News America Marketing's Alleged Plans to Seize Safeway Account Outlined in Suit

Last Updated Mar 31, 2009 12:27 PM EDT

With News America Marketing's settlement/acquisition of Floorgraphics Inc. behind it, NAM can now turn its attention to all the other lawsuits against it. Specifically, NAM is being sued by Valassis, Theme Promotions, and Insignia Systems. Two of those cases are scheduled to come to trial later this year, possibly as soon as May or June. (Correction: Theme won its case and the resulting appeal.)

BNET previously noted that NAM's settlement with FGI bodes well for the other plaintiffs -- who allege various anticompetitive, false advertising or antitrust actions by NAM. All the different POP and promo companies are watching each other's cases closely.

It is not clear, however, whether Insignia is aware of a 2007 case in which NAM sued two of its former business partners, Robert Fireman and Ann Raider. The claim was for breach of NAM's confidentiality after Fireman and Raider -- annoyed that promised compensation from NAM had not materialized -- allegedly talked to FGI's lawyers about NAM's relationship between Safeway, Ahold's Stop & Shop supermarkets, and SSD, a unit of NAM. Download a copy of the suit here. (BNET understands the suit was settled.)

NAM's complaint states that Fireman and Raider met FGI's attorneys at the Marriott Hotel in Newton, Mass.:
The discussion focussed on non-public negotiations with Ahold (an international supermarket company and owner of the Stop & Shop chain) and Safeway Stores ... Both Ahold and Safeway are customers of News America.

With respect to the meeting with Safeway, Fireman discussed SSD's prupose in the Safeway meeting as "getting the Floorgraphics business [with Safeway] back" to SSD.

"I gave him a general sense of ... the situation that [SSD] had between Ahold and Safeway," said Fireman at his deposition.
According to Fireman, this "situation" was that SSD gave up business from Ahold in order to obtain other business from Safeway.
This should be fascinating to the folks at Insignia, because they just lost a bunch of Safeway business to NAM in December. Here's a selection from Insignia's Q4 2008 earnings call transcript:
ANTHONY MARCHESE, ANALYST, MONARCH CAPITAL: A question for you with respect to the Safeway account. Could you discuss, to the extent that you can, why you lost it? You made the statement in the press release that it bolsters your case against News America, so if you can -- if you can elaborate on what that all means.

CEO SCOTT DRILL: I think News America worked out an exclusive arrangement, and I don't know for sure, but I think that they guaranteed or paid Safeway a significant amount of money specifically to exclude Insignia.

ANTHONY MARCHESE: Okay. And I guess the issue is why would they -- again, why would they change? You're saying you believe, or rumor has it, that in essence they were paid to change.

SCOTT DRILL: Yes.

ANTHONY MARCHESE: Okay.

SCOTT DRILL: So I think the answer probably is money ... Safeway represented 1,500 stores out of our network. And they are highly-valued stores, so it hurts to not have those 1,500 stores in the network. The value of each contract, each national contract, is less when you're selling a network of 8,800 stores and change versus a network of 10,300 stores and change. Excuse me, I am choking a little bit.

ANTHONY MARCHESE: And so, I guess the hope is that a favorable outcome for FLOORgraphics would have enormous implications for you guys.
"Enormous implications" indeed: Insignia had a net loss of $2.3 million last year, but spent more than $3.2 million on legal bills in the case.

That puts it in a similar position to Valassis, which has also seen its profits decimated by its anti-NAM legal fund. One question remains: If NAM does go to trial against Insignia, will NAM president Chris Mixson corner Insignia's Drill in the courthouse toilet and make threatening remarks to him, as alleged in this hilarious Fortune story?

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