Valassis Wins $300 Million Judgment in News Corp. Suit

Claimed News America Hiked In-Store-Media Prices for Marketers That Didn't Buy Newspaper Inserts

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A correction has been made in this story. See below for details.

BATAVIA, Ohio ( -- Valassis Communications won a huge antitrust victory over its longtime and much bigger rival News Corp. as a Michigan state court jury awarded Valassis a $300 million antitrust judgment this morning.

News Corp.'s News America Marketing unit publishes SmartSource newspaper coupon inserts and controls in-store advertising vehicles throughout much of the U.S. supermarket industry.
News Corp.'s News America Marketing unit publishes SmartSource newspaper coupon inserts and controls in-store advertising vehicles throughout much of the U.S. supermarket industry. Credit: News America Marketing
The judgment in Wayne County Circuit Court equals more than a quarter of the annual $1.1 billion sales of News Corp.'s News America Marketing unit, which publishes SmartSource newspaper coupon inserts and controls in-store advertising vehicles throughout much of the U.S. supermarket industry, including instant-coupon machines, shelf coupons and shopping-cart ads.

It's also not much smaller than the $340 million market capitalization Valassis had when trading opened this morning, but news of the win had sent the stock up 26% by midday and as much as 45% at one point.

Valassis bet heavily on the outcome of the trial, and Chairman-CEO Alan Schultz testified that layoffs would result if the company lost.

The judgment is still well below the $1.5 billion Valassis sought. And in a signal of how much more the couponing business means to Valassis than to News Corp., the latter's share price was up 0.3% at midday despite the ruling, which the company said in a statement it will appeal.

'Uneven playing field'
Valassis' Mr. Schultz said in a statement: "We are pleased with the jury's verdict, and we look forward to moving ahead with our two other cases, including the antitrust case in the Eastern District of Michigan where any compensatory damages will be trebled. Furthermore, I am very proud of the efforts of our employees who have been competing on this uneven playing field for nearly a decade." Yet another Valassis antitrust complaint against News Corp. is pending in state court in California.

In a statement via its public-relations firm, Rubenstein Associates, News America said:

We are disappointed with today's decision, which rewards a company that turned to litigation as its business strategy rather than compete. Although we are sure that the Michigan state court jury did their best to reach a fair conclusion, we recognize they were hampered by the court's decision not to allow a key piece of information to be introduced: the legal analysis by the Federal Trade Commission that Valassis had made an 'effort to induce collusion' when it announced its new pricing policy in a public investor call. This information would have shown that this lawsuit was merely part of a larger strategy to get News America Marketing to raise its prices, a move that would have affected both our clients and their consumers by reducing the number of coupons available -- a consequence that would be extremely unfortunate in this economy.

In a 2006 consent decree, neither Valassis nor News America admitted wrongdoing, and Valassis agreed to not publicly discuss matters that could be construed as setting prices or limiting competition. The FTC charged Valassis with attempting to fix newspaper-insert prices through statements made in a 2004 investor conference call.

Penalizing marketers
Valassis contended in its lawsuit that News America illegally bundled deals on its in-store media and newspaper inserts, severely penalizing marketers on price for in-store media when they didn't also buy space in the company's inserts.

While Valassis and News America have roughly equal shares of the inserts market, News America owns the lion's share of syndicated in-store media in the U.S., even more so after buying a much smaller rival, Floorgraphics, earlier this year. That deal came shortly after News America settled in mid-trial and for undisclosed terms a lawsuit Floorgraphics had filed, charging that News America hacked into its computers and broke into its offices as part of a program of sabotage and intimidation. Separate antitrust litigation from another in-store rival, Insignia Systems, against Floorgraphics is also pending.

The Michigan trial, which lasted more than a month, included testimony from numerous package-goods-marketing executives from companies including Sara Lee Foods, PepsiCo and H.J. Heinz, who talked about their in-store-advertising prices going up in some cases by millions of dollars after they ended newspaper-insert deals.

News America declined to comment on whether it had changed or will change its contracts or deal structure as a result of the litigation or verdict.

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CORRECTION: An earlier version of this story incorrectly reported that News America was party to an FTC consent decree issued earlier this year. News America was not bound by the consent decree, which was issued in 2006.

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