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Valassis Wins $300M In Lawsuit Vs. Murdoch News Corp Unit

Alex Constantine - July 31, 2009

By Nat Worden
JULY 23, 2009

2706224459 17078be322 - Valassis Wins $300M In Lawsuit Vs. Murdoch News Corp UnitNEW YORK (Dow Jones)--Valassis Communications Inc. (VCI), a marketing company for consumer goods, said Thursday that it won $300 million in damages from a lawsuit alleging unfair competitive practices against News Corp. (NWSA) unit News America Marketing.

News Corp., owner of this newswire, said it was "disappointed" with the jury's verdict in a county court in Michigan, and it intends to appeal the decision.

The lawsuit, one of three against News America by Valassis, alleged that News America used its dominant market position in its in-store marketing business to undercut Valassis in its freestanding insert, or newspaper coupon, business.

News America denied the charges and said the Valassis 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 customers by reducing the number of coupons available - a consequence that would be extremely unfortunate in this economy."

News America also said its case was hampered by the court's decision not to allow a complaint against Valassis filed by the Federal Trade Commission in 2006 that said the company made "an effort to induce collusion" when it announced a new pricing policy on a public conference call with investors.

Valassis Chief Executive Alan Schultz said the pricing announcement he made was relevant to the investment community and that it wasn't an effort to collude on prices with anyone.

News of the jury's decision in its favor sent Valassis shares sharply higher, up 23%, to $8.63. News Corp.'s A shares rose 2.1%, to $9.87, amid a broad market rally.

Valassis's profits had been dented in recent years because of lost pricing power. Segment profit in its newspaper coupon business has fallen from $185 million in 2001, when it made up 93% of its overall profits, to $1.8 million in 2008, when it made up less than 2% of its profits.

The Michigan jury found News America liable on both counts of Valassis's suit. Meanwhile, Schultz said the company was looking forward to moving ahead on two other cases against News America Marketing - a federal antitrust case and a state unfair-competition suit in California. He said the company could triple its damages in federal court and double them in California.

A News America spokeswoman disputed Valassis's ability to win additional damages.

Elsewhere, shares of Insignia Systems Inc. (ISIG), which competes with News America in the in-store marketing business, rose over 20% in Thursday trading in reaction to the court's decision. Insignia - which has some business relationships with Valassis - also has filed suit against News America for unfair competition in federal district court in Minneapolis.

News America has responded with a motion to dismiss the case and said Insignia's case is unrelated to Thursday's verdict.

-By Nat Worden, Dow Jones Newswires; (212) 416-2472; nat.worden@dowjones.com


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