Wednesday, June 12, 2013
On June 7, a pension fund filed a derivative suit against News Corp and its top executives for breach of fiduciary duty, and against the executives for waste of corporate assets and unjust enrichment. These claims are based on News America Marketing’s illegal and anti-competitive business practices, including monopolizing the market for in-store promotion services and for FSIs.
News America has paid almost $655 million to settle lawsuits from three competitors related to its anti-competitive practices, and may be forced to pay millions more to resolve a lawsuit filed by customers such as Heinz and Dial, and by Foster Poultry Farms on behalf of a proposed class of customers. In addition, News America was the subject of an FBI investigation related to News America’s computer hacking, and was allegedly investigated by the DOJ for possible antitrust violations.
According to the Complaint, News Corp acquired dominance in the market for advertising and promotion services geared toward CPGs “through various wrongful acts designed to impede competition, including: (i) entering into long-term exclusive contracts with retailers; (ii) paying large economically unjustifiable cash payments to retailers to derail competitor contracts; (iii) bundling and predatorily pricing its in-store advertising and promotion products and services with its FSIs; (iv) hacking into competitors’ computer files; (v) dishonestly disparaging competitors’ compliance rates and financial viability; and (vi) defacing competitors' advertisements.”
Defendants allegedly breached their fiduciary duties by “creating a culture of lawlessness within News Corp, and/or consciously failing to prevent the Company from engaging in the unlawful acts.”
As relief, the plaintiffs seek an order: requiring News to “reform and improve its corporate governance,” requiring disgorgement of benefits obtained by the defendants, and awarding fees and other appropriate relief.