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Valassis-News America Deal Raises History of FTC Antitrust Issues

While Valassis (VCI) figures out what to do about the wrench News America Marketing Group has thrown into its proposed $500 million settlement of their antitrust litigation, CEO Al Schultz might also want to give some thought to the possibility that even if the two sides can come to terms the FTC might not like what it sees.

BNET previously suggested that the agreement -- in which Valassis and NAM agree to not compete with bundled deals and cooperate on a shared direct mail venture -- should be examined by the FTC. The agreement creates a cartel featuring the three companies that control almost all the grocery coupons and supermarket ads in America: Valassis, NAM and Insignia Systems (ISIG), which has its own cooperation deal with Valassis.

There is precedent for the FTC to step in:

In 2006, the FTC extracted a settlement from Valassis in which Valassis agreed not to try persuading NAM to fix prices.* It will be interesting to see what Valassis and NAM's agreement on shared direct mail says about such prices.

In 2008, the attorney general of Minnesota extracted a consent decree from NAM in which the Rupert Murdoch-owned agency agreed not to publicize misleading statements about Insignia.

Lastly, when NAM bought Heritage Media in 1997 the FTC initially examined the deal to see if it raised antitrust issues. The feds concluded it did not.

They were helped to that conclusion by two law firms: Hogan & Hartson, which currently represents NAM in the Valassis litigation; and Constantine Cannon, which has also represented NAM, and whose name partner Jan Friedman Constantine is a former chief ethics officer for News Corp. (NWS), NAM's corporate parent.

Perhaps they believe that, more than 10 years later, they can again convince the FTC that an even bigger supermarket advertising monopoly -- in which the three main competitors have all agreed to cooperate! -- raises no antitrust issues. We'll see.

*Correction: This item originally implied, incorrectly, that Valassis and NAM attempted to fix prices. Only Valassis was subject to FTC action.

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