Rupert Murdoch's News Corp and Heinz have sued each other in two different federal courts, a sign that an advertiser mutiny against News and its alleged monopolistic practices is spreading.
Previously, News was sued by Dial Corp over similar allegations. Heinz has now joined that suit; and in turn been sued back by News.
Two large drugstore chains, Rite Aid and Family Dollar, removed their business from News America Marketing, the News Corp unit that handles newspaper coupons and in-store marketing.
It is extremely unusual for a major ad handler to be at the center of so much legal conflict with its clients, all at the same time.
The new Heinz suit is particularly surprising because News is suing Heinz for breach of contract even though Heinz is still a current client, and the company has a $468 million annual marketing budget, according to the suit (not all of which is spent via News). Normally, ad agencies and media providers will bend over backwards to avoid conflicts with big-spending clients.
A Heinz spokesperson confirmed to Business Insider that the company had also sued News. “Heinz recently filed a lawsuit against News America on grounds of overpricing and this [new] lawsuit appears to be part of their defense strategy. While we don’t comment on pending litigation, we can tell you that Heinz stands behind its position and we will vigorously pursue this matter.”
The suits all stem from a lengthy piece of previous litigation in which News was accused by competitors of using illegal monopolistic practices to keep prices artificially high for its advertisers. News settled those allegations — which came from competing coupon and in-store agencies — for $656 million. The 2011 settlement came after reams of negative information came out in court alleging News clients paid higher prices than they needed to for ads.
Now, it seems, many of News' clients are angry that they may have overpaid and want their money back. Other clients named in the 2011 litigation include Conagra, Pepsi, Smuckers, DelMonte, Kraft, Coca-Cola, Clorox, Kimberly-Clark, GlaxoSmithKline, Novartis, Pfizer, Reckitt Benckiser, Quaker Oats, Church & Dwight, Unilever, Tyson, and Campbell's Soup.
Heinz sued News in federal court in the Eastern District of Michigan, alleging antitrust activity in News' supermarket and grocery store advertising. So News struck back in New York federal court, alleging Heinz breached its contract with News by not suing in the jurisdiction the two companies had agreed to litigate their disputes within.
News also seeks a declaratory judgment against both companies that News is not engaging in antitrust or monopolistic practices -- a move that would prevent companies from suing News as a matter of law. In its case, News can point to the fact that it settled the previous antitrust litigation, and thus the cases against were never proven. Dial's suit, for instance, assumes the evidence unearthed in those cases is largely true, even though juries never reached a verdict.
News also claims it is impossible for it to hold a monopoly on prices because spending in the entire category was $20 billion annually, of which News America Marketing's revenues were $400 million, or 2%. And some of the biggest clients -- Walmart, Target, CostCo, and BJ's -- do not use agencies for in-store marketing, for instance.
But the suit also admits part of the case against News might be true. News states in its complaint that it handled both Heinz's newspaper and in-store businesses at the same time, and had a right of first refusal on new work for Heinz.
The 2011 antitrust lawsuits alleged that News illegally bundled those services together -- by offering low prices that were only available if clients took both services -- along with restrictive contracts that prevented other agencies from bidding for clients' new work.
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