Valassis Exec Testifies on Anti-News America "Sock Puppets"; Paid Wyeth $1M to Stay

Last Updated Jul 8, 2009 3:32 PM EDT

Thomas Murray, vp/general manager at Valassis, told a Michigan state court that he was aware his agency's web servers were used to make anonymous attacks on News America Marketing on a coupon enthusiast web site. BNET first reported that Valassis had allegedly used "sock puppets" on BringBacktheCoupons.com in April.

Murray told the court that he did not know who had made the posts, via disguised identities, and that Valassis had never investigated to find out. The attacks are now the subject of a separate suit in New York.

Murray's testimony came in a case where Valassis is trying to prove that News America used its monopoly in in-store supermarket advertising to subsidize an illegal price war in the newspaper coupon business.

Murray testified that when he was a News America employee before he joined Valassis, he learned that NAM's corporate strategy was to offer payments to supermarkets to go with News America so that smaller competitors such as Heritage Media and ActMedia would be driven out of business:

Q. And what did they say to you about the News strategy with regard to Heritage and ActMedia? A. I would tell you they were almost giddy about the fact that they bid up the retail payments to the point where Heritage Media couldn't keep pace. I believe that last retailer that I was referring to Albertsons I think they actually paid 100 percent of the revenue to that retailer that came in. And the initial payment was 25 percent. So this was off the chart high, completely unsustainable. And I said how are you going to keep this up? And they said look this whole thing was about driving their stock price down, buying the company and then we will wean them off these payments down the road and get them back to normal, so won't worry about it.
That testimony dovetailed with what the court heard earlier from Robert Emmel, a digruntled former News America employee who said that NAM had paid Food Lion not to contract with another agency, Floorgraphics, for in-store ads. Emmel was asked:
Question: Taking, for example, the Food Lion example, do you recall any discussion of why the -- the amount of money that came back from corporate to bid for that contract was as high as it was? Answer: Yeah. I -- I recall many discussions. It was the last critical mass that existed in the Floorgraphics network. And the comments that were made was that if that had been wrestled away from Floorgraphics, it would, in essence, solidify for years the News America network and prevent a barrier of success for Floorgraphics.
Floorgraphics did indeed go out of business.

Murray also descibed how News America wrote a letter to Wyeth, a Valassis client, claiming its newspaper coupon prices were $4 per page. Wyeth demanded a refund from Valassis because it was paying nearer $5 per page, and Valassis gave Wyeth $1 million to keep the company happy:

Q. Now this says -- well, what about what happened after your customer got this letter from News? A. Well, the first thing I think you can see the handwritten note: Is this really the market now was her question. And their price was I believe it was in the $4.80 range, and I believe industry prices were in the $4.95 range, and the letter referenced this $4 rate as being the market. And we had to -- this letter resulted in us having to give an immediate $1 million giveback to the customer.
Murray also testified that Dannon's bundled coupons and in-store deal with News America was so cheap that the yogurt company told Valassis it should not bother pitching their account. Even if they "gave them the pages for free," Dannon would stick with News America because the in-store buys were so inexpensive as a result, Murray said.

The trial continues.

Image by Flickr user bschmove, CC.