT: THIS IS MS. GREENTHAL'S WAR SCENARIO?
7 MR. ALIOTO: IT'S HER WAR SCENARIO. IT'S ALSO THE
8 MISSION STATEMENT BY THE EXAMINER. IT'S THE CONTRA CONSISTENT
9 STATEMENTS BY MR. BENNACK THAT THEY WERE GOING TO DO THAT.
10 OKAY. WHAT HAPPENS IF THEY DON'T COMPETE? IF THEY
11 DON'T COMPETE WHAT DID THEY -- WHAT DID THEY SHOW US? THEY
12 DIDN'T EXPECT IT BUT WHAT DID THEY SHOW US?
13 MR. FALK GOT UP THERE ON THEIR DOCUMENTS THAT THEY
14 DID, AND WHAT THEY INTENDED TO DO WAS TO KEEP THE PRICES AND
15 THE REVENUES THE SAME, EVEN THOUGH THEY ELIMINATE ANOTHER
16 NEWSPAPER.
17 THAT MEANS THAT THEY WILL NOT, IF THE PAPER IS SOLD
18 TO THE FANGS OR ANYONE ELSE, AND NOT REQUIRED -- NOT REQUIRED
19 TO CONTINUE -- AND NOT ONLY REQUIRED TO CONTINUE IN THE SENSE
20 OF REQUIRING THE JOA TO CONTINUE, I MEAN REQUIRED IN THE SENSE
21 THAT THE COURT WOULD ENJOIN HEARST FROM BUYING THE CHRONICLE.
22 BECAUSE THEN ALL KINDS OF COMPETITIVE ISSUES WOULD BEGIN TO
23 RISE THAT WOULD HELP EVERYBODY.
24 BUT IF THEY SOLD THE EXAMINER, THE PRICES WOULD STAY
25 THE SAME OR GO UP -- OR GO UP. INDEED, THE CHRONICLE DID THEIR
2329
OPENING ARGUMENT \ ALIOTO
1 STATEMENT WHERE THEY WOULD KEEP THE REVENUES AT THE SAME AMOUNT
2 AND CUT THE COSTS OFF OF THE EXAMINER. THIS IS LIKE A
3 MONOPOLY. YOU HAVE TWO FOLKS BOTH MAKING MONEY. THEY
4 ELIMINATE ONE AND THEY DON'T INTEND TO TOUCH THE PRICES.
5 ALSO MS. -- MS. GREENTHAL IN HER STATEMENT, THE
6 CHRONICLE STATEMENT, THAT THEY HAD IN FRONT OF THEM WHEN THEY
7 MADE THE DECISION ON AUGUST THE 6TH AND WHEN THEY HAD TO GO
8 OVER IT, THIS WAS THE BIG DECISION -- THEY HAD IN FRONT OF THEM
9 ALSO WHAT WOULD HAPPEN IS THAT -- IS THAT THE CHRONICLE WOULD
10 THEN BEGIN TO COMPETE AND UPGRADE, AND THEY WOULD HAVE NEW
11 PLANTS, AS THE COURT IS AWARE.
12 THE COURT IS ALSO AWARE THAT MR. WHITE OVER AND OVER
13 AGAIN, WE'RE GOING TO GET READY. WE'RE GOING TO GET -- WE'RE
14 GOING TO GET MORE REPORTERS. WE ARE GOING TO GET MORE
15 SECTIONS. WE ARE GOING TO DO ALL OF THAT. SO THAT NOT ONLY IS
16 THERE A PRICE DIFFERENCE, BUT THERE IS THE KIND OF COMPETITION
17 AND CHOICE THAT WOULD OTHERWISE -- THAT WILL EXIST.
18 IF IT GOES TO THE FANGS, WE ARE NOT GOING TO HAVE
19 CHOICE.
20 NOW --
21 THE COURT: WHY NOT?
22 MR. ALIOTO: WELL, BECAUSE OF A NUMBER OF THINGS,
23 YOUR HONOR. FIRST OF ALL, IT'S NOT A COMPETING PAPER, WE NOW
24 FIND OUT. THEY NEVER INTENDED IT TO BE A FULLY COMPETING
25 PAPER. WE FOUND OUT EVEN WHEN MR. FANG WAS ON THE STAND -- WE
2330
OPENING ARGUMENT \ ALIOTO
1 FOUND OUT THAT -- THAT ACCORDING -- ACCORDING TO HIM THERE IS
2 NO CHANCE OF THE PAPER EVER MAKING IT IF THE CONTRACTS -- THE
3 ADVERTISING CONTRACTS WENT WITH THE SALE.
4 WELL, WE POINTED OUT THAT IN THE AGREEMENT OF THE
5 SALE, THE PURCHASE BY HEARST, THEY GET ALL OF THE CONTRACT FROM
6 THE SAN FRANCISCO NEWSPAPER AGENCY. THEY GET EVERYTHING.
7 THERE IS NO WAY. WE WENT THROUGH ALL THE DIFFERENT
8 THINGS THAT MR. FANG SAID. ALL OF THE DIFFERENT THINGS THAT HE
9 SAID WOULD HAPPEN HE COULDN'T MAKE IT IF THOSE THINGS HAPPENED,
10 EVERY ONE OF THEM HAPPENED. IT'S A SHAM, JUDGE. WHAT WILL
11 HAPPEN, AS HE SAYS AND HE POINTS OUT, IT'S AN ENTIRELY
12 DIFFERENT NONCOMPETITIVE NEWSPAPER.
13 THE COURT: ALL RIGHT. ASSUME I AGREE IT'S A SHAM.
14 HOW IS MR. REILLY HURT?
15 MR. ALIOTO: FIRST ON THE PRICES. IF THE COURT
16 RULES THAT THE EXAMINER CANNOT -- THE HEARST CORPORATION CANNOT
17 PURCHASE THE CHRONICLE, THEN WHAT HAS TO HAPPEN IS THEY HAVE TO
18 CONTINUE FOR FIVE YEARS UNDER THE JOA, UNLESS THEY WANT TO SELL
19 IT TO SOMEBODY ELSE. THEY HAVE TO CONTINUE FOR FIVE YEARS
20 MAKING MONEY --
21 THE COURT: COULDN'T HEARST OR CHRONICLE, FOR THAT
22 MATTER, SIMPLY DECIDE THEY ARE NO LONGER GOING TO PUBLISH THE
23 NEWSPAPER?
24 MR. ALIOTO: THERE IS AN OBLIGATION IN THE JOA TO
25 PUBLISH.
2331
OPENING ARGUMENT \ ALIOTO
1 THE COURT: IS THERE AN OBLIGATION THAT THEY MUST
2 SUPPLY --
3 MR. ALIOTO: THERE IS. AND ONE OF THE DOCUMENTS,
4 YOUR HONOR, WHEN -- WHEN MR. BENNACK WAS TRYING TO DO HIS
5 CARTEL AGREEMENT, WHICH NO ONE HAS SEEN THOSE KIND OF SPLIT
6 AGREEMENTS WHERE A FELLOW SAYS, "I AM GOING TO SHUT MY PAPER
7 DOWN BUT I STILL GET A CUT FOR A COUPLE OF YEARS." THE LAST
8 TIME THEY DID THAT WAS WHEN ROCKEFELLER DID THE SOUTHERN
9 IMPROVEMENT COMPANY, GOT ALL THE GUYS IN, SHUT DOWN ALL THE
10 REFINERIES AND ALL OF THAT. THAT'S WHERE ANTITRUST COMES FROM,
11 A MISUSE OF THE TRUST AGREEMENT. THAT'S WHERE IT COMES FROM.
12 BUT, ANYWAY, MR. BENNACK -- I DON'T KNOW WHERE I GOT
13 OFF ON THAT ONE. BUT MR. BENNACK, MR. BENNACK HIMSELF SAYS
14 JUST THAT, YOUR HONOR, THAT WHEN HE IS GOING TO MAKE THAT DEAL
15 WHERE HE IS GOING TO GET A PERCENTAGE -- THIS IS IN 1997 -- HE
16 SAID, "OF COURSE, WE'LL HAVE TO HAVE THEM AGREE THAT WE DON'T
17 HAVE TO PUBLISH." BECAUSE RIGHT NOW UNDER THEIR AGREEMENT THEY
18 ARE SUPPOSED TO --
19 THE COURT: WHERE IS THAT? LET ME SEE THAT.
20 MR. ALIOTO: YES. THE DOCUMENT TO WHICH I AM
21 REFERRING, YOUR HONOR, IS A 19 -- IT SHOULD BE THE 1997
22 DOCUMENT. IT IS FROM --
23 THE COURT: I THOUGHT YOU WERE REFERRING TO A PAST
24 PROVISION IN THE JOINT OPERATING AGREEMENT.
25 MR. ALIOTO: HE -- THERE IS A PROVISION IN THE JOINT
2332
OPENING ARGUMENT \ ALIOTO
1 OPERATING AGREEMENT. THE PRINTING COMPANY, THE SAN FRANCISCO
2 NEWSPAPER, THEY HAVE THE OBLIGATION TO ACTUALLY PRINT THE
3 PAPER.
4 THE COURT: WELL, I UNDERSTAND THAT. BUT WHERE IS
5 THERE AN OBLIGATION IN THE JOA THAT THE TWO JOINT VENTURERS
6 MUST CONTINUE TO PUBLISH NEWSPAPERS? IS THERE SUCH A
7 PROVISION?
8 MR. ALIOTO: WELL, THERE IS -- YOUR HONOR, THERE IS
9 AN AGREEMENT THAT -- OKAY. WHAT THEY ARE TALKING ABOUT -- THEY
10 HAVE TO PUT IN THEIR PAPER, THEY HAVE TO PUBLISH IN THE
11 AFTERNOON AND THEN THE PRINTING IS ACTUALLY DONE BY THE
12 PRINTING COMPANY.
13 THE COURT: NO. I UNDERSTAND.
14 MR. ALIOTO: OKAY.
15 THE COURT: BUT YOU SAID THERE IS A PROVISION IN THE
16 JOA THAT REQUIRES THE PARTIES TO PUBLISH A NEWSPAPER, THAT
17 CHRONICLE AND HEARST HAS TO SUPPLY THE NEWSPAPER AGENCY WITH A
18 NEWSPAPER.
19 MR. ALIOTO: WELL, THE NEWSPAPER AGENCY HAS TO PRINT
20 THE NEWSPAPER FOR --
21 THE COURT: THE JOINT VENTURERS HAVE TO FURNISH AN
22 EDITORIAL PRODUCT FOR THE AGENCY TO PRINT.
23 MR. ALIOTO: OKAY. NOW, IT SAYS IN THE -- IT SAYS
24 THAT -- RIGHT IN THE BEGINNING IN THE "WHEREAS" -- IN THE
25 "WHEREAS" SECTIONS, YOUR HONOR, IT SAYS THAT -- THIS IS WHERE
2333
OPENING ARGUMENT \ ALIOTO
1 THEY ARE GOING TO HAND OVER THE PRODUCTION OF BOTH OF THE
2 NEWSPAPERS.
3 THE COURT: RIGHT.
4 MR. ALIOTO: I THINK THAT -- AND, AGAIN, THE IDEA
5 WAS TO ENABLE BOTH TO SURVIVE AS -- TO SURVIVE AS INDEPENDENTS.
6 THE ACTUAL -- THE -- BOTH OF THE PARTIES AGREE WITH
7 THE PRINTING COMPANY, THAT THE PRINTING COMPANY WILL PUBLISH
8 BOTH NEWSPAPERS. THAT'S ON 3.1 OF THE AGREEMENT AT PAGE 20.
9 THE COURT: THAT'S CLEAR.
10 MR. ALIOTO: PARDON ME?
11 THE COURT: THAT'S CLEAR.
12 MR. ALIOTO: YES.
13 SO THAT IT SAYS:
14 "COMMENCING ON THE EFFECTIVE DATE AND
15 CONTINUING THROUGHOUT THE TERM HEREOF THE
16 PRINTING COMPANY WILL" -- AND THEN "PRINT BOTH
17 THE NEWSPAPERS."
18 SO THAT IS THE OBLIGATION OF THE PRINTING, AND BOTH
19 THE OTHER PARTIES ARE AGREEING THAT THAT'S WHAT THIS NEW PARTY
20 IS SUPPOSED TO DO AND THAT'S WHAT THEY HAVE TO DO.
21 WHEN MR. BENNACK TALKS ABOUT -- HE SAYS THAT HE
22 BELIEVES -- HE BELIEVES THAT THE CHRONICLE WILL LET THEM OUT OF
23 THEIR OBLIGATION TO PRINT -- OR TO PUBLISH A NEWSPAPER WHEN HE
24 IS MAKING HIS AGREEMENT WITH THEM. AND THAT DOCUMENT IS 19 --
25 IT SHOULD BE 1997 AND '98, YOUR HONOR, AND I CAN -- I CAN GET
2334
OPENING ARGUMENT \ ALIOTO
1 THAT ONE. I THINK THAT -- THAT THE OBLIGATION IS APPARENTLY --
2 HERE IT IS, YOUR HONOR. THIS IS ON EXHIBIT NUMBER 67. THIS IS
3 THE DOCUMENT DATED OCTOBER 27, 1997.
4 THE COURT: IT'S A MEMO FROM BENNACK TO ASHER?
5 MR. ALIOTO: YES, SIR.
6 THE COURT: IT'S A MEMO TO FILE.
7 MR. ALIOTO: YES, SIR. NOW, THIS IS ON THE
8 PERPETUAL ARRANGEMENT DEAL WITH THE CHRONICLE THAT THEY ARE
9 TRYING TO DO.
10 IF THE COURT WILL GO TO PAGE 3 AND THE FIRST FULL
11 PARAGRAPH, THIRD SENTENCE, WHICH BEGINS IN A PARENTHESES,
12 QUOTE:
13 "I ACKNOWLEDGED CHRONICLE WOULD HAVE TO
14 RELIEVE US OF OUR PUBLISHING OBLIGATIONS, WHICH
15 WE BELIEVED THEY WOULD DO."
16 THE COURT: WHERE ARE THOSE PUBLISHING OBLIGATIONS?
17 MR. ALIOTO: I THINK THAT THE WAY THAT THEY HAVE
18 WRITTEN THE JOA, YOUR HONOR, IS THAT BOTH OF THEM AGREE WHAT
19 THE PRINTING COMPANY IS TO DO, AND THE PRINTING COMPANY HAS AN
20 OBLIGATION TO PRINT BOTH.
21 THE COURT: WELL, LET'S ASSUME -- LET'S ASSUME THAT
22 THERE IS NOTHING IN THE JOA WHICH PREVENTS THE PARTIES FROM
23 SHUTTING DOWN ONE OF THE TWO NEWSPAPERS.
24 MR. ALIOTO: OKAY.
25 THE COURT: WHY COULDN'T THEY DO THAT?
2335
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: IF A NEWSPAPER WANTED TO -- SUPPOSE THE
2 EXAMINER WAS TIRED AND THEY SAID, "OKAY, WE'RE IN THE JOA.
3 WE'VE HAD IT. WE'RE SHUTTING DOWN OUR PAPER."
4 FINE. SEE YOU LATER. THAT IS -- THERE WOULD BE A
5 MONOPOLY CREATED, BUT IT WOULD BE THRUST UPON THE REMAINING
6 PAPER, THE CHRONICLE. IT'S NOTHING THAT HE DID, NOTHING THAT
7 THE CHRONICLE DID -- OR SHE DID. IT'S NOTHING THAT THE
8 CHRONICLE ITSELF DID.
9 SO IF THE EXAMINER SAYS, "I DON'T WANT TO DO IT
10 ANYMORE. I DON'T WANT THIS 25 MILLION EVERY YEAR. IT'S
11 BUGGING ME," AWAY THEY GO.
12 THE COURT: WELL, I GATHER THAT HEARST WOULD STILL
13 BE ENTITLED TO HALF THE NET EXCESS?
14 MR. ALIOTO: ABSOLUTELY NOT. THAT IS CARTEL. THE
15 OBLIGATION UNDER THE -- UNDER THE NEWSPAPER PRESERVATION ACT IS
16 THAT -- IS TO PRESERVE THE PAPERS. THAT WOULD VIOLATE THE --
17 THAT IF THEY -- THAT IS THE TRUST AGREEMENT. THAT IS -- THE
18 IDEA THAT THEY COULD SHUT THEIR PAPER DOWN, THAT WAS OUT --
19 THAT WAS THROWN OUT IN THE HAWAII CASE. NO ONE HAS SEEN THIS
20 KIND OF CONDUCT, YOUR HONOR, SINCE THE TURN OF THE CENTURY
21 EXCEPT IN THESE JOA'S WITH THESE NEWSPAPERS. THEY'RE DOING IT,
22 APPARENTLY, MR. BENNACK TESTIFIED, TO TWO OR THREE OF THEM.
23 THEY DID IT IN DETROIT. THEY SHUT THE PAPER DOWN AND THEY
24 STILL GET INTEREST ON IT. THEY GET PAID FOR SHUTTING THE PAPER
25 DOWN. THEY GET PAID, AS THE HAWAII COURT SAYS, FOR SHUTTING A
2336
OPENING ARGUMENT \ ALIOTO
1 COMPETITOR DOWN.
2 I MEAN, THAT IS REALLY OLD-TIME CARTEL STUFF. AND I
3 DON'T THINK -- YOU KNOW, I MENTIONED BEFORE, YOU KNOW, THE
4 SOUTHERN IMPROVEMENT COMPANY, AND THAT'S WHAT THEY USED TO DO.
5 AND THAT WAS TOSSED OUT. THAT WAS RIDICULOUS. BECAUSE IT
6 IS -- IT IS NONCOMPETITIVE IN ITSELF. IT IS AN AGREEMENT TO
7 PAY SOMEONE NOT TO COMPETE. IT'S ALMOST COMMON LAW.
8 SO WHEN MR. BENNACK SUGGESTED THAT OR --
9 THE COURT: IS THAT WHAT IS GOING ON HERE?
10 MR. ALIOTO: YEAH. WELL, THEY TRIED IT.
11 THE COURT: AND YOUR THEORY IS THAT THAT'S THE
12 REASON CHRONICLE IS GETTING $660 MILLION FOR THIS PAPER AS
13 OPPOSED TO THE FOUR TO FIVE HUNDRED MILLION DOLLARS WHICH
14 KNIGHT RIDDER AND GANNETT AND TIMES MIRROR WERE OFFERED?
15 MR. ALIOTO: WELL, YOUR HONOR, THOSE OTHER PAPERS
16 NEVER EVEN GOT INTO THE ACT. THE PERSON FROM DLJ WHO WAS HERE,
17 SHE SAYS, WHAT IS THE -- WHAT IS THE THING IN THE JOA? THIS IS
18 ONE OF THE THINGS WE ARE ASKING THE COURT TO GET RID OF.
19 THEY NOT ONLY HAVE A FIRST RIGHT OF REFUSAL, THEY
20 HAVE A FIRST NEGOTIATION. AND THERE IS NO TIME LIMIT ON IT.
21 AND SO WHAT THEY GET IS NOT ONLY -- YOU HAVE TO NEGOTIATE WITH
22 US, AND THEN IF THE NEGOTIATIONS BREAK DOWN, THEN IF SOMEONE
23 ELSE OFFERS, THEN THEY GET A FIRST RIGHT OF REFUSAL.
24 WELL, WHO WOULD BE COMPETING AGAINST THAT? THAT
25 FIRST RIGHT OF REFUSAL WAS KNOCKED DOWN IN CITIZEN PUBLISHING,
2337
OPENING ARGUMENT \ ALIOTO
1 AND IT WAS NOT RESURRECTED IN THE NPA.
2 THE COURT: WELL --
3 MR. ALIOTO: BECAUSE THEY HAD IT THERE IN THAT ONE.
4 THE COURT: LET'S TALK ABOUT THAT.
5 MR. ALIOTO: OKAY.
6 THE COURT: FIRST RIGHT OF REFUSAL AND THE 60-MILE
7 CLAUSE.
8 MR. ALIOTO: OKAY.
9 THE COURT: HOW IS REILLY HARMED BY THE ENFORCEMENT
10 OF THOSE PROVISIONS? ISN'T CHRONICLE THE PARTY THAT'S --
11 THAT'S HARMED? LET'S ASSUME THAT THOSE PROVISIONS ARE NOT
12 EXEMPTED BY THE NEWSPAPER PRESERVATION ACT. DOESN'T THAT GIVE
13 CHRONICLE ESSENTIALLY AN OPTION TO REQUIRE THAT THE PAPER BE
14 EXPOSED TO OTHER BUYERS, EVEN WITHIN THE 60-MILE RADIUS OF SAN
15 FRANCISCO, OTHER PUBLISHERS WITHIN THAT RADIUS, WHICH WOULD
16 INCLUDE KNIGHT RIDDER AND I SUPPOSE THE NEW YORK TIMES AND
17 GANNETT BECAUSE OF THEIR OWNERSHIP OF PAPERS IN THE 60-MILE
18 AREA?
19 MR. ALIOTO: YES.
20 THE COURT: BUT ISN'T THE PARTY HARMED BY THOSE
21 PROVISIONS CHRONICLE RATHER THAN MR. REILLY?
22 MR. ALIOTO: THERE IS NO QUESTION THAT THE CHRONICLE
23 IS SUBSTANTIALLY HARMED BY THOSE PROVISIONS. BUT IT IS ALSO
24 CORRECT THAT THOSE PROVISIONS, THOSE RESTRAINTS, TEND TO AND
25 WILL LIKELY -- AND LIKELY THREATEN HARM TO MR. REILLY OR ANY
2338
OPENING ARGUMENT \ ALIOTO
1 OTHER SUBSCRIBER.
2 THE COURT: HOW SO?
3 MR. ALIOTO: BECAUSE THOSE TEND TO -- THAT
4 GUARANTEES TO THE EXAMINER THAT THEY DON'T HAVE TO WORRY ABOUT
5 ANOTHER COMPETITOR COMING INTO THE MARKET. THEY DON'T HAVE TO
6 BE CONCERNED ABOUT THAT. THEY DON'T HAVE TO BE CONCERNED ABOUT
7 HAVING TO COMPETE. WHEN THEY COMPETE, THEY DO A LOT OF THINGS
8 EVEN IN THE JOA, WHICH THEY SAID THAT THEY WOULD DO, YOUR
9 HONOR. THEY SAID THAT.
10 SO IF YOU HAVE THOSE KINDS OF RESTRAINTS THAT
11 PREVENT THE POSSIBILITY, THE FREE AND OPEN POSSIBILITY, OF THE
12 SALE OF EITHER ONE OF THE PAPERS, BUT IT WOULD HAVE TO BE --
13 YOU KNOW, THEY COULD ONLY TAKE THE POSITION THAT THE PAPER HAS
14 WITH THE JOA, UNTIL IT'S OVER.
15 BUT NOW, REMEMBER, THE COURT MAY RECALL, THAT IN THE
16 DOCUMENT WE HAD -- IT WAS NOT DLJ BUT IT WAS THE DOCUMENT BY
17 THE EXPERTS FOR HEARST IN WHICH -- IN WHICH THEY SAID THAT
18 WE'VE GOT TO GET MOVING HERE BECAUSE, AS THE TIME GETS CLOSER
19 TO THE 2005, OUR LEVERAGE IS LESSENED AND LESSENED. AND
20 SOMEONE COULD COME IN AND BE A BRAND NEW COMPETITOR.
21 SO IT HAS AN IMPACT -- IT HAS AN IMPACT. IT HAS THE
22 TENDENCY TO RESTRAIN TRADE IN THIS MARKET. AND, AS THE COURT
23 KNOWS AS WELL, THE COURT -- ITS A LONG-TIME PRINCIPLE, JUDGE.
24 YOUR HONOR HAS EXTRAORDINARY POWERS GRANTED TO YOUR HONOR. AND
25 THE COURT CAN, AS THE PARAMOUNT CASE SAID, NOT ONLY RESTRAIN
2339
OPENING ARGUMENT \ ALIOTO
1 THOSE ACTS WHICH ARE ILLEGAL IN THEMSELVES, BUT EVEN THOSE ACTS
2 THAT TEND TOWARD IT, EVEN THOUGH THEY MIGHT OR ARE PART OF
3 IT -- EVEN THOUGH THEY MIGHT INDIVIDUALLY VIEWED BE -- BE OKAY,
4 INNOCENT, WHOLLY INNOCENT ACTS, IT'S LIKE FRUIT FROM THE
5 POISONOUS TREE OR FRUIT FROM A TREE AND THE GUY -- THE COURT
6 HAS THE POWER TO CUT THE WHOLE TREE. IF THE COURT BELIEVES
7 THAT THAT'S GOING TO SAVE THE ORCHARD EVEN THOUGH -- THEY USE
8 THE TREE ANALOGY IN THE PARAMOUNT CASE SO I AM NOT GETTING
9 FARTHER THAN THAT ONE, YOUR HONOR.
10 BUT THE POINT IS THAT THE COURT HAS POWER TO ENJOIN
11 THAT. SO WHETHER IT ACTUALLY HAS --
12 THE COURT: HAVING BEEN SAID TO CLIMB OUT ON LIMBS
13 MYSELF.
14 (LAUGHTER)
15 MR. ALIOTO: ALL RIGHT. WELL, THAT'S ONE I WILL
16 KIND OF SEMI BACK ON.
17 BUT THE POINT IS THAT THE 60-MILE LIMIT, THE FIRST
18 RIGHT OF REFUSAL, IF THAT IS TAKEN OUT, THEY ARE NOT A PART OF
19 THE NEWSPAPER PRESERVATION ACT. AND WE HAVE TO REMEMBER, THE
20 NEWSPAPER PRESERVATION ACT AND, I BELIEVE, THE ANTITRUST LAWS,
21 IN THIS INDUSTRY FAVOR THE NUMBER OF COMPETITORS, NOT THE
22 ELIMINATION OF THEM.
23 THE PURPOSE OF THE NEWSPAPER PRESERVATION ACT IS TO
24 HAVE TWO OR MORE.
25 THE COURT: IS THERE ANY EVIDENCE IN THIS RECORD TO
2340
OPENING ARGUMENT \ ALIOTO
1 SUPPORT THE IDEA THAT IF SOME OTHER PURCHASER WERE TO ACQUIRE
2 THE CHRONICLE, A PURCHASER OTHER THAN HEARST, THAT THAT WOULD
3 LEAD TO GREATER PRICE COMPETITION?
4 MR. ALIOTO: YES.
5 THE COURT: WHAT IS THAT?
6 MR. ALIOTO: THE EVIDENCE IS THAT THE CHRONICLE
7 ITSELF -- ONE WOULD ASSUME THAT IF IT WERE A PERSON OF SOME --
8 IT DEPENDS ON WHO IT IS, OBVIOUSLY. BUT, OBVIOUSLY, THEY WOULD
9 LOOK AT AND MAKE A JUDGMENT ON A BUSINESS ARRANGEMENT. THAT'S
10 WHAT THEY WERE AFRAID OF.
11 THE COURT: LET'S ASSUME IT'S ONE OF THOSE
12 PUBLISHERS WITHIN A 60-MILE RADIUS OF SAN FRANCISCO, KNIGHT
13 RIDDER, NEW YORK TIMES, GANNETT.
14 MR. ALIOTO: YES.
15 THE COURT: OBVIOUSLY, COMPANIES WITH THE FINANCIAL
16 RESOURCES TO DO THIS 3AND OBVIOUSLY EXPERIENCED IN THE
17 NEWSPAPER BUSINESS. THEY KNOW HOW TO RUN A NEWSPAPER.
18 MR. ALIOTO: YES.
19 THE COURT: WHAT LEADS YOU TO BELIEVE OR WHAT
20 EVIDENCE IS THERE IN THIS RECORD TO SUGGEST THAT IF THE
21 CHRONICLE WERE TO BE PURCHASED BY ONE OF THOSE FIRMS THAT THERE
22 WOULD BE A GREATER DEGREE OF PRICE COMPETITION?
23 MR. ALIOTO: BOTH OF THEM DID STUDIES ABOUT IT, AND
24 THAT'S WHAT THEY CONCLUDED. THAT'S WHY THEY WANTED TO EXCLUDE
25 COMPETITORS, BECAUSE SOME OF THESE COMPETITORS WOULD COME IN
2341
OPENING ARGUMENT \ ALIOTO
1 AND ALREADY HAVE THEIR PRINTING FACILITIES. AND SO, FOR
2 EXAMPLE, THE EXAMINER WAS PARTICULARLY CONCERNED ABOUT IT. AND
3 THEIR EXPERTS -- I FORGOT THE GUY'S NAME.
4 THE COURT: WHERE IS THAT? WHERE IS THAT EVIDENCE?
5 MR. ALIOTO: OKAY. LET ME GET IT, JUDGE. THIS IS
6 THE EXHIBIT -- EXHIBIT 89, YOUR HONOR. THIS IS PROJECT SUN.
7 THIS IS THE PROJECT BY WASSERSTEIN, PERELLA, THE COURT MAY
8 RECALL, AND IF YOU LOOK DOWN AT THE BOTTOM ON ARABIC NUMBER 2,
9 HEARST POSSIBLE LOSS OF COMPETITIVE ADVANTAGE OVER TIME, IN THE
10 FIRST BULLET:
11 "THIS WILL BE PARTICULARLY TRUE IF THE
12 CHRONICLE SALE WERE ONLY TO OCCUR SHORTLY BEFORE
13 JOA UNWIND IN 2005 SINCE THIRD-PARTY BUYERS
14 WOULD NO LONGER BE SUBJECT TO UNFAVORABLE
15 ECONOMIC SPLITS OF JOA GOING FORWARD.
16 'COMPETITORS' (WITH THEIR OWN PLANT/FACILITIES)
17 WOULD BE ABLE TO BID FOR THE CHRONICLE, THEREBY
18 ELIMINATING NEED TO PAY 'MAXIMUM' VALUE TO
19 ACQUIRE HEARST'S SHARE OF THE AGENCY IN 2005,
20 LEAVING HEARST WITH MORE LIMITED ALTERNATIVES TO
21 MONETIZE ITS INTERESTS IN THE JOA."
22 THIS IS A MAJOR THREAT. AND SO IF SOMEBODY CAME IN,
23 FOR INSTANCE, THE NEW YORK TIMES, THEY COULD BUY THE CHRONICLE.
24 THEY WOULD HAVE A 50/50 SITUATION UNTIL THE 2005 IS OVER. BUT
25 THEY WOULD BE GEARING UP. THAT'S THE JOCKEYS AGAIN. AND THEY
2342
OPENING ARGUMENT \ ALIOTO
1 WOULD BE GEARING UP.
2 AND BOTH OF THESE STUDIES SAY WHAT IS GOING TO
3 HAPPEN IN 2005 IS THAT THE EXAMINER IS GOING TO MOVE TO THE
4 MORNING. AS SOON AS THEY DON'T HAVE THIS THING ANYMORE, THE
5 EXAMINER IS GOING TO MOVE TO THE MORNING. THE EXAMINER IS
6 GOING TO COMPETE ON PRICES. CHRONICLE IS GOING TO COMPETE ON
7 PRICES. IF CHRONICLE REMAINS CHRONICLE, IT'S GOING TO HAVE TO
8 BUILD A NEW PLANT. THEY ARE EXPECTING -- IN THEIR DOCUMENTS
9 THEY WERE EXPECTING TO BUILD A NEW PLANT IN 2002 OR 2003.
10 THE COURT: WELL, IT'S EASY TO SEE HOW CHRONICLE MAY
11 BE HARMED BY THIS PROVISION OR THESE POSSIBLE OTHER ACQUIRERS
12 OF THE CHRONICLE -- NEW YORK TIMES, GANNETT, KNIGHT RIDDER.
13 BUT HOW IS A CONSUMER OF NEWSPAPERS OR SUBSCRIBER AND READER OF
14 NEWSPAPERS HARMED?
15 MR. ALIOTO: BY THE RESTRICTIVE AGREEMENTS.
16 THE COURT: WELL, BUT IS THAT INJURY IN FACT?
17 MR. ALIOTO: IT -- NO, YOUR HONOR. THIS IS UNDER
18 INJUNCTION, AND WHEN THE COURT IS SAYING "INJURY IN FACT," THAT
19 IMPLIES TO ME THAT THAT IS THE FACT OF DAMAGE WHICH IN AN
20 INJUNCTION YOU DON'T HAVE.
21 WHAT YOU ARE DOING IS YOU ARE LOOKING TO THE FUTURE,
22 AND THE LAWS -- YOU KNOW, THE LAW UNDERSTANDS OUR DIFFICULTY
23 BECAUSE THE LAW SAYS THAT CONGRESS WROTE "MAY SUBSTANTIALLY
24 LESSEN COMPETITION OR TEND TO CREATE A MONOPOLY."
25 WHAT HAS THE COURT SAID ABOUT THAT THIS? THEY SAID
2343
OPENING ARGUMENT \ ALIOTO
1 WE HAVE GOT TO NIP THESE THINGS IN THE BUD. WE CAN'T EVEN LET
2 THEM COME ABOUT. SO IF IT LOOKS LIKE IT'S GOING IN THAT
3 DIRECTION, IF IT LOOKS LIKE IT'S THE KIND OF THING THAT WILL
4 CAUSE HARM OR INJURY -- OBVIOUSLY, IF THESE ARE THE TWO -- IF
5 THIS IS THE AREA OF COMPETITION THAT SUBSCRIBERS ARE LOOKING
6 TO, THE IDEA THAT THERE WOULD BE AGREEMENTS THAT WOULD LIMIT
7 THE POTENTIAL EXPANSION OF THAT OR THE CHANGE OF THAT OR THE
8 BETTERMENT OF THAT OR THE LIKELY COMPETITION OF THAT, THAT
9 WOULD HAVE AN IMPACT ON THEM, AS WELL, NOT ONLY ON THE
10 CHRONICLE BUT ON THEM, AS WELL.
11 AND IT ALL WORKS. IT WORKS, JUDGE, BECAUSE BEFORE
12 YOU HAVE THESE AGREEMENTS YOU'VE GOT TO COMPETE, JUST LIKE
13 EVERY OTHER INDUSTRY AND EVERYBODY ELSE. BECAUSE OF THESE
14 AGREEMENTS, WHICH ARE VERY LIMITED -- THERE IS ONE PART HERE
15 THAT I NEED TO POINT OUT, YOUR HONOR, IF I MAY USE THIS. THIS
16 IS 18 -- THIS IS VERY IMPORTANT BECAUSE THE -- WHAT IS EXEMPT
17 FROM THE ANTITRUST LAWS IS REALLY VERY LIMITED BY 1802 OR 1801
18 AND 180 -- 1802.
19 IN ADDITION TO THOSE LIMITS, WHAT THE CONGRESS SAYS
20 IN THIS VERY LAST LINE IS:
21 "EXCEPT AS PROVIDED IN THIS CHAPTER, NO
22 JOINT NEWSPAPER OPERATING ARRANGEMENT OR ANY
23 PARTY THERETO SHALL BE EXEMPT FROM ANY ANTITRUST
24 LAW."
25 PERIOD. SO IF IT'S NOT IN 1802, YOU CAN'T DO IT.
2344
OPENING ARGUMENT \ ALIOTO
1 AND THERE IS NOTHING IN THERE ABOUT A 60 MILE; THERE IS NOTHING
2 IN THERE ABOUT FIRST RIGHT OF REFUSAL, WHICH THE SUPREME COURT
3 ALREADY THREW OUT AND WHICH THE CHRONICLE, BY THE WAY,
4 INTERESTINGLY ENOUGH, AGREES THAT IT WOULD NOT BE COVERED --
5 WOULD NOT BE COVERED BY THAT.
6 NOW, I THINK IT'S IMPORTANT BECAUSE THE COURT IS
7 RAISING THESE ISSUES -- IT'S IMPORTANT TO SEE, YOU KNOW,
8 EXACTLY WHAT -- WHAT SOME OF THE THINGS THEY WERE TALKING
9 ABOUT.
10 THIS IS EXHIBIT 84, YOUR HONOR. EXHIBIT 84 IS A
11 GROUP OF DOCUMENTS WHICH INCLUDES EXHIBIT 83, WHICH IS THE SAN
12 FRANCISCO EXAMINER BUSINESS PLAN, WHICH ALSO INCLUDES THE
13 ATTACHMENT BY THEIR FOLKS THAT -- TWO PEOPLE THAT WERE
14 IDENTIFIED AS JIM SEVRENS AND LEE.
15 NOW, IN THAT --
16 THE COURT: 84?
17 MR. ALIOTO: 84 IS THE KIND OF COVER FOR IT, YOUR
18 HONOR, BUT THE REAL DOCUMENT IS 83. 84 REFERENCES 83. THAT'S
19 WHY I HAVE THEM TOGETHER.
20 THE COURT: 84 MENTIONS THE MCCLATCHY ANCHORAGE
21 WINDOW?
22 MR. ALIOTO: THERE IS THAT, BUT ALSO YOU WILL SEE IN
23 THE THIRD PARAGRAPH, "ATTACHED IS A SOLO A.M. PLAN WE HAD JIM
24 SEVRENS AND LEE DEVELOP LAST JULY."
25 THE COURT: RIGHT.
2345
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: THAT'S WHAT THIS IS. AND THAT'S
2 EXHIBIT 83.
3 AND THAT ONE BEGINS, YOUR HONOR -- AND THAT ONE
4 BEGINS BY IN THEIR MISSION STATEMENT, QUOTE:
5 "THE SAN FRANCISCO JOA TERMINATES IN 2005.
6 IT IS THE INTENTION OF THE HEARST CORPORATION TO
7 MAINTAIN A NEWSPAPER PRESENCE AND COMPETE FOR
8 THE MARKETPLACE FOLLOWING THE DEMISE OF THE
9 JOA."
10 AND DOWN BELOW YOU WILL SEE WHAT THEY ARE TALKING
11 ABOUT. I MEAN, THEY ARE VERY SPECIFIC. THE VERY LAST
12 PARAGRAPH:
13 "THE FOLLOWING PLAN ASSUMES THAT OUR
14 STRATEGIC MOVES WILL HAVE PUT US IN A POSITION
15 TO ESSENTIALLY LAUNCH A NEW MORNING EXAMINER IN
16 2005 AND INCLUDES ASSUMPTIONS IN EACH OF THE
17 FOLLOWING CATEGORIES:"
18 NOW, AGAIN, THAT'S THIS. WHAT THEY ARE TALKING
19 ABOUT IS THEY ARE GETTING READY -- THEY ARE GETTING READY FOR
20 2005. AND THEY ARE VERY SPECIFIC ABOUT IT. AND THAT'S WHY IF
21 EITHER COMPANY MAKES ANY MOVES AGAINST THE OTHER TO PREVENT
22 THEM TO GET READY FOR THE RACE IN 2005, THAT'S WHY THE EXAMINER
23 CALLS THAT AN ANTITRUST VIOLATION.
24 AND IF YOU GO TO THE NEXT PAGE, WHAT THEY ARE
25 TALKING ABOUT IS, QUOTE:
2346
OPENING ARGUMENT \ ALIOTO
1 "THE SAN FRANCISCO EXAMINER WILL BE A
2 300,000 CIRCULATION NEWSPAPER."
3 THEY ALSO SAY, IF THE COURT WOULD GO TO UNDER
4 THEIR -- UNDER THEIR SCENARIO, THEY HAVE A NUMBER OF SCENARIOS,
5 BUT UNDER SCENARIO 1 -- AND THIS IS THE SECOND PAGE. IT HAS
6 THE BATES NUMBER, YOUR HONOR, HN0013765.
7 AND WHAT THEY SAY IS -- ON THE VERY TOP THEY ARE
8 TALKING ABOUT REDUCING THE ADVERTISING RATES. BUT IF THE COURT
9 WILL GO DOWN TO THE THIRD FULL PARAGRAPH THAT BEGINS, QUOTE,
10 "THE SINGLE COPY PRICING." IT'S THE THIRD PARAGRAPH. AND IT
11 STATES, QUOTE:
12 "THE SINGLE COPY PRICING WILL BE TEN CENTS
13 DAILY AND 50 CENTS ON SUNDAY, A REDUCTION FROM
14 OUR CURRENT PRICING OF 25 CENTS DAILY AND 1.50
15 ON SUNDAY. THESE DISCOUNTED RATES SHOULD RESULT
16 IN SEVEN-DAY VENDING MACHINE SALES OF 75,000, ET
17 CETERA."
18 IN OTHER WORDS, THEY ARE TALKING ABOUT S, "OH, WELL, YOU KNOW, IF WE CAN'T BUY THE CHRONICLE, WELL,
21 AFTER 2005, YOU KNOW, WE ARE JUST GOING TO GIVE UP, YOU KNOW,
22 AND WALK AWAY." THAT'S WHAT HE TRIED TO SAY.
23 BUT THE COURT WILL REMEMBER THAT I ALSO HAD HIM ON A
24 DOCUMENT WHERE HE WAS TALKING TO HIS OWN PEOPLE AND -- AND WHEN
25 HE WAS TALKING TO HIS OWN PEOPLE, THIS IS WHERE HE GAVE THAT
2348
OPENING ARGUMENT \ ALIOTO
1 EXTRAORDINARY STATEMENT THAT, "WELL, YOU KNOW, YOU'VE GOT TO
2 FAKE IT WITH YOUR OWN PEOPLE." HE SAID THAT -- THEY'RE ALL
3 TALKING ABOUT COMPETING BEYOND 2005, YOUR HONOR. BUT HE SAID
4 IN HIS PAPER -- IF THE COURT WILL JUST GIVE ME JUST ONE SECOND.
5 HERE IT IS. THIS IS TO HIS OWN PEOPLE. THIS IS EXHIBIT 71.
6 THIS IS DATED SEPTEMBER '98. AND HE SAYS -- AND THIS IS TO
7 MR. ASHER AND TO MR. IRISH FROM MR. BENNACK HIMSELF. AND HE IS
8 TALKING ABOUT WHAT HE WAS TELLING MR. SIAS FROM THE CHRONICLE:
9 "I TOLD HIM WE WOULD CERTAINLY APPROACH
10 MATTERS IN THE SAME GOOD FAITH SPIRIT. I TOLD
11 HIM, HOWEVER, THAT WE WERE CERTAINLY GOING TO
12 TAKE THE STEPS WE BELIEVED NECESSARY TO PREPARE
13 OURSELVES FOR THE RESUMPTION OF A FULLY --
14 "RESUMPTION OF A FULLY COMPETITIVE SITUATION IN
15 THE POST-2005 PERIOD."
16 AND HE GOES ON TO SAY THAT:
17 "I TOLD HIM THAT WE HAD DISCUSSIONS" -- THIS
18 IS GETTING INFORMATION ON SPLITTING THE
19 ASSETS -- "BUT, AMONG OTHER THINGS, PREPARING
20 OURSELVES FOR THE DAYS WHEN WE WOULD BE
21 CONVENTIONAL COMPETITORS AGAIN."
22 WELL, WHY DO YOU SAY -- IF YOU DIDN'T BELIEVE THIS,
23 IF THIS WAS THE BLOWFISH IDEA AND EVERYTHING, WHY ARE YOU
24 TELLING THIS TO YOUR PEOPLE HERE? WHY DON'T YOU PUT IN HERE,
25 "WELL, THIS IS A BIG FAKE AND DON'T WORRY ABOUT IT?" WHY DO
2349
OPENING ARGUMENT \ ALIOTO
1 YOU PUT IN HERE, INSTEAD, "NONE OF THIS IS VERY PLEASANT TO
2 CONTEMPLATE." COMPETITION SOMETIMES ISN'T BUT IT'S COMPETITION.
3 SO WHY ARE YOU TELLING YOUR OWN PEOPLE THAT?
4 AND HE MAKES THIS EXTRAORDINARY STATEMENT AND
5 SOMETIMES YOU'VE GOT TO -- YOU KNOW, YOU CAN'T TELL YOUR OWN
6 PEOPLE YOU'RE GOING TO DIE, YOU KNOW, OR I THINK HE USED THE
7 EXPRESSION "ROAD KILL." YOU CAN'T TELL THEM THAT.
8 WELL, WHAT IS HE SAYING, THAT HE'S GOING TO -- THAT
9 HE IS LYING TO THEM? NO. WHAT HE IS DOING IS HE IS TRYING TO
10 COVER UP HIS TESTIMONY BEFORE YOUR HONOR TO TRY TO SUGGEST HE
11 DIDN'T MEAN THIS. AND HE DOESN'T MEAN IT NOW BECAUSE IF HE DID
12 MEAN IT, HE HAS THE INTENT TO COMPETE, AND HE CANNOT BE ALLOWED
13 TO NOT COMPETE. AND HE HAS THE WHEREWITHAL. HE HAS THE
14 $660 MILLION. AND HE HAS -- AND HE HAS THE VERY PRODUCT THAT
15 WE ARE TALKING ABOUT, A NEWSPAPER, AND WHEN THE COURT COMES TO
16 JUDGE THE CREDIBILITY OF THE WITNESS, THIS IS -- THIS IS
17 CLASSIC OMAR KHAYYAM.
18 THE COURT: YOU LOST ME.
19 MR. ALIOTO: WELL, LET ME GIVE IT. OMAR KHAYYAM IS
20 GREAT, JUDGE, BECAUSE IT REALLY APPLIES TO THESE WITNESSES. IT
21 SIMPLY SAYS:
22 "WHEN THE MOVING FINGER WRITES AND HAVING
23 WRIT MOVES ON: NOR ALL YOUR WIT NOR PIETY CAN
24 LURE IT BACK TO CANCEL HALF A LINE, NOR ALL YOUR
25 TEARS WASH OUT A WORD OF IT."
2350
OPENING ARGUMENT \ ALIOTO
1 SO YOU WRITE IT; IT'S THERE; YOU CAN'T GET IT BACK.
2 WIT, PIETY OR TEARS.
3 HERE IT IS (INDICATING). THAT'S IT. HE'S STUCK
4 WITH IT. HE'S STUCK WITH IT AND HE DIDN'T LIKE IT. AND IT
5 WASN'T ONCE, JUDGE. IT WAS SO MANY TIMES. AND SO WHAT -- AND
6 SO HE HAD NO PROBLEM TELLING YOU, WELL, HE DIDN'T MEAN IT.
7 AND EVEN WHEN YOU HAVE MR. WHITE, MR. WHITE WAS
8 SAYING THE REASON I WAS SENT OUT HERE WAS TO DO THIS. REMEMBER
9 ALL THE THINGS THAT HE IS GETTING READY TO DO.
10 THE COURT: WHERE IS THE EVIDENCE HERE THAT HEARST
11 ATTEMPTED TO ENFORCE THAT 60-MILE CLAUSE?
12 MR. ALIOTO: TO ENFORCE THE 60-MILE CLAUSE?
13 THE COURT: YES, TO EXCLUDE --
14 MR. ALIOTO: YOUR HONOR?
15 THE COURT: TO EXCLUDE ANY POTENTIAL --
16 MR. ALIOTO: HOW ABOUT THIS? THEY DIDN'T EVEN HAVE
17 TO GET TO THAT. IT'S LIKE THEIR ARMOR. IT'S LIKE THEIR
18 PROTECTION. THEY HAVE THIS RIGHT, WHICH WE ARE ASKING THE
19 COURT TO VOID, OF NOT ONLY FIRST RIGHT OF REFUSAL, BUT THEY
20 HAVE TO NEGOTIATE WITH THEM FIRST. THEY HAD SET A DATE, AS
21 YOUR HONOR RECALLS, FOR -- I FORGOT. IT WAS AUGUST 12TH OR
22 16TH OR WHATEVER IT WAS, WHICH WAS THE LAST DAY THAT ANYONE
23 COULD SUBMIT A BID FOR THE CHRONICLE. THEY MADE THEIR DEAL
24 AUGUST 6TH, BEFORE THE DATE THAT ANYONE HAD THE RIGHT TO DO IT.
25 THEY DIDN'T EVEN HAVE TO USE THE 60 DAYS. ALL THEY HAVE TO DO
2351
OPENING ARGUMENT \ ALIOTO
1 IS TALK ABOUT IT. DID YOU HEAR THE LADY FROM DLJ -- I FORGOT
2 HER NAME RIGHT NOW, GREENTHAL.
3 THE COURT: GREENTHAL.
4 MR. ALIOTO: YES. DID YOU HEAR -- THE WAY THEY
5 WOULD TALK ABOUT IT, THEY DON'T -- ALL THEY HAVE TO DO IS
6 MENTION IT. SO --
7 THE COURT: ISN'T THE PARTY HARMED BY THAT
8 CHRONICLE?
9 MR. ALIOTO: YES, DEFINITELY. DEFINITELY THEY ARE.
10 THE COURT: I DON'T HEAR MR. ROSCH COMPLAINING ABOUT
11 THIS, HOWEVER.
12 MR. ALIOTO: I THINK HIS CLIENTS MIGHT BECAUSE IT'S
13 INTERESTING, JUDGE, WHEN YOU ASK THAT QUESTION, THE CHRONICLE
14 TOOK THE POSITION IT'S NOT PROTECTED. THAT WAS A VERY
15 INTERESTING ADMISSION. SOMEBODY IS GETTING THE PICTURE.
16 REMEMBER, THAT MR. SIAS WAS NO FRIEND OF THE CHRONICLE
17 STOCKHOLDERS. THIS GUY WAS LIKE AN INSIDER. HE WAS GIVING
18 MORE INFORMATION TO HEARST THAN HEARST COULD GET ON ITS OWN.
19 MR. ROSCH: YOUR HONOR, I DON'T OBJECT NORMALLY TO
20 ORAL ARGUMENT, BUT THAT'S SCANDALOUS AND I MOVE THAT IT BE
21 STRICKEN.
22 THE COURT: WELL, I DON'T THINK HE WAS REFERRING TO
23 MR. SIAS. I THINK HE MISSPOKE.
24 ARE YOU REFERRING TO THAT INDIVIDUAL WHO IS
25 MENTIONED?
2352
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: YEAH. WELL, WE WEREN'T CLEAR WHO IT
2 WAS. FIRST HE WAS IDENTIFIED AS ONE PERSON.
3 THE COURT: RIGHT.
4 MR. ALIOTO: MR. ROSENBERG. THEN HE WAS IDENTIFIED
5 AS MR. NICHOLS. THEN HE WAS IDENTIFIED AS SOMEBODY ELSE.
6 THE COURT: I THINK MR. ROSCH THOUGHT YOU WERE
7 REFERRING TO MR. SIAS.
8 MR. ALIOTO: HOWEVER, THE CHRONICLE ITSELF FELT --
9 IT WAS OF THE VIEW THAT MR. SIAS WAS GIVING INFORMATION TO
10 HEARST. THAT'S A WRITTEN DOCUMENT THAT IS IN AUGUST --
11 THE COURT: WELL . . .
12 MR. ALIOTO: OKAY.
13 THE COURT: BUT THAT'S NOT OUR LAWSUIT.
14 MR. ALIOTO: NO, NO.
15 THE COURT: THAT MAY BE ANOTHER LAWSUIT.
16 (LAUGHTER)
17 MR. ALIOTO: ALL RIGHT. BUT FOR THE RECORD, IF IT
18 PLEASE YOUR HONOR, IT'S EXHIBIT 134. AND THIS IS THE LETTER
19 FROM MS. GREENTHAL TO THE CHRONICLE FOLKS. AND SHE STATED IN
20 HER DOCUMENT -- SHE STATED THAT IN THE LAST -- IT LOOKS LIKE
21 IT'S AN E-MAIL SO IT'S THE LAST -- SECOND-TO-LAST SENTENCE, SHE
22 SAYS THAT, QUOTE:
23 "IT'S VERY CLEAR TO ME THAT THE SUBSTANCE OF
24 OUR LAST DISCUSSION WITH JOHN ON THIS TOPIC
25 SOMEHOW GOT TO FRANK."
2353
OPENING ARGUMENT \ ALIOTO
1 AND THEN SHE GOES ON. AND WHEN SHE TESTIFIED SHE
2 FELT LIKE HE HAD GIVEN THEM INFORMATION --
3 MR. ROSCH: I OBJECT TO THAT AS WELL, YOUR HONOR.
4 IT MISCHARACTERIZES THE EVIDENCE. AGAIN, THIS IS SCANDALOUS
5 MATERIAL WHICH IS ENTIRELY IRRELEVANT.
6 MR. ALIOTO: WELL, I DIDN'T WRITE IT, YOUR HONOR.
7 MR. ROSCH: AND I MOVE THAT IT BE STRICKEN.
8 THE COURT: WELL, I AM GOING TO OVERRULE THE
9 OBJECTION. MR. ALIOTO HAS POINTED TO EXHIBIT 134 AND HE HAS
10 MADE AN INTERPRETATION AND A FAIR INTERPRETATION GIVEN THE --
11 GIVEN THE DOCUMENT. THE OBJECTION IS OVERRULED.
12 MR. ALIOTO: OKAY. BUT REGARDLESS, YOUR HONOR, THAT
13 EVEN THOUGH THE CHRONICLE ITSELF OR THE STOCKHOLDERS MAY BE
14 HARMED BY THAT, TOO, AND TOOK THAT POSITION THAT IT'S NOT
15 COVERED -- AND WE WOULD SAY THIS, YOUR HONOR. IF IT'S NOT
16 COVERED IT HAS TO GO BECAUSE IT WAS ALREADY REPUDIATED BY THE
17 SUPREME COURT.
18 THE COURT: WELL, MY PROBLEM IS HOW IS YOUR CLIENT
19 HURT?
20 MR. ALIOTO: OKAY. THERE ARE TWO -- YOUR HONOR,
21 THERE ARE TWO ASPECTS. FIRST OF ALL, IF THAT --
22 THE COURT: OR THREATENED TO BE HARMED?
23 MR. ALIOTO: MY CLIENT -- FIRST OF ALL, I WISH TO
24 EMPHASIZE AGAIN, I BELIEVE THAT MY CLIENT MAY -- IS THREATENED
25 BY THAT, THAT THAT PREVENTS ON ITS FACE POTENTIAL NEW
2354
OPENING ARGUMENT \ ALIOTO
1 COMPETITION, POTENTIAL COMPETITION FOR HIS BUSINESS, POTENTIAL
2 COMPETITORS COMING IN, AS BOTH OF THESE FOLKS HAVE RECOGNIZED.
3 IF THESE OTHER COMPETITORS COME IN, THERE IS THAT POTENTIAL OF
4 PRICE COMPETITION, OBVIOUSLY.
5 BUT I THINK IT'S MORE THAN THAT. I THINK THAT WHEN
6 THE COURT IS DOING EQUITY, THE COURT HAS TO ENSURE THAT ALL OF
7 THESE RESTRAINTS ARE PROHIBITED AND THAT THE COURT HAS THE
8 POWER TO DO THAT.
9 SOMETIMES, FOR EXAMPLE, IN PROVING AN ANTITRUST CASE
10 NOT ALL OF THE ANTITRUST VIOLATIONS WILL NECESSARILY CALL
11 MONETARY DAMAGE TO A PLAINTIFF. NONETHELESS, IN ORDER, AS THE
12 SUPREME COURT SAID IN CONTINENTAL OR TO GET THE FULL PICTURE OF
13 HOW THESE PEOPLE ARE OPERATING, EVERYTHING THEY DO IS WITH
14 RESTRAINTS, YOUR HONOR, THAT IF YOU GET THE FULL PICTURE, THE
15 COURT WHEN IT COMES TO SOMETHING IN EQUITY HAS THE RIGHT TO
16 STAMP OUT NOT ONLY THE DIRECT VIOLATIONS BUT ANY OF THOSE --
17 EVEN THOSE THAT MIGHT OTHERWISE BE LEGAL, AND WHETHER OR NOT
18 THEY IMPACT ANYBODY.
19 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
20
21
22
23
24
25
2355
OPENING ARGUMENT \ ALIOTO
1 BECAUSE THEY ARE PART AND PARCEL OF THE OVERALL
2 SCHEME.
3 NOW, HERE I WOULD SUBMIT TO YOUR HONOR THAT THE IDEA
4 THAT THEY WOULD HAVE THESE RESTRICTIONS ON POTENTIAL SELLERS,
5 BECAUSE, LOOK, IF WE GO BACK -- IF I CAN GO BACK, IF WE GO BACK
6 TO WHERE WE WERE WITH THE JOA RECOGNIZING THAT THE JOA WAS
7 MEANT TO INCREASE THE COMPETITORS, RECOGNIZING ALSO, YOUR
8 HONOR, THAT SECTION 7 AT LEAST WAS ALSO MANY TIMES, AS WE PUT
9 IN OUR BRIEFS, MEANT TO INCREASE COMPETITORS BECAUSE OF THE
10 THREATENED HARM, THEY FIGURE THE BEST WAY TO PRESERVE
11 COMPETITION WAS MORE COMPETITORS, THOSE WERE THOSE ORIGINAL
12 CASES, AND THOSE WERE WHICH WE CITED TO YOUR HONOR.
13 BUT SUPPOSE DURING THE COURSE OF ANY OF THIS, ONE OF
14 THE PARTIES WANTED TO SELL. OKAY. IF HE WANTED TO SELL,
15 SOMEONE WHO WANTED TO BUY OBVIOUSLY WOULD COME INTO THE MARKET
16 AND ONE WOULD THINK IF THEY WERE WILLING TO BUY, YOU KNOW,
17 THEY'D WANT TO DO A GOOD JOB.
18 SOMEONE MIGHT GET TIRED, AND IF THAT PERSON COULDN'T
19 COME IN BECAUSE OF THE 60 MILES OR IF THE PERSON COULDN'T COME
20 IN BECAUSE OF FIRST RIGHT OF REFUSAL, THAT POTENTIAL IS NEVER
21 THERE. IT'S IMMEDIATELY WIPED OUT.
22 SUPPOSE THE EXAMINER -- SUPPOSE MR. BENNACK WANTED
23 TO CARRY THROUGH WITH HIS THREAT. SUPPOSE HE DECIDED, "OKAY,
24 WE'RE LAYING DOWN. YOU KNOW, WE'RE NOT DOING -- WE'RE NOT
25 TRYING TO HELP ANYBODY. WE DON'T CARE WHAT THE SAN FRANCISCO
2356
OPENING ARGUMENT \ ALIOTO
1 NEWSPAPER AGENCY DOES. YOU KNOW, FORGET IT." AND SUPPOSE THAT
2 THERE'S NOTHING -- AND HE WANTED TO LEAVE. HE COULD LEAVE. HE
3 COULD JUST LEAVE. NOTHING IS HURT HERE BECAUSE THE CHRONICLE,
4 YOU KNOW, THEY DIDN'T DO ANYTHING FOR THAT.
5 BUT SUPPOSE THE EXAMINER REALLY WANTED TO LEAVE
6 LEGITIMATELY AND THEY WANTED TO SELL TO SOMEBODY. SUPPOSE IT
7 WAS TONY RIDDER WHO'S DOWN IN SAN JOSE. ALL RIGHT, 'I'M
8 GETTING OUT OF HERE. I DON'T LIKE SAN FRANCISCO. I'VE HAD IT.
9 I'M GOING TO HOUSTON CHRONICLE, WORLD CLASS NEWSPAPER."
10 (LAUGHTER)
11 MR. ALIOTO: AND HE SAYS, "I'M LEAVING." HE SAYS
12 THAT. TONY RIDDER CAN'T BUY IT.
13 NOW, BECAUSE OF THE 60-MILE LIMIT, YOUR HONOR, IF NO
14 ONE CLOSER WANTS TO BUY IT, THEN THE CHRONICLE GETS A MONOPOLY
15 BUT NOT BECAUSE OF NOTHING THEY DID BUT BECAUSE OF THE 60-MILE
16 LIMIT, AND SOMEONE LIKE REILLY IS HURT. NOW, THIS WAS A FACT
17 IN THIS CASE.
18 THE COURT: HOW?
19 MR. ALIOTO: THIS WAS A FACT IN THIS CASE. THE FACT
20 IN THIS CASE --
21 THE COURT: HOW WAS REILLY HURT?
22 MR. ALIOTO: BECAUSE TONY RIDDER WAS SUPPOSED TO
23 HAVE OFFERED -- WE HAVE IT IN THE DOCUMENTS -- SUPPOSED TO HAVE
24 SAID THAT THEY WOULD BUY THE EXAMINER, BUT ONLY WITH THE JOA,
25 WHICH SHOULD HAVE BEEN DONE OBVIOUSLY, BUT ONLY WITH THE JOA
2357
OPENING ARGUMENT \ ALIOTO
1 THEY WOULD HAVE PAID HEARST SOME MONEY.
2 TONY RIDDER WAS KNOCKED OUT FOR TWO REASONS. ONE,
3 THE JOA AND THE 60 MILES. HE'S GONE.
4 SO WHAT HAPPENS? INSTEAD OF THE EXAMINER BEING RUN,
5 CONTINUING TO BE RUN AND RUN BY A MAJOR NEWSPAPER, THAT
6 POTENTIAL WAS LOST.
7 NOW, THAT WAS AN ACTUAL OFFER. THAT WAS -- YOU
8 KNOW, THAT WAS AN ACTUAL OFFER.
9 NOW, THE FEWER THE PAPERS, THE HIGHER THE PRICES.
10 THAT'S WHAT WE'RE LOOKING AT.
11 THIS IS VERY -- I WOULD RESPECTFULLY SUBMIT WHAT THE
12 CONGRESS INTENDED TO DO HERE AND THE WAY IT ACTUALLY FUNCTIONS
13 IS THAT IF YOU CHOOSE VOLUNTARILY TO GO INTO A JOA, IF IT'S
14 GOING TO BE A SPRINGBOARD, IF THE COURT SAYS -- IF THE COURT
15 ALLOWS -- IF THE COURT DOES NOT PROHIBIT HEARST FROM BUYING THE
16 CHRONICLE, THEN IT'S A ROAD MAP FOR MONOPOLY IN ANY CITY, YOUR
17 HONOR, BECAUSE IT WOULD BE REAL SIMPLE.
18 ONE OF THE -- THE DOMINANT PAPER WILL SIMPLY SAY TO
19 THE OTHER PAPER, "WE'LL BUY YOU OUT OR WE'LL TAKE YOU OVER," OR
20 ANYTHING LIKE THAT, "AND WE'LL HAVE A MONOPOLY BECAUSE YOU'RE A
21 FAILING PAPER."
22 THE COURT: WELL, LET'S JUST SPIN THIS OUT FOR A
23 MOMENT.
24 MR. ALIOTO: OKAY.
25 THE COURT: HOW IS COMPETITION IMPROVED IF
2358
OPENING ARGUMENT \ ALIOTO
1 KNIGHT-RIDDER WERE THE PURCHASER RATHER THAN HEARST?
2 KNIGHT-RIDDER HAS AN 80 PERCENT SHARE IN SANTA CLARA COUNTY
3 WITH THE SAN JOSE MERCURY NEWS. THEY HAVE A 38 PERCENT SHARE
4 IN CONTRA COSTA COUNTY WITH THE CONTRA COSTA TIMES. IF THEY
5 WERE THEN TO ACQUIRE THE CHRONICLE, THEY WOULD HAVE A
6 65 PERCENT SHARE IN SAN FRANCISCO, 44 PERCENT SHARE IN MARIN,
7 53 PERCENT SHARE IN SAN MATEO COUNTY. HOW IS THAT LIKELY TO
8 IMPROVE COMPETITION IF KNIGHT-RIDDER WERE THE PURCHASER?
9 MR. ALIOTO: OKAY, I WAS DISCUSSING ABOUT THE
10 EVIDENCE FROM KNIGHT-RIDDER WITH REGARD TO THE EXAMINER.
11 YOU'RE SAYING WITH REGARD TO THE -- YOU'RE POSITING THE
12 QUESTION WITH REGARD TO THE CHRONICLE?
13 THE COURT: YES.
14 MR. ALIOTO: OKAY. IF --
15 THE COURT: WELL, EVEN IF YOU TAKE THE EXAMINER AND
16 KNIGHT-RIDDER WERE THE PURCHASER OF THE EXAMINER WITHIN THE
17 JOA, THE EXAMINER HAS A 32 PERCENT SHARE IN SAN FRANCISCO.
18 MR. ALIOTO: YES.
19 THE COURT: HOW WOULD KNIGHT-RIDDER AS THE PURCHASER
20 OF EITHER OF THESE PAPERS WITH OR WITHOUT THE JOA IMPROVE THE
21 COMPETITIVE ENVIRONMENT?
22 MR. ALIOTO: WELL, WHAT THE SUPREME COURT SAID IS
23 THAT ANYBODY IS BETTER THAN THE COMPETITOR IN THE MARKET DOING
24 IT. THE SUPREME COURT SAID THAT THE FAILING -- IF IT'S A
25 FAILING COMPANY OR OTHERWISE, OR YOU JUST WANT TO LEAVE, IT'S
2359
OPENING ARGUMENT \ ALIOTO
1 NOT FAILING BECAUSE THESE GUYS ARE MAKING MONEY, BUT IF YOU
2 WANT TO LEAVE, THE COURT SAYS THAT IT CANNOT BE APPLIED IN A
3 MERGER OR ANY OTHER CASE UNLESS IT IS ESTABLISHED THAT THE
4 COMPANY THAT ACQUIRES THE FAILING COMPANY OR BRINGS IT UNDER
5 DOMINION IS THE ONLY AVAILABLE PURCHASER. FOR IF ANOTHER
6 PERSON OR GROUP COULD BE INTERESTED, A UNIT IN THE COMPETITIVE
7 SYSTEM WOULD BE PRESERVED AND NOT LOST TO MONOPOLY POWER. IN
8 OTHER WORDS, AN OUTSIDER IS ALWAYS BETTER RATHER THAN -- IF
9 THAT'S THE ONLY THING AVAILABLE.
10 NOW, I WOULD SAY IN ORDINARY CIRCUMSTANCES, YOUR
11 HONOR, THAT I THINK THAT IF THE CHRONICLE OR THE EXAMINER WERE
12 PUT UP FOR SALE IN THE JOA, I THINK THAT THEY WOULD PROBABLY
13 ATTRACT MANY MORE PEOPLE AND I THINK THAT -- WHICH WOULD HELP
14 COMPETITION, AS THE SUPREME COURT SAYS, WHICH MEANS IT HELPS
15 THE SUBSCRIBERS AS WELL AS THE ADVERTISERS AND PRESERVES THE
16 ACT, PRESERVES THE ANTITRUST ACT, PRESERVES THE PRESERVATION
17 ACT. BUT I WOULD SUBMIT THAT OTHERS WOULD HAVE A MORE LIKELY
18 CHANCE OF BEING ABLE TO DO IT.
19 THE COURT: ONE MORE QUESTION.
20 MR. ALIOTO: AS MANY QUESTIONS AS YOU WANT, YOUR
21 HONOR.
22 THE COURT: IS THERE ANY CASE THAT YOU'RE AWARE OF
23 THAT DISCUSSES NEGATIVE PRICE TRANSACTIONS UNDER SECTIONS 1,
24 2 OR 7? IS THERE ANY --
25 MR. ALIOTO: WELL, I WOULD SAY THIS: SINCE THE
2360
OPENING ARGUMENT \ ALIOTO
1 ILLUSTRIOUS EXPERTS FOR THE DEFENDANTS COULD ONLY COME UP WITH
2 THE GARBAGE EXAMPLE --
3 THE COURT: WELL, THAT'S --
4 MR. ALIOTO: -- THERE ARE A LOT OF GARBAGE CASES,
5 BECAUSE I'VE BEEN INVOLVED IN SOME OF THOSE. BUT THE NEGATIVE
6 PRICE, YOUR HONOR, IS, IN WHICH YOU PAY A PRICE FOR SOMEONE
7 TO --
8 THE COURT: TAKE THIS THING OFF YOUR HANDS.
9 MR. ALIOTO: YES. OKAY. I THINK YOU WOULD ONLY
10 FIND THAT KIND OF CONDUCT IN A CARTEL CASE. I DON'T THINK THAT
11 IT COULD OTHERWISE -- I DON'T THINK THAT IT WOULD OTHERWISE
12 EXIST.
13 THE COURT: HOW SO?
14 MR. ALIOTO: WELL, BECAUSE --
15 THE COURT: HOW IS THAT CARTEL BEHAVIOR?
16 MR. ALIOTO: WELL, IN A CARTEL, IN ORDER TO --
17 SOMETIMES IN ORDER TO PARTICIPATE IN -- WELL, LIKE EVEN IN OUR
18 CASE RIGHT HERE, IN ORDER TO PARTICIPATE IN GAINING A MONOPOLY,
19 YOU MAKE PEOPLE -- YOU MAY PAY PEOPLE TO BASICALLY RUN
20 SOMETHING OUT; IN OTHER WORDS, TO TAKE IT OFF.
21 THE COURT: IT'S EVIDENCE OF A CONSPIRACY BETWEEN
22 HEARST AND FANG.
23 MR. ALIOTO: YES. OH, YES. CERTAINLY.
24 THE COURT: AND A CONSPIRACY TO DO WHAT?
25 MR. ALIOTO: BUT HERE'S THE DEAL --
2361
OPENING ARGUMENT \ ALIOTO
1 THE COURT: PREDATORY PRICING? WHAT? PREDATORY
2 PRICING? WHAT IS IT?
3 MR. ALIOTO: NO. CONSPIRACY TO ESTABLISH A MONOPOLY
4 BECAUSE THEY KNOW THEY'RE NOT GOING TO COMPETE AGAINST IT.
5 WHEN MR. REILLY, FOR EXAMPLE, MADE A BID ALSO
6 AFTERWARDS, WHEN HE WAS INVITED BY HEARST TO DO THAT, AND I
7 GUESS, YOU KNOW, THE EVIDENCE NOW SHOWS THAT THAT WAS KIND OF A
8 FAKE, BUT WHEN HE WAS INVITED TO DO THAT, HE WAS TALKING
9 ABOUT -- AND SO WAS FANG, MR. FANG -- THEY WERE TALKING ABOUT
10 AN AMOUNT THAT WOULD REALLY MAKE THEM COMPETITIVE. REMEMBER,
11 THE FIRST OFFER BY MR. FANG WAS $210 MILLION. THEY SAY, "WELL,
12 WAIT A MINUTE. THE EXAMINER -- HEARST HAS TO -- WHY DOES
13 HEARST HAVE TO DO THIS IN THE FIRST PLACE?" HEARST SAYS THEY
14 HAD TO DO IT FOR POLITICAL REASONS. THAT'S WHAT THEY'RE
15 SAYING.
16 THE COURT: DO YOU DISBELIEVE THAT?
17 MR. ALIOTO: NO, BECAUSE IT WORKED. THE DEPARTMENT
18 OF JUSTICE SENT IN, AND THEY SAID, "HEY, YEAH, YOU GUYS GOT TWO
19 COMPETING NEWSPAPERS." AND IT'S NOT TRUE, BUT THEY DIDN'T KNOW
20 THAT, THE DEPARTMENT DIDN'T KNOW THAT.
21 THE COURT: ARE YOU SURE?
22 MR. ALIOTO: WELL, IT WOULD BE PRETTY ROUGH TO SEND
23 SOMETHING TO THE FEDERAL -- WELL, PRETTY ROUGH TO MAKE A
24 STATEMENT LIKE THAT.
25 THE COURT: THEY HAD MR. FANG'S DEPOSITION. DID
2362
OPENING ARGUMENT \ ALIOTO
1 FANG --
2 MR. ALIOTO: YOUR HONOR, I'LL TELL YOU THIS --
3 THE COURT: DID FANG IN THAT DEPOSITION DESCRIBE
4 WHAT HE TESTIFIED TO WITH RESPECT TO HIS PLANS FOR THIS
5 NEWSPAPER?
6 MR. ALIOTO: FIRST OF ALL, HE DIDN'T HAVE ANY PLANS,
7 YOUR HONOR. YOU KNOW, REMEMBER WE HAD THAT. HE DIDN'T HAVE
8 ANY BUSINESS PLANS.
9 BUT THERE'S -- YOU MAY HAVE ANOTHER POINT. THEY MET
10 WITH HIM FIVE TIMES. YOU WONDER WHO'S WORKING FOR WHO. THEY
11 NEVER MET WITH ANYONE ELSE. IT WAS LIKE THEY WERE REPORTING TO
12 HIM ALMOST. IT WAS VERY UNUSUAL.
13 BUT, IN ANY EVENT, WHEN THE GOVERNMENT ISSUED THEIR
14 PRESS RELEASE AND SAID TO EVERYONE THAT FOR THE FIRST TIME IN
15 35 YEARS THERE WILL BE COMPETITIVE NEWSPAPERS, THAT WAS THE
16 LINE -- THAT WAS, IN FACT, THE LINE THAT HEARST WAS GIVING
17 EVERYWHERE, INCLUDING TO YOUR HONOR.
18 THE COURT: CORRECT.
19 MR. ALIOTO: OKAY. THEN MR. ASHER GETS ON THE STAND
20 AND SAYS, "WE NEVER HAD AN INTENTION THERE WOULD BE A
21 FULLY-COMPETITIVE NEWSPAPER. AND NOT ONLY THAT, NEITHER DID
22 THE FANGS." THAT WAS WILD I THOUGHT BECAUSE IT WAS PLAIN THAT
23 IT WAS A SHAM. I MEAN, IT WAS AN ADMISSION. THESE ARE NOT
24 BAREFOOT BOYS. THESE ARE PEOPLE THAT ARE VERY, VERY POWERFUL
25 AND THEY KNOW WHAT THEY'RE DOING.
2363
OPENING ARGUMENT \ ALIOTO
1 AND IT WAS TO GAIN A MONOPOLY THAT THEY WERE MAKING
2 THESE REPRESENTATIONS. YOU CAN NEVER BE SURE WHETHER OR NOT
3 WHAT THEY'RE SAYING IS TRUE BECAUSE THEY CHANGE ON THEIR OWN SO
4 OFTEN AND IT DOESN'T BOTHER THEM. THEY WILL -- THEY'RE LIKE A
5 CHAMELEON. THEY CAN FASHION THEIR STATEMENTS TO THE OCCASION
6 AND THEY DO, AS WE SAW AGAIN AND AGAIN.
7 THE COURT: IS COMPETITION HARMED? LET'S ASSUME
8 THAT THE CHRONICLE PURCHASED BY HEARST GOES FORWARD. IS
9 COMPETITION HARMED BY SPINNING OFF THE EXAMINER ASSETS TO THE
10 FANGS? AND IF SO, HOW?
11 MR. ALIOTO: YES, IT'S HARMED BOTH WAYS. I MEAN,
12 IT'S HARMED IF THE COURT ALLOWS THE HEARST CORPORATION TO BUY
13 THE CHRONICLE.
14 THE COURT: BUT THAT'S --
15 MR. ALIOTO: IT ELIMINATES A NEWSPAPER.
16 THE COURT: PUT THAT ASIDE FOR A MOMENT.
17 MR. ALIOTO: OKAY. THEN THE OTHER ONE IS IF THEY
18 SELL THEIR ASSETS.
19 THE COURT: CORRECT. THE EXAMINER-FANG TRANSACTION
20 OR THE HEARST-FANG TRANSACTION ON ITS OWN, DOES THAT CREATE
21 COMPETITIVE INJURY? AND IF SO, WHAT IS THAT COMPETITIVE INJURY
22 AND WHO SUFFERS IT?
23 MR. ALIOTO: IN OTHER WORDS, IF HEARST WERE REQUIRED
24 TO GIVE OVER ITS ASSETS TO THE FANGS TO --
25 THE COURT: IF THEY --
2364
OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: -- PUBLISH IT?
2 THE COURT: IF THEY COMPLETE A --
3 MR. ALIOTO: THEY DIDN'T WANT THOSE ASSETS, JUDGE.
4 THEY DIDN'T WANT IT. THEY DIDN'T WANT THE PRESSES OR ANYTHING.
5 THIS IS WHERE THEY CAME UP MAGICALLY TWO DAYS BEFORE THE
6 AGREEMENT WITH A BUDGET OF $15 MILLION WHICH JUST HAPPENED TO
7 FIT INTO THE 5-MILLION-DOLLAR DEAL.
8 THEY USED TO HAVE -- WE DIDN'T GET A DIFFERENT
9 BUDGET. YOUR HONOR MAY REMEMBER, WE TOOK MR. FANG'S DEPOSITION
10 THE DAY BEFORE THIS TRIAL STARTED.
11 THE COURT: COME BACK TO THE POINT.
12 MR. ALIOTO: YES.
13 THE COURT: HOW IS COMPETITION HARMED?
14 MR. ALIOTO: IF THEY DON'T HAVE ASSETS?
15 THE COURT: NO. HOW IS COMPETITION HARMED BY
16 COMPLETION OF THE TRANSACTION CONTEMPLATED IN THE MARCH 16
17 CONTRACT?
18 MR. ALIOTO: HIGHER PRICES.
19 THE COURT: HOW SO? HOW ARE HIGHER PRICES LIKELY TO
20 RESULT?
21 MR. ALIOTO: BECAUSE THERE'S NO COMPETITION. THEY
22 ALREADY PUT IN DOCUMENTS THEMSELVES THAT THEY CAUGHT -- THEY
23 GOT CAUGHT WITH IN WHICH THEY SHOWED THAT THERE WOULD BE NO --
24 FIRST OF ALL, THAT THEIR OWN DOCUMENTS SAY THAT THEIR PRICES
25 WOULD EITHER REMAIN THE SAME IN A MONOPOLY POSITION OR NEVER
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OPENING ARGUMENT \ ALIOTO
1 LOWER BECAUSE THEY DON'T HAVE TO COMPETE EVEN THOUGH THEY TAKE
2 OFF THE COSTS FOR THE AFTERNOON NEWSPAPER COMPLETELY. THAT'S
3 THE SAME AS -- I MEAN, THAT'S THE ABSOLUTE WHAT LEARNED HAND
4 SAID WAS A CINEMAGRAPHIC VIEW OF THE INTENT, MONOPOLY INTENT.
5 WHEN YOU HAVE TWO COMPETITORS AND YOU MAINTAIN THE
6 SAME REVENUE BUT SIMPLY DEDUCT, IN OTHER WORDS, IT'S MONOPOLY.
7 IT'S A PRICE THAT THEY COULD NEVER ACHIEVE ON THEIR OWN. THEY
8 HAVE A DOUBLE, YOU KNOW, BOTH OF THEM, AND THEN THEY JUST
9 ELIMINATE THE COSTS OF ONE. THEY KEEP THE PRICE UP THERE.
10 IF THEY HAD TO COMPETE, THEY WOULD HAVE TO COMPETE.
11 THEY CAN'T COMPETE, YOUR HONOR. I THINK THE EVIDENCE IS CLEAR
12 THE FANGS CANNOT COMPETE AGAINST THE CHRONICLE. AND BECAUSE OF
13 THAT, THERE'S NOT GOING TO BE THIS PRICE COMPETITION THAT BOTH
14 HEARST AND THE CHRONICLE ARE BASICALLY SAYING IS GOING TO
15 HAPPEN. THEY'RE SAYING IT'S GOING TO HAPPEN, AND THEY ARE
16 EXPRESSING THEIR INTENT THAT IT DOES HAPPEN.
17 THE COURT: ALL RIGHT. LET'S ASSUME THAT IS CORRECT
18 AND WHAT HAPPENS AT THE END OF THE THREE-YEAR PERIOD IS THAT
19 FANG GOES OUT OF BUSINESS, THEY QUIT PUBLISHING THE EXAMINER,
20 THEY BURY HIM. WHAT IS THE HARM IN THE THREE-YEAR PERIOD OF
21 TIME THAT THEY'VE GONE AHEAD WITH THAT ENTERPRISE, CONTINUED TO
22 PUBLISH A NEWSPAPER CALLED THE EXAMINER, TO BE SURE NOW A
23 METROPOLITAN DAILY BUT SOMETHING THAT'S CALLED AN EXAMINER, AND
24 THEY SELL IT IN SAN FRANCISCO PRIMARILY, WHAT'S THE HARM IN
25 THAT?
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OPENING ARGUMENT \ ALIOTO
1 MR. ALIOTO: FEWER -- HIGHER PRICES AGAIN, HIGHER
2 PRICES THAT WOULD OTHERWISE NOT EXIST.
3 THE COURT: IS ENTRY FORECLOSED? IS THERE A
4 POSSIBILITY OF ENTRY BY SOME OTHER PUBLISHER THAT IS FORECLOSED
5 BY THIS TRANSACTION?
6 MR. ALIOTO: WELL, I WOULD SAY THIS, YOUR HONOR:
7 ACCORDING TO MR. ROSSE, AND I THINK IT WAS IN ANSWER TO YOUR
8 HONOR'S QUESTION, YOUR HONOR ASKED HIM ABOUT THAT AND MR. ROSSE
9 SAID --
10 THE COURT: I REMEMBER DISTINCTLY. IT WAS QUITE
11 EXTRAORDINARY.
12 MR. ALIOTO: YES. HE SAID THAT THE BARRIERS WERE
13 SUBSTANTIALLY HIGH AND THAT THEY COULDN'T GET IN.
14 THE COURT: WELL, DEAD-WEIGHT LOSS WAS HIS
15 DESCRIPTION.
16 MR. ALIOTO: I BELIEVE THAT THE COURT -- I'LL GET IT
17 FOR YOUR HONOR, BUT IT WAS MR. ROSSE AND HE DID -- AND YOUR
18 HONOR ASKED HIM, "ARE YOU SAYING THAT THE VARIOUS ENTRIES ARE
19 HIGHER OR NOT?" AND HE SAID, "YES, THEY ARE. THEY'RE STILL
20 HIGH, THAT'S CORRECT." THAT'S WHAT HE SAID. THAT WAS THEIR
21 GUY. I DON'T HAVE THAT RIGHT NOW.
22 BUT THEN IN ADDITION, AS WE POINTED OUT BEFORE, AND
23 AS WE HAVE HERE, THAT THE COURT MAY REMEMBER THIS, THIS WAS
24 ABOUT A NEW ENTRANT, AND THIS WAS HEARST'S POSITION AND THESE
25 WERE IN THE RESPONSES TO THE GOVERNMENT --
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OPENING ARGUMENT \ ALIOTO
1 THE COURT: YES.
2 MR. ALIOTO: -- AND THEY USE THESE EXTRAORDINARY
3 WORDS. IT SAYS HEARST DOES NOT BELIEVE THAT ENTRY INTO THE
4 METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE RELEVANT AREA IN
5 DIRECT COMPETITION WITH THE COMBINED SAN FRANCISCO CHRONICLE
6 AND EXAMINER NEWSPAPERS OR THE CHRONICLE ALONE.
7 THE COURT: ISN'T THAT YOUR EVIDENCE THAT THE
8 DEPARTMENT'S PRESS RELEASE WAS MISLEADING?
9 MR. ALIOTO: AMONG OTHER THINGS.
10 THE COURT: THIS WAS A STATEMENT BY HEARST ITSELF TO
11 THE DEPARTMENT OF JUSTICE WHICH --
12 MR. ALIOTO: YES.
13 THE COURT: -- COMPLETELY CONTRADICTED THE
14 DEPARTMENT'S PRESS RELEASE.
15 MR. ALIOTO: YES. YES, IT DOES. YOUR HONOR IS
16 RIGHT. IT DOES.
17 THE COURT: THUS, YOU SAY, THERE'S SOMETHING ELSE
18 GOING ON HERE.
19 MR. ALIOTO: OH, WE'VE SAID THAT. YES, SIR. YEAH,
20 BECAUSE --
21 THE COURT: AND WHAT IS IT?
22 MR. ALIOTO: WELL, WE THINK THAT THE EVIDENCE AND WE
23 THINK THAT THE COURT CAN CLEARLY UNDERSTAND THAT THE EVIDENCE
24 OR PART OF THE EVIDENCE IS THAT THE DEAL WAS THAT THERE WOULD
25 BE NO OPPOSITION SO LONG AS HEARST CORPORATION SOLD THE
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