Reed lawsuit alleges ‘The Spy’ and ‘Mr. X’ helped create a monopoly for McGraw-Hill Construction

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Reed Construction Data (RCD), a unit of Reed Elsevier, filed a lawsuit last week that alleges its chief competitor, McGraw-Hill Construction, had engaged in corporate spying since 2002 to build and preserve its market share. The lawsuit estimates that Dodge, a unit of McGraw-Hill Construction that lists construction projects nationwide, has an 80% to 90% market share in the more than $100 million sector.

“This is a case of brazen industrial espionage committed by a sophisticated corporate entity with the intent of forcing its top competitor out of the marketplace,” the lawsuit stated.

Iain Melville, CEO of RCD, said in a statement: “McGraw-Hill Dodge has used our information to deceive and confuse the market about RCD and the data we offer. This was an attempt by Dodge to force RCD out of business and obtain a monopoly over the construction data industry.”

A McGraw-Hill spokesperson said the company plans to “vigorously defend” itself against Reed Construction’s legal claims. “We take these allegations very seriously and are committed to ensuring that all employees comply with our Code of Business Ethics.”

This is not the first legal dispute between McGraw-Hill and Reed Elsevier’s construction businesses. In 2000, McGraw-Hill alleged that Cahners Business Information, now Reed Business Information, engaged in unfair trade practices against McGraw-Hill’s Sweet’s unit, which provides building product information.

The RCD lawsuit against McGraw-Hill Construction has elements that read like an espionage novel. The suit alleges that McGraw-Hill Construction had a director of competitive intelligence, who was known internally as “The Spy.”

This employee allegedly hired consultants, one of whom was known to McGraw-Hill Construction sales staffers as “Mr. X” to protect his identity, to purchase subscriptions to Reed Connect, RCD’s online subscription service that lists construction projects around the country. When a person buys a subscription to Reed Connect, an agreement specifically prohibits the data’s being shared with an RCD competitor.

The lawsuit alleges that top management at McGraw-Hill’s construction unit was aware of the practice.

Some industry observers dismissed the seriousness of the charges and characterized the practice as typical, hard-nosed business. “[It’s] certainly not unusual for one research company to buy another’s data,” said a construction industry executive, who spoke on condition of anonymity.

“I can only talk about how we conduct ourselves,” Melville said in an interview with Media Business. “We believe in operating as an organization in an ethical and professional manner at all times. And we believe in a fair and open competitive landscape.”

RCD contents in the lawsuit that the breach in its data provided Dodge with an unfair competitive advantage. For instance, first-hand knowledge of RCD’s product enabled Dodge salespeople to use prespecified search terms that made it appear to potential customers that Dodge had many more projects listed than RCD, the suit contends.

RCD contends these business practices contributed to Dodge’s achieving what amounts to a “monopolistic” market share.

It is unclear whether RCD is using the allegation of monopoly to increase the seriousness of Dodge’s efforts to access Reed Connect data or whether RCD is leveraging the allegation of corporate spying to bolster its contention that Dodge is essentially a monopoly.

A McGraw-Hill spokesperson said, “The market is served around the country by numerous information providers. MHC has become the industry leader through the value of its superior products and services.”

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