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Why News Corp.'s Settlement With Insignia Creates a Grocery Ad Cartel

News Corp. (NWS)'s $125 million settlement with Insignia Systems (ISIG) over allegations that News used dirty tricks to control a dominant position in the supermarket advertising business ought to raise yet another red flag for the FTC: There are now three companies that control almost all the in-store ads and grocery coupons in the U.S. -- News, Valassis (VCI) and Insignia -- and they're all cooperating with each other following a skein of legal deals.

In today's case, Insignia alleged News used exclusive contracts to gain a monopoly status with some supermarkets and advertiser clients. Although Insignia "won" the suit, the agreement ironically solidifies News' position in its business.

As a result, News and Insignia clients should expect to see prices for in-store supermarket ads and newspaper coupons start to rise. There is no significant competition going on in this market place.

In today's settlement:

Insignia entered into a 10-year exclusive agreement with NAM (News America Marketing) ... Under the terms of the confidential settlement agreement, NAM will pay Insignia $125 million and Insignia will pay $4 million to NAM in relation to the business agreement.
It follows a $500 million deal between News and Valassis that included a 10-year shared direct mail agreement, and a separate deal between Insignia and Valassis in which Insignia services Valassis' Super Valu client.

To recap, News now has a deal with Insignia; Insignia has a deal with Valassis; and Valassis has a deal with News.

Sure, the deals all cover slightly different subject matter but that's not the point. They're in bed together, they know what each other's clients are up to, and no good can come of this. It's time for the FTC to intervene again, which it did once in 2006 when it ended Valassis' attempt to fix prices with News.*

*Correction: This item originally said, incorrectly, that NAM was involved in Valassis's attempt to fix prices. It was not.