On Wednesday, the U.S. Court of Appeals for the Ninth Circuit affirmed a $3.5 million verdict for Theme Promotions against News America Marketing based on antitrust and other violations. Theme Promotions, Inc. v. News Am. Marketing FSI, __ F.3d __, 2008 WL 3852724 (9th Cir. Aug. 20, 2008) (.pdf as revised Oct. 10, 2008).
Background: Theme Promotions was involved in arranging theme-related promotions that would involve advertising multiple consumer packaged goods companies ("CPGs") in the same themed advertisement (such as a certain brand of cereal with a certain brand of soda). After selling the advertising space to the CPGs, Theme would then purchase free standing inserts ("FSIs") – i.e., coupon booklets often published in Sunday newspapers – in which it would run the advertisements. Although Theme had signed a contract to purchase FSIs from Valassis, News began including and enforcing right of first refusal provisions in its FSI contracts with CPGs to prevent them from participating in special event promotions organized by Theme unless Theme purchased the FSIs News.
Prior Proceedings: Theme challenged News America's right of first refusal provisions as anti-competitive, and asserted that News engaged in unfair business practices. Theme filed suit in 1997. The lower court originally dismissed Theme's claims on a motion for summary judgment, but the Ninth Circuit reversed, reinstating Theme's claims in 2002. See Theme Promotions, Inc. v. News America FSI, 35 Fed. Appx. 463 (9th Cir. 2002). After a three-week trial in August 2005, the jury ruled in favor of Theme. The district court reduced the original damages awarded by the jury, setting aside findings for Theme on intentional interference claims as privileged under the Noerr-Pennington doctrine, and setting aside a negligent interference claim, but entered judgment on the state law antitrust and other claims for $3.5 million.
Appeal to the Ninth Circuit: News appealed, arguing that there was insufficient evidence to support the verdict. Theme cross-appealed, seeking to reinstate some of the damages awarded by the jury but disallowed by the lower court.
The Ninth Circuit affirmed the lower court's ruling, finding that "the jury verdict in favor of Plaintiff was supported by substantial evidence in the record." This is not surprising given the deferential standard of review. It is a victory for Theme, and may provide hope to other advertisers who are facing aggressive competition by News, and to other advertising companies that are currently litigating against News for its anti-competitive practices.
For example, among the issues raised by News was the relevant market definition, which Theme had defined as the sale of FSIs to CPGs. The court found sufficient support for this definition, which may be a good sign for Valassis in its antitrust suit against News over FSIs, previously discussed here and here.
On the other hand, the Ninth Circuit also affirmed the lower court's reversal of certain jury findings for Theme, and upheld the denial of a permanent injunction against News enforcing its right of first refusal provisions. The court held that "News supplied evidence that right of first refusal agreements result from competition between News and Valassis, and that an injunction would only serve to put News at a competitive disadvantage."