Dial Corp.'s new lawsuit against News Corp. could set the stage for a full-scale mutiny among Rupert Murdoch's advertising clients, according to a prominent retail industry lawyer. Such a mutiny could cost News "hundreds of millions of dollars," the attorney speculates.
Daniel Low, of law firm Kotchen & Low, wrote in a blog post that he was surprised that all News Corp.'s clients who used its News America Marketing subsidiary for grocery coupon distribution haven't joined a suit against the company.
The suit, filed by Dial, alleges that News broke antitrust law with exclusionary contracts and practices that kept prices for its coupon clients artificially high for years. (Dial is owned by Henkel, which markets supermarket staples such as Loctite, Persil and Purex, in addition to Dial Soap.)
Dial makes a bunch of dramatic allegations, including:
- News allegedly hacked into computers owned by a rival in-store advertising company, Floographics, to obtain customer lists.
- News made large up-front payments to supermarkets to guarantee they would deal exclusively with News and not competitors.
- News tore down rival advertisers' signs and ads when they saw them in stores who had signed such contracts.
It is surprising that the Dial lawsuit was brought only on behalf of Dial, and not as class action on behalf of all affected CPGs [consumer packaged goods companies]. Given the high litigation costs of a monopolization lawsuit, the hundreds of potential class members, and the hundreds of millions of dollars that could be at stake for CPGs, a class action seems to be a more efficient vehicle for resolving the claims.
Low's speculation isn't idle. News has already lost several rounds of litigation over its alleged antitrust activities in the grocery coupon business, and it has cost the company $656 million in settlements. Those settlement were with Floorgraphics, Valassis and Insignia Systems, all agencies that supply advertising services for coupons and groceries.
Among their clients, only Dial has weighed in publicly against News, seeking money back for alleged illegal high prices. But evidence emerged in the previous litigation that several other News clients were allegedly overcharged. Among them: Conagra, Pepsi, Smuckers, DelMonte, Kraft, Coca-Cola, Clorox, Kimberly-Clark, GlaxoSmithKline, Novartis, Pfizer, Reckitt Benckiser, Dial, Quaker Oats, Church & Dwight, Unilever, Tyson, Hain Celestial, T. Marzetti, and Campbell's Soup.
Of those, the most angry client was undoubtedly former Sara Lee marketing executive Debra Lucidi, who once wrote an email describing her experience as a News America Marketing client. She said "it feels like they are raping us and they enjoy it" (click to enlarge):
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