Friday, June 12, 2009

Transcripts from Floorgraphics v. News America Marketing Trial

Trial transcripts related to the Floorgraphics v. News America Marketing trial are now available, including testimony from the afternoon of March 4 (.pdf), the morning of March 5 (.pdf), and the afternoon of March 5 (.pdf).

In the lawsuit, Floorgraphics alleged that News America engaged in anticompetitive activities with the stated intention of destroying Floorgraphics' business. The trial ended in a settlement and News America's acquisition of Floorgraphics' retailer contracts. The testimony from the case could have a broader impact, however, as the allegations are similar to those made against News America by Insignia and Valassis.

March 4 Henderson P.M. Testimony - Floorgraphics first witness was Gary Henderson, a former employee of Floorgraphics who went to work for News America. Gary Henderson testified regarding a letter and chart (similar to this one) used by News America in claiming that its services were better than the services provided by competitors Floorgraphics and Insignia. Specifically, News America addressed compliance rates: When in-store advertisers agree to place a certain number of ads, compliance rates measure the number of ads that are actually in the store during the relevant time period, or advertising cycle. For example, if an in-store advertiser contracted to place 100 ads, and an auditor could only find 85 ads during an audit, the compliance rate would be 85%.

In the sales documents that News America shared with manufacturers, News claimed that it "consistently deliver[ed] average compliance rates of 90-95%." By contrast, News claimed that Floorgraphics' compliance rates were 49%, and Insignia's were 16%. Henderson admitted that News America made these claims even though they had not performed an audit of their own floor advertising program, instead assuming that their floor ad placement rates were similar to shelf and cart ads. A document introduced by Floorgraphics showed that the alleged compliance rate for Floorgraphics was based on an audit performed by News America Marketing (which may not have known which stores the ads were supposed to be in, making an audit potentially unreliable), and not a third party. It was further suggested that the audit did not comport with News America's own internal audit guidelines.

Henderson testified that the sales force was instructed to use the documents about compliance rates aggressively with all accounts, that they provided the documents to various manufacturers such as Tropicana and Kellogg's, and that the documents became a topic of interest among many clients. At the same time, Henderson admitted that News America had its own compliance problems and that "Floorgraphics could make a great case to customers" about News America's compliance problems.

Henderson was confronted with several documents suggesting that he shared confidential information with News America that he obtained while working at Floorgraphics. Henderson hired several sales representatives away from Floorgraphics to work with him at News America, and it was suggested that they also may have used confidential information against Floorgraphics.

I'll try to summarize the other transcripts in future posts.

Related posts.


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