Murdoch Faces New Antitrust Claims From Former Supermarket Promotion Rival
News Corp.'s $500 million settlement of Valassis Communications Inc.'s unfair competition complaints has stirred a former rival in the business of supermarket promotions to try to reopen a closed case to take another crack at the company built by Rupert Murdoch.
Floorgraphics Inc., which settled its allegations of anticompetitive behavior by selling News Corp. its contracts for $29.5 million in 2009, asked a New Jersey judge this month to let it examine new evidence that might entitle it to more money. Company executive George Rebh said in a March 29 affidavit he wanted to renew his fight after reading how much News Corp. paid Valassis and its January statement that it saw "significant risks" in presenting that case to a jury.
"It was the combination," he said in court papers.
Murdoch may already have spent more than the projected earnings of News Corp.'s hit "Avatar" movie to settle Valassis's lawsuits. Floorgraphics' potential demands would be added to that, and separate claims by Insignia Systems Inc. at a trial to be scheduled after April 12. The Minneapolis-based marketer of in-store promotions seeks unspecified damages from New York-based News Corp.'s News America Marketing, or NAM, which contributed to its division's $414 million operating loss in the quarter ended Dec. 31 due to the Valassis payment.
"News Corp. cost us hundreds of millions of dollars in lost opportunity," Insignia Chief Executive Officer Scott Drill said in an interview. Rebh declined to say what his estimates of damage to Floorgraphics are.
News Corp. said in a filing that Floorgraphics couldn't reopen the case because it couldn't show "extraordinary justifying circumstances." Teri Everett, a spokeswoman for News Corp., declined to comment beyond its court filing.
The Valassis settlement kept the spotlight of a trial off allegations that News Corp. employees threatened smaller rivals, destroyed signs in supermarkets and broke into computers to steal trade secrets. Insignia's lawyers have 20 hours of videotaped sales meetings at NAM "that are quite powerful in terms of their mentality with respect to competition," Drill said. NAM hasn't made overtures about settling, Drill said, adding that he's looking forward to a trial.
While Drill hasn't seen the tapes, which are under seal, he said he was told of their "power." Floorgraphics' Rebh wants News Corp. to turn the tapes over to him too, according to his deposition.
News Corp., of which Murdoch is chairman and CEO, relies on the coupon business, which last year had $353 million in operating income, to help fund new ventures such as Fox Business News and Sky Italia, said Barclays Plc credit analyst Hale Holden.
News Corp. will make $350 million to $400 million in operating income from "Avatar" once the world's top-grossing film is also released on pay television and DVD, two people with knowledge of its financial performance and projections said last month. The sum represents News Corp.'s cut of about 40 percent of as much as $1 billion that the film is expected to earn, the people said.
Of 22 equity analysts rating News Corp.'s stock, there are 11 "buys," 10 "holds" and one "sell," according to Bloomberg data.
The cases are Insignia Systems Inc. v. News America Marketing In-Store Inc., 04-cv-04213, U.S. District Court, District of Minnesota (Minneapolis) and Floorgraphics Inc. v. News America Marketing In-Store Services Inc., 04-cv-03500, U.S. District Court, District of New Jersey (Trenton).
To contact the reporters on this story: Linda Sandler in New York at firstname.lastname@example.org; Sarah Rabil in New York at email@example.com.