Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Stay of monopoly claims on in-store advertising services denied, (Mar 31, 2016)

By Linda O’Brien, J.D., LL.M.

In a competitor’s action against News Corporation for allegedly maintaining a monopoly over the market for in-store advertising and promotions (ISPs) and leveraging that monopoly to acquire a dominant position in the market for free-standing inserts (FSIs) sent to consumers, the federal district court in Detroit has declined to stay monopolization, predatory pricing, and exclusive dealing claims pending resolution of tying and bundling claims by a panel, pursuant to a settlement in a prior case between the parties (Valassis Communications, Inc. v. News Corporation, March 30, 2016, Tarnow, A.).

Valassis Communications, Inc. and News Corporation (NAM)—through its subsidiaries News America Marketing Group, News America Marketing FSI, Inc., and News America Marketing In-Store Services, Inc.—compete in the markets for ISPs, products placed in the aisles of retail stores that advertise consumer goods, and FSIs, booklets of coupons for consumer goods delivered to consumers’ homes, in the U.S. ISP providers contract with retailers for access to their aisle space, and consumer packaged goods manufacturers (CPGs) contract with the providers for access to the retailers’ aisles and for the creation and placement of ISP products.

In 2006, Valassis filed suit against NAM’s three subsidiaries, alleging that the subsidiaries violated the Sherman Act by using their market power to illegally bundle sales of ISPs and FSIs. The parties entered into a settlement agreement, providing for the payment of $500 million to Valassis, a ten year shared mail distribution agreement, and a procedure for resolving future claims by an independent panel of antitrust experts.

In November 2013, Valassis commenced a second action, asserting claims of monopolization, predatory pricing, exclusive dealing, and bundling in the ISP and FSI markets against NAM and its subsidiaries. NAM moved for dismissal. A magistrate judge issued a report and recommendation (R&R) to dismiss the tying and bundling claims without prejudice and to stay the remaining claims pending resolution of the tying and bundling claims by the panel provided in the settlement of the prior case.

First, in adopting the R&R in part, the court dismissed the tying and bundling claims without prejudice, since neither party contested that the claims fell within the future claims resolution provision of the settlement agreement in the prior case.

However, the court declined to stay the case pending resolution of the claims before the independent panel. In declining to adopt the R&R in part, the court noted that the panel’s resolution of the tying and bundling claims would not be dispositive of the plaintiff’s remaining claims and there was no risk of inconsistent rulings or duplicative discovery. Further, the plaintiff would be severely prejudiced by a stay if the defendants were found to have violated antitrust laws. Finally, the court would benefit from the expertise of the panel for all claims.

The case is No. 2:13-cv-14654-AJT-MJH.

Attorneys: David S. Mendelson (David Mendelson PC) and Kimberly L. Scott (Miller, Canfield, Paddock and Stone, PLC) for Valassis Communications, Inc. David F. DuMouchel (Butzel Long, PC) and Kenneth A. Gallo (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for News Corporation, News America Marketing Group, News America Marketing FSI, Inc., and News America Marketing In-Store Services, Inc.

Companies: Valassis Communications, Inc.; News Corporation; News America Marketing Group; News America Marketing FSI, Inc.; News America Marketing In-Store Services, Inc.

Cases: Antitrust MichiganNews