NAM-Valassis Settlement Falls Apart: Just When You Thought It Was Safe to Go Back Into the Supermarket ...

Last Updated Feb 2, 2010 3:48 PM EST

The $500 million settlement between Valassis (VCI) and News America Marketing Group is falling apart already: NAM filed a motion just four days after reaching the deal complaining that Valassis has breached the agreement. NAM's motion seeks a court order enforcing the letter of their pact.

The settlement ended a lengthy legal war in Valassis' favor after the newspaper coupon and supermarket ad agency accused its rival of unlawfully maintaining a monopoly on grocery advertising through predatory pricing.

NAM's motion gives more detail on what, exactly, the two sides have agreed to -- and what NAM believes Valassis is screwing up. According to the motion, in addition to the cash, the agreement:

  • Prevents either party from "tying" or "bundling" their services to clients for lower, predatory rates.
  • Establishes a three-person panel of antitrust experts to oversee the agreement.
  • Creates a distribution deal in which Valassis sells to NAM shared mail services on "specified terms."
NAM complains that Valassis is now insisting that the tying ban apply only to NAM; that it does not want the three-person panel; and that Valassis wants a penalty of six times NAM's revenues if NAM breaks the deal. NAM describes that last demand as "preposterous," and the mutual injunction as a "dealbreaker."

Valassis has yet to respond.

What does this all mean? First, it delays NAM's payment to Valassis of $500 million by several days -- if not weeks or months -- while the two sides hash out the meaning of the thing they both thought they were agreed upon.

Second, if the two sides cannot come to terms then the settlement may fall apart completely, potentially putting the parties back on course for a trial. Such a trial would be unlikely to occupy the previous slot allotted to it on the calendar (it was supposed to begin today), because the judge first must decide NAM's new motion.

You've got to hand it to NAM -- if this motion isn't genuine, it's a marvellous delaying tactic. (NAM's corporate parent, News Corp. (NWS) has a motive to delay: The deal wipes out its profits from the movie Avatar.)

If it is genuine, what was Valassis thinking by having its hands tied by the same chains it wants placed on NAM?

This one could run and run.