Trial: Valassis Lost Share When It Raised Prices; Tried To Hire News America's Mixson

Valassis lost share of the newspaper coupon business to News America Marketing because it raised prices during the recession of 2002, not because it was forced out by anticompetitive practices, lawyers for NAM are arguing in a trial between the two companies. Plus, Valassis is fudging its numbers by leaving Procter & Gamble out of its analyses, News America claims.

Most damaging to Valassis gossip-wise was the news that Valassis CEO Alan Schultz tried to hire News America president Chris Mixson in 2003 -- Valassis is currently trying to portray Mixson as an evil genius.

Valassis claims that News America required clients who wanted to access its in-store supermarket advertising monopoly to also buy its newspaper coupon deals, thus forcing them out of Valassis' coupons. In opening arguments, a News America lawyer made it clear he would use Valassis' own internal documents against the company to demonstrate that it lost its dominance in coupons because it wasn't competitive enough, not because News America is a rogue empire that ignores the law.

(The news is several days old due to a de facto news blackout on the trial. BNET is bringing trial coverage as fast as its sources can relay it, and as fast as I can digest it.)

News America opened its case by arguing that Valassis lost its 56 percent majority share of the newspaper coupon business when it made the strategic error of raising prices:

Valassis made a bad business choice. They raised prices during a recession to increase their already healthy profits and they made that choice knowing it would cost them market share.

News America knows this because they obtained Valassis' reports to its own board of directors on the decision:

Here is another report to the board of directors: We announced a price increase for all business in 2002 and beyond. As a result, we are forecasting declines in market share and pricing in 2002. They go on to say: We are still committed to our price increase, even if it means a sacrifice in market share. They know that their decision to raise prices caused it to lose customers in market share.

Following that, the 56-44 percent split flipped in favor of News America. But, as NAM's counsel argued, that doesn't represent much because some clients are so massive it only takes a couple to move massive amounts of overall market share:

... it only takes the loss of a few customers to move out of the market shares, you have got General Mills and Kimberly-Clark, those two alone, six percentage points but Valassis's own documents as we have seen show that they lost at least 14 major customers, that's just the major ones from the price increase. That's just the ones they reported to the board of directors.

Valassis only has a small share because it refuses to count Procter & Gamble as a client, News America lawyer Richard Stone argued:

... they have been in the mid-40s market share unless, of course, you exclude Procter & Gamble and which will tell you their share is 36, 38. Who is being deceptive here? They want to exclude their largest customer when they want to come into the courtroom and seek damages about their market share?

But perhaps the most uncomfortable moment for Valassis came when Stone noted that Valassis chief Schultz had courted NAM's Mixson (the man allegedly involved in this wacky bathroom incident):

... they portray him as some evil guy who has masterminded these unlawful practices that go all the way back to 2000, that's what they tell you. Guess what, outside this courtroom, in 2003, Mr. Schultz the CEO of Valassis tried to hire Mr. Mixson away from News America Marketing, he was so impressed with Mr. Mixson's talent and integrity, he tried to hire him away.

Stone was referring there to Valassis' allegations that Mixson made it his mission to drive Valassis to "the brink of utter desperation." Stone said that ws just harmless business tough-guy talk:

Look, if you pour through eight million e-mails over eight years, every business is going to have those kind of language and every businesses going to have that kind of speech.

More to come.

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