Consultant Refuses to Drop Suit Over Newspaper Sale

The Hearst Corp.’s sale of the San Francisco Examiner has not persuaded political consultant Clint Reilly to drop his antitrust suit against Hearst’s purchase of the San Francisco Chronicle, Reilly’s lawyer said.

Reilly intends to seek a restraining order against the sale of the morning Chronicle on Monday unless he is persuaded that the Examiner’s new owner has a fighting chance to restore newspaper competition to the city, attorney Joseph M. Alioto said. He said Reilly does not like what he’s seen so far.

Based what is publicly known about the terms of the sale of the Examiner to local publisher Ted Fang, experts on newspaper operations and finances have advised Reilly that “there is no possibility of this being a competing newspaper,” Alioto said.

According to experts, Reilly said, producing a daily newspaper competitive in advertising, circulation and news coverage will cost $80 million to $100 million a year.

But Fang, publisher of the free Independent newspaper and Asian Week, has said his family is not wealthy. He is reportedly acquiring the Examiner for a nominal sum and will get a Hearst subsidy of up to $66 million over three years, a figure contained in Hearst’s latest court filing.

Fang says he plans to switch the afternoon newspaper to mornings in August and compete against the Chronicle by focusing on local coverage.

Hearst reportedly will pay $660 million for the Chronicle, a deal scheduled to be completed Thursday. Hearst’s sale of the Examiner to Fang’s new company, ExIn LLC, is to be completed at the same time.

The Examiner and Chronicle have run their business operations jointly and shared profits for 35 years, while keeping separate editorial staffs. Hearst announced the purchase of the Chronicle last August and said it would close the Examiner unless it found a buyer.

Alioto said Reilly would drop his objections “if the potential buyer looked as if it were going to be a viable competitive alternative to the Chronicle . . . but from the information we have, that is not the case.”

Hearst spokesman Paul Luthringer declined to comment. But in court papers filed Thursday opposing Reilly’s suit, Hearst argued that the sale of the Examiner should eliminate any legal objection to Hearst’s acquisition of the Chronicle.

Reilly, who ran unsuccessfully for mayor last year, sued in January, charging that the purchase would violate antitrust laws by depriving readers of competing sources of news and advertising.

Alioto said U.S. District Judge Vaughn Walker would probably consider the temporary restraining order Wednesday unless Hearst agrees to delay the purchase until April 13, the date of a previously scheduled hearing on Reilly’s suit.