S.F. newspaper fight goes to court

SAN FRANCISCO — Lawyers battling over Hearst Corp.'s $660 million bid to purchase the San Francisco Chronicle went to federal court Monday, launching a case that promises to have a deep impact on the future of the city's media market and on newspaper competition around the country.

Hearst plans to take over the Chronicle — which for more than a century has been the main competition to its own San Francisco Examiner — and sell the struggling Examiner to a local publishing company complete with $66 million in subsidies to keep the newspaper afloat.

But in opening arguments Monday, lawyers opposed to the deal called it a sham and charged that the Examiner's new owners, the Fang family, will shut the 135-year-old newspaper down in order to leave Hearst with a monopoly in the lucrative San Francisco newspaper market.

"We've described it as a sham. It certainly is that," said attorney Joseph Alioto, who represents former mayoral candidate Clint Reilly in his legal challenge to the sale.

"Antitrust laws can and will be violated unless the Hearst Corp. is prevented from acquiring the Chronicle," he added.

Reilly, who made his own unsuccessful bid to buy the Examiner, hopes to prove that Hearst and the Fangs have entered what amounts to a sweetheart deal that ignores real ways to save the newspaper as a truly independent editorial voice for San Francisco.

Hearst and the Fangs, for their part, say their agreement is the only way to keep the Examiner afloat and accuse Reilly of waging the court battle to seek political revenge for his failed 1999 mayoral bid.

In their opening statements Monday, Hearst's lawyers said the end of the 40-year-old joint operating agreement (JOA) between the two newspapers in 2005 left the New York-based media conglomerate with no choice but to sell the Examiner, a weak afternoon paper whose daily circulation of 110,000 is dwarfed by the morning Chronicle's 465,000.

"No facts are in dispute in this case," the company's lead lawyer, Gary Halling, said. "Everyone in this case agrees that the Examiner is a failing business, that it is not viable as currently constituted."

The case is being closely watched in San Francisco, where the Chronicle and the Examiner have co-existed since 1965 under a JOA which allows them to share operating costs and profits but maintain separate news operations.