Legal Question in Business Law in California

You might want to speak with the authorities who license your newstand about whether there is anything the city can do. My initial take is that if he is on a public street giving something away for free, there's probably nothing you can do. If he were selling something, then the city might restrict where he does so, or even prohibit it. You might be creative and give away your free papers for free, too, outside your newstand. You might be able to put up a sandwich sign nearby advertising the variety of papers and magazines that you sell.

I think he has the right to hand out free newspapers. The City can regulate the number of businesses, including newsstands, within reason, especially when they are on City sidewalks. There are several theories why this kind of regulation is reasonable and permissible. However, passing out free newspapers is a protected activity (a form of free speech) protected by the First Amendment to the U.S. Constitution, and the City has very limited power to restrict or regulate free speech.