Del Monte Allegedly "Held Hostage" by News America; Heinz Wanted to Rip Agency a "New A Hole"

Last Updated Jul 6, 2009 2:22 PM EDT

A News America Marketing sales chief testified that Del Monte complained it was being "held hostage" in a proposed deal that only allowed the fruit marketer to get steep discounts in its bills if it bought both in-store supermarket ads and newspaper coupons from the agency.

The testimony came in a Michigan state court trial in which rival agency Valassis claims that News America bundled its supermarket monopoly and newspaper coupon deals together in order to illegally price rival agencies out of the newspaper business.

The court also heard that Heinz threatened to rip "a new A hole" in News America after it found out it was not receiving preferential rates; that Chattem was offered a $150,000 payment just to sign a contract, and that Georgia-Pacific was pitched a deal in which it would save $2.6 million if it bought both types of advertising.

News America Marketing evp/Eastern division sales Alan Verdun was asked by Valassis lawyers about a pitch for DelMonte business in 2005. The court heard about a NAM memo describing DelMonte's reaction to the pitch:

Question: And it says Ryan -- that's one of your people, right -- met with Deb -- that's one of the Del Monte people? Answer: Yes. Question: Deb was very frustrated that NAM would not provide in-store value and incentives at 30 percent FSI share. Did I read that right? Answer: Yes. Question: And what that means is that News America would not give in-store incentives if they only got a 30 percent share of the FSI business, correct? Answer: I would have to pull the agreement to see what that means. ... I know we lost Del Monte and I don't know what iterations the various proposals had in them. Question: And this one goes on, referring to the person at DelMonte, she informed Ryan that she will not be "held hostage" on the FSI deal based on in-store programs. Did I read that right? Answer: That's what it says.
Heinz was similarly unhappy with the bundle:
Question: In your memo talks about you getting ripped a new A hole from a director on about five different brands at Heinz because they found out their rate was higher than somebody else's. Is that what happened? Answer: That's what it says. Question: Did you lose business at Heinz? Answer: And not that I am aware of. Question: This is in 2007. Since then, have you? Answer: Not that I am aware of.
Verdun also testified about a deal offer to Chattem, which makes Gold Bond and Icy Hot among other products:
Question: Exhibit 147, Mr. Verdun, is a series of e-mails at News America re: Chattem, in May of 2007, correct? Answer: Yes. Question: And on the second page of this, it says it's to Andrea at Chattem, right, from Robert at News America, Robert Isaacs? Answer: Yes. Question: It says we just heard back from our finance team and they would like to offer up one more option. They are pushing for a three-year deal. They would like to offer an additional $150,000 for a three-year contract. This is $85,000 less than what you had originally requested. And that's a cash payment for a three-year deal, right? Answer: This would appear to be a proposal for -- that included a signing bonus. Question: And that's an up front cash payment right? Answer: Well, it looks here to be an up front check.
In the Georgia-Pacific deal, the court heard, NAM specifically linked its supermarket and newspaper deals together in the form of a discount worth up to $2.6 million. A Valassis lawyer read from the pitch document:
Question ... On average, our top five clients save roughly 2.5 million each on SmartSource in-store annually, as a direct result of their News America FSI single source agreements. That's, again, asserted as a statement of fact by your people to a customer, correct? Answer: That's what it says. Question: In 2004? Answer: Correct. Question: This says partnership proposal, total anticipated savings from a one year News America FSI ROFR [right of first refusal], $2.6 million, do you see that? Answer: Yes. Question: This is, we can agree, is stated as an assertion of fact, correct? Answer: It appears to be stated.
The trial continues.