Insignia Wins Ruling v. News America; Stage Set for Another Antitrust Trial in POP Biz
Insignia Systems won a ruling in Minnesota federal court paving the way for a full-blown trial on its claims that News America Marketing engaged in unlawful monopoly tactics to deprive it of customers. The issues at stake are largely similar to those in a Michigan state court case in which Valassis won a $300 million verdict against NAM.
Download the ruling here.NAM won just one part of the ruling, knocking down Insignia’s claim that NAM had “monopsony,” or buyer’s monopoly, on the supermarket advertising scene.
The ruling put on the record several snippets of gossip that have become legend in the in-store wars. First, it includes testimony from former client Pamela Wesson of Sara Lee. According to Wesson, a NAM sales rep told her that if she bought in-store ads with Insignia then NAM might exercise its contractual rights to tear them out:
During a routine sales call, . . . a NAM sales representative[] informed me that NAM was the exclusive provider of in-store advertising with a number of large retail store chains whose stores sold Sara Lee brands. [The sales representative] told me that as the exclusive provider, NAM personnel were authorized to take down competitors’ signs, including Insignia POPSigns, from the shelves of these stores. She indicated that Sara Lee would be throwing its money away on Insignia POPSigns because they were very likely to be removed by NAM personnel and thus would be ineffective in promoting Sara Lee brands. . . . Because of [the sales representative’s] statements to me about NAM removing competitors’ signs from store shelves and Insignia’s poor compliance, I could not risk continuing to recommend Insignia’s programs to Sara Lee’s brand team.
Next, the ruling recounts the text of NAM president Dominic Porco’s infamous letter to customers in which he alleged that NAM had a 90 percent compliance rate on ads placed in stores; that NAM had a 10,000-strong field force; and that Insignia only had a 20 percent compliance rate. Insignia alleges the letter was mostly lies. The letter said:
Did you know that most in-store marketing services providers rely on retailers or subcontracted field labor to execute the programs that YOU buy? This means that on average, less than half the stores that you contracted for are ultimately installed. Less than half! We know that from a variety of sources, including client feedback, industry intelligence and a range of audit studies. In fact, our latest audit studies confirm this, as the results indicated that FLOORgraphics compliance averages were once again below 50%. Even more glaring is that in these same studies, Insignia POPS was found to have executed in less than 20% of the stores we surveyed.
At News America Marketing, we operate differently. We take field execution extremely seriously. We have a dedicated in-house Field force that is 10,000+ people strong. … As a result, we are able to consistently deliver average compliance rates of 90-95%!
Part of the ruling gives some historic data on the size of in-store agency revenues:
According to Insignia, [Floorgraphics Inc.] generated revenues of nearly $70 million in 2002 by selling a variety of at-shelf advertising products, including floor decals. Insignia asserts that by 2007, however, FGI’s revenues had fallen to $13 million and were based solely on sales of floor decals.
… Insignia notes that the revenue for the top three firms providing advertising services to CPGs grew from $292 million to $393 million between 2002 and 2006.
No trial date has been set. NAM faces a separate federal trial against Valassis in 2010.
- Previously:
- Insignia Uses Valassis Trial to Bludgeon News America in Minn. Federal Case
- News America’s Emmel Testifies on Exclusivity Payments to Eckerd, Ahold, Harris Teeter
- News America Marketing’s Alleged Plans to Seize Safeway Account Outlined in Suit
- Valassis, Insignia Stock Jumps on News America Marketing Group Settlement
- News America Marketing Group Settles With Floorgraphics; Valassis, Insignia Likely Rejoicing
- Trial: Did News America Marketing Group Break Into Floorgraphics’ Computers?
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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