Valassis v. News America Closing Arguments: Why the Jury May Hand a Monopoly to Murdoch

Last Updated Jul 21, 2009 2:41 PM EDT

Valassis has offered plenty of evidence that News America Marketing has an illegal monopoly in supermarket advertising but it still may lose the case -- delivering NAM a second monopoly in the promo business.
Valassis and News America Marketing started their closing arguments today in a Michigan state court trial over whether the latter illegally took business from the former by forcing clients dependent on News America's virtual monopoly over supermarket advertising to take bundled deals for newspaper coupons. Much is at stake. The court has heard that there may be 450 layoffs at Valassis if the jury finds that News America's tactics were legit. The stock prices of Valassis and Insignia Systems are both highly dependent on the verdict. Beyond that, the decay of Valassis' newspaper coupon business in favor of News America would be almost unstoppable. And News America would eventually gain two virtual monopolies: The first over in-store supermarket ads and the second over newspaper coupons. Clients would see increases in their POP bills: Testimony has indicated that News America threatened increased prices for Pepsico, Unilever, Conagra and Kraft by millions of dollars when it felt able to leverage its dominance in supermarkets.
The jury has heard plenty of testimony to allow it to conclude that News America was engaging in unfair competition. Exclusivity payments, unannounced price rises, and clients who believed they were held hostage by News America have all featured in the trial. BNET's sources indicate that the Valassis legal team feels confident in its case.

The icing on the cake: Valassis has tried to portray itself as the local company done good (it's based in Livonia, Mich.) while News America is a mob-like bunch of New Yorkers owned by the "Capo di Tuto Capo," Rupert Murdoch.

But if you think the decision is a lock for Valassis, think again. It should not be a surprise if the jury goes for News America.

The main problems with Valassis' case are that it has been complicated, long, and, for laypersons, counterintuitive. Although BNET has highlighted some of the more colorful parts of the case, the majority of the testimony has been an unstructured waltz through the arcana of CPMs, net effective rates and per-page costs. Much of it was impossible to follow, even for someone with knowledge of the business. Will a Michigan jury understand it all? They may not.

Second, this trial lasted weeks. Much of the testimony was incredibly dull. And it was largely on video, not from live witnesses. Juries literally fall asleep in cases like this. If they did in this case, they will be less sure of finding in Valassis' favor.

Third, Valassis is essentially arguing that News America broke the law by offering a two-for-one deal that was cheaper than a single buy. Every American consumer appreciates that discounts are often offered for bulk buys; yet in this case Valassis alleges it's illegal. Technically, Valassis may be correct, but the jury will have to overcome its "common sense" hurdle in order to reach that lawyerly conclusion.

Last of all, the jury has heard that although News America may be dominant in supermarkets, both companies have access to in-store advertising (Valassis via Insignia). And while Valassis has lost the war, it is still a going concern -- the newspaper coupon category is split 56-44 percent in favor of News America. Those numbers don't look insurmountable to someone not in the business.

(Note to readers: BNET will break into its delayed-but-chronological coverage of the trial when breaking news happens. We'll continue summarizing trial testimony even after the verdict if needs be.)