News America Marketing Group Buys Floorgraphics Just Hours After Settling Spying Lawsuit
News America Marketing Group has agreed to buy Floorgraphics Inc., the company said. A deal price was not disclosed.
The acquisition — which consists primarily of FGI’s client and supplier contracts and “other assets” — comes immediately after the two companies agreed to settle their lawsuit in midtrial over whether Rupert Murdoch’s News America had sabotaged FGI’s business by lying to its customers and hacking into its computers.
I’m going to take a wild guess and suggest that the acquisition was part of the settlement. BNET reported yesterday that the settlement may have cost News America a “substantial sum,” given how damning the initial testimony against News America had been.
The settlement brings the war between FGI and News America full circle. In FGI’s complaint against News America, the company said this:
At a meeting in July 1999, News’ Chief Executive Officer told FGI that News was interested in buying FGI, but if FGI refused to sell and chose instead to compete with News for in-store programs other than floor advertising — such as instant coupon machines, shelf ads, take ones or shopping cart placards — News would destroy FGI.
FGI chose to compete … and News America’s allegedly anticompetitive actions triggered the suit and the spying allegations:
… on at least eleven separate occasions between October 2003 and January 2004, News intentionally, knowingly and without authorization breached FGI’s secure computer system and repeatedly accessed, viewed, took and obtained FGI’s most sensitive and private information concerning its past and upcoming advertising and marketing programs.
Here’s the full text of News America’s release:
News America Marketing announced today that it has entered into an agreement with FLOORgraphics, Inc. to purchase the company’s network of in-store contracts and other assets. This will expand News America Marketing’s network of at-shelf, floor and cart advertising and in-store promotion products to 50,000 stores in the United States.
Laura Richards, News America Marketing’s Vice President of Corporate Communications, stated, “We’re pleased to be expanding our network of stores to better serve our customers and we’re very excited to incorporate the quality network so ably developed by FLOORgraphics.”
BNET’s take: Given that FGI had alleged that News America had already organized the mass resignation of FGI’s sales staff, and given that FGI’s web site is no longer functional, it’s a good bet that there wasn’t much left of FGI to acquire. Thus, this “acquisition” looks more like a face-saving gesture for News America than a real deal.
The move puts Valassis and Insignia, two other direct/in-store marketing agencies, in an interesting position. They both have similar lawsuits against News America. Insignia is small but remains a going concern (even though it is currently making a loss). It is thus vulnerable to a similar take-out from News America. That would leave just News America and Valassis as the dominant players in the market. Valassis’ stock is trading at record lows — Murdoch’s empire could afford to take it out, also, if it wanted. But that might trigger monopoly concerns by the FTC.
- See BNET’s previous coverage of the in-store marketing wars:
- News America Marketing Group Settles With Floorgraphics; Valassis, Insignia Likely Rejoicing
- Valassis May Not Be Able to Pay Debt; Litigation May “Materially Harm” the Company
- Trial: Did News America Marketing Group Break Into Floorgraphics’ Computers?
- Valassis Stock Threatened With De-listing by NYSE
- Valassis’ Plan to End Newspaper Coupons Outrages Middle America
- Valassis Suit vs. News America Being Conducted in Secrecy
- Valassis: Layoffs Will Continue as It Reduces Newspaper Coupon Business; It’s All News America’s Fault
- Valassis Writes Down $245 Million in Assets; Legal Bills Running at 10% of Profits
- Valassis Angers Blogger Moms by Yanking RedPlum Coupons From Newspapers
- Valassis Reduces the Cost of Fun for Employees
- Direct Mail Giant Valassis Is “Not Paying Its Bills”; Stock Is “Worth $0”
- Alloy Beats WPP, IPG et al in Network Efficiency Ranking
- The Cost of Valassis’ Suit vs. News America Is Eating Its Profit
Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.
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