News America Wants to Use Valassis Client Mars Against It in Federal Trial

News America Marketing Group may finally have found a client that can help its legal war against Valassis (VCI), its archrival in the supermarket coupon business. Valassis has asked a federal judge to exclude testimony from Shelby Coakley, a media buyer at Mars/Masterfood, who described in a deposition that Valassis offered Mars a bundle of its services at a cheaper rate -- the exact kind of predatory pricing maneuver that Valassis alleges NAM uses to maintain an unlawful monopoly on supermarket advertising.

Download Valassis' motion to exclude the Mars evidence here, and Coakley's testimony here.

It sounds technical and dull, but behind the arcana of bundled pricing deals is a dramatic years-long war for control of supermarket coupons and those little ads you see on grocery store shelves. They're enormously lucrative for the two companies that dominate the market (Valassis and NAM). In recent years NAM has had the upper-hand in the battle. Valassis alleges that its Rupert Murdoch-owned rival has used illegal pricing tactics to maintain an unfair level of market share.

The fight has forced both companies' clients to discuss their coupon policies in public -- an activity marketers despise -- and much dirty laundry has emerged as a result (see related story ladder below). Most of the running has been made by Valassis, which already won a $300 million verdict in a state court after using testimony of NAM's former clients against it. Valassis is now trying to get triple damages in federal court on the same issues.

But NAM appears to have found a Valassis client to help its claim that both coupon agencies are as bad as each other. Coakley was interrogated by NAM's lawyers last July about a bidding contest between NAM and Valassis for Mars' "free-standing insert" business (FSI's are newspaper coupons, to you and me). Coakley described Valassis' bid:

They had -- so you know, like they have their direct mail, and they have their sampling, and they have their -- they have some market-basket-type data that they can access, so they are proposing they could use all of that, you know, bundle that all together to give us some efficiencies.

Mars restricted the bids to just FSI and Valassis won, she said.

Valassis wants all that excluded from testimony in the upcoming federal trial in Michigan. Its motion argues:

News apparently intends to introduce argument and evidence that its bundles are, somehow, procompetitive because "Valassis bundles too." News also plans to argue that Valassis is not entitled to damages because it is, in general, a poorly run company with greedy executives. News should be precluded from attempting to mislead the jury, and waste the jury's time, with argument or evidence on these issues, which have no conceivable relevance to Valassis' claims or News' defenses in this action.

Valassis particularly wants to prevent NAM from describing its business as a "consumer packaged goods roach motel," where brands get forced into taking bundled offerings at lower, predatory rates that prevent NAM from competing. Valassis begged the judge:

... at one point News counsel told the jury that Valassis' bundles were a CPG "roach motel" ... [a NAM lawyer once said] "This is like the CPG roach motel. CPGs check in but they don't check out. They have a bundle that latches them to the CPGs. That's a pretty potent bundle and it worked for Sara Lee."

The judge has yet to rule.

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