Heinz Dial v News America

Al Capone portrayed as a role model. Business tactics that one person compared to “rape.” Brazen threats to crush the competition. All in the service of saving us some money. Bet you never thought the world of coupons was quite so complicated.

About the worst thing a couponer can do is clear shelves, or worse yet, pass counterfeit coupons. But there’s an even darker, seamier underside to the world of couponing, that was first exposed during a long and ugly legal battle between the country’s two major coupon providers. Now, a couple of manufacturers are opening some of those old wounds, in the first wave of what could become a new series of long and ugly legal battles.

News America Marketing, the parent company of SmartSource, has filed suit against the H.J. Heinz Company and Dial Corporation, one month after Heinz and Dial sued News America and its parent company, News Corporation. The companies contend that News America used an unfair advantage to overcharge them for running their advertisements and offering their coupons in stores and in SmartSource inserts. They want their money back – times three. The News America suit denies those claims, and accuses the companies of breaching their contracts by filing suit in the first place.

This could represent the first battle, in what Business Insider describes as News America’s “civil war with its own advertisers.”

To backtrack a bit, the whole story first began unfolding during several years’ worth of legal battles between News America and Valassis, the parent company of RedPlum. Before those disputes were settled in 2010, with News America paying $500 million to Valassis, Valassis had accused News America of using monopolistic tactics to try to corner the coupon market.

It may be hard to picture SmartSource as a monopoly, when it’s clearly not the only coupon insert out there. But think about the last time you were in a grocery store. What company’s name was on the blinkie coupon machine? What company had ads built onto the front of shopping carts? What company provided floor decals, video displays and other in-store advertisements for products? You’d be hard-pressed to find any company other than SmartSource there.

And that was the basis of Valassis’ complaint. It accused News America of trying to get a stranglehold on the coupon market, by using its virtual in-store monopoly as leverage. Valassis said News America strong-armed its corporate clients, to ensure that any company that advertised with its in-store services also ran its coupons in SmartSource inserts, and vice versa. Those that didn’t, Valassis alleged, faced News America’s wrath – or, at the very least, hugely inflated prices.

Among the juicy tidbits that emerged during the dispute were the aforementioned Al Capone story. News America Marketing’s CEO was accused of using a clip from “The Untouchables” as an in-house motivational tool – specifically, the scene where Capone gives a motivational speech, then beats a man to death with a baseball bat. The CEO admitted showing a clip from the movie, but denied it was that specific scene. And an employee with Sara Lee, who negotiated with News America, complained that the company raised their in-store rates when Sara Lee took its insert coupon business elsewhere. It “feels like they are raping us and they enjoy it,” she said.

As part of the 2010 settlement, the judge was to issue a permanent injunction, barring News America from “certain business practices at issue in the lawsuits.” Case closed.

Fast forward to today, though. News America and Valassis may have buried the hatchet, but now it’s the aggrieved manufacturers’ turn to weigh in. Heinz and Dial’s lawsuit notes that News America’s competitors “have already obtained hundreds of millions of dollars in lost profit.” And now, they argue, they deserve their own piece. Their suit, they point out, “is the first by a consumer packaged goods company,” and not a competitor, “seeking to obtain recompense for monopoly overcharging.”

Heinz and Dial claim that News America has nearly 84% of the in-store marketing business, and uses that near-monopoly to pressure companies into corresponding long-term contracts to run coupons in SmartSource inserts. News America, the companies claim, charges “monopoly prices” that are “substantially above the competitive pricing.”

In its own lawsuit against Heinz and Dial, News America denies having anything close to a monopoly, pointing out that major chains like Walmart and Target don’t use its in-store services at all. It denies unfair pricing, and also says the fact that the Heinz and Dial lawsuit was filed in Michigan is in violation of contracts with the companies that stated any legal dispute they had was to be heard in New York.

Considering that Heinz and Dial weren’t even the ones who felt like they were being “raped”, why are they suing and not Sara Lee? That’s the question many observers are asking, since those companies were hardly the only ones whose names came up during the News America-Valassis dispute. The long list of companies allegedly overcharged or threatened by News America includes Sara Lee, Hormel, Georgia-Pacific, Kellogg’s, ConAgra, Pepsi, Smuckers, Del Monte, Kraft, Coca-Cola, Clorox, Unilever, Tyson and Campbell’s. A successful suit by Heinz and Dial could open the floodgates for future lawsuits by any or all of those companies.

So think about all of that, next time you use a coupon. Kind of makes the controversies caused by “Extreme Couponing” seem downright quaint in comparison.


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