Companies End Coupon “Civil War” With SmartSource

Several coupon issuers have dropped most of their legal complaints against the very publication that carries their coupons, in an unusual lawsuit some had described as a “civil war” between the country’s largest coupon publisher and its own advertisers.

Dial, Henkel, Heinz, Foster Farms, Smithfield Foods, HP Hood, BEF Foods and Spectrum Brands have agreed to end their coupon dispute with News America Marketing, the publisher of the SmartSource coupon inserts. A federal judge has approved the plaintiffs’ request for a dismissal with prejudice, which prevents them from litigating over the same issue in the future.

It’s a vindication of sorts for News America, which has already spent hundreds of millions of dollars to settle similar lawsuits. But the case isn’t quite over yet.

The companies’ 2012 lawsuit stemmed from a series of separate but related disputes – one of them, between News America and its main competitor, Valassis, the publisher of the RedPlum coupon inserts.

That dispute goes on. Valassis argues that News America is locking advertisers into long-term contracts and punishing those who do business with Valassis, in an attempt to monopolize both the insert coupon and in-store advertising businesses.

Dial, Heinz and the others built upon that argument and filed their own lawsuit, claiming that they had suffered from such tactics just as much as Valassis. News America’s alleged efforts to corner the market forced coupon issuers and advertisers to pay “unlawful, above-competitive prices,” the companies argued in their complaint.

News America dominates the in-store marketing business, which consists of tearpad and on-shelf coupons, product ads on shopping carts, branded floor decals and the like. It’s also the largest provider of Sunday coupon inserts (with at least 80% market share, the plaintiffs alleged). Valassis, in contrast, has its own Sunday insert, but no significant presence in stores.

And that, the plaintiffs argued, gave News America a significant edge that it manipulated into an even greater advantage. They claimed that News America strong-armed them into lengthy “bundled” contracts for both insert and in-store advertising. If they chose to offer coupons in the RedPlum insert, they say they were forced to pay much higher prices for in-store ads. Similarly, they say they paid higher prices for running their coupons in the SmartSource insert, unless they agreed to offer all of their coupons there.

They’re much the same arguments that Valassis made in several lawsuits against News America that it ultimately settled in 2010 for $500 million (and then Valassis sued again in 2013, claiming that News America never stopped its anti-competitive tactics). News America also settled separate complaints from two in-store marketing competitors, for $125 million and $29.5 million respectively, without admitting wrongdoing in any of the cases.

So far, at least, News America has shown no inclination to settle the still-pending lawsuits. In a response to Valassis’ lawsuit, and in a countersuit filed against Dial and Heinz (which it dropped last year), News America strongly denied that it had, or ever would have, monopoly power in either the in-store or coupon insert business. Advertisers “frequently demand package discounts,” so News America said it’s simply giving them what they want to help keep their costs down. And if they choose not to buy a package deal, News America said it does nothing to prevent companies from doing business with competitors if they wish.

The plantiffs’ complaints about News America’s in-store marketing remain unresolved, so the rest of their lawsuit still stands. Due to the still-pending litigation, Heinz, Foster Farms, HP Hood and BEF Foods declined to comment on what prompted their decision to drop their coupon-related complaints against the News America division that publishes the SmartSource inserts. The other companies did not respond to requests for comment.

Plenty of other companies that do business with News America likely had their eye on this case. If the plaintiffs were successful in arguing that News America wasn’t playing fair, then dozens or even hundreds of other companies could have jumped on the bandwagon with their own lawsuits. That’s unlikely to happen now. And curiously enough, in the three years since filing their lawsuit, many of the current plaintiffs have remained News America clients, and have continued to offer their coupons in the SmartSource inserts.

So the current dispute may not be quite over yet. But with only a handful of plaintiffs and a stripped-down lawsuit, it appears that this “civil war” will ultimately fall short of a full-fledged revolution.