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Advertising Age reports that News Corp.’s News America Unit – owned by media mogul Rupert Murdoch – is selling manufacturers including Procter & Gamble, Kimberly-Clark, Johnson & Johnson, Unilever, and General Mills “total control of advertising and promotion on the shelves of 35,000 U.S. stores for as long as two years at a time.”

The cost of such exclusivity can be in the millions and “can effectively lock out competitors from in-store advertising for their duration - even if the marketer is not advertising at that time - and confer an edge in crucial retail territory described by marketers as the ‘moment of truth.’” News America itself has a 90 percent market share in the in-store media categories in which it participates.

Ad Age says that the deals work this way: “Though retailers own the shelf and floor space, News America has contracts to sell shelf ads, floor ads and instant-coupon machines at about 35,000 food, drug and mass merchandisers nationwide…Under the terms of the deals it has been selling, marketers pay News America for media and a minimum production expense for in-store ads across multiple four week cycles whether or not they use the space or services, according to the documents. In weeks they choose not to use the space, competitors can be blocked from using it.”

One packaged good company that has been blocked from the program tells Ad Age that he “was told when he inquired about buying a shelf-sample dispenser program that the category had been sold out to his rival (Unilever) for a year for $1.8 million. But the marketer said he hadn’t been asked to bid on the category-exclusive deal beforehand and wasn’t informed of the full scope of Unilever’s buyouts across multiple categories.”

Not only that, but News America appears to be using its exclusives with some companies to strong arm other companies into buying less desirable options – for example, pushing shopping cart ads with companies that cannot get their ads onto store shelves.

Christopher Mixson, president of News America Marketing, tells Ad Age, “News America’s business practices work to benefit consumers and do not inhibit competition. News America fairly competes by providing superior products at lower prices. This competition benefits our clients, retailers and consumers. We are gratified that our clients have sought to make larger buys in the face of numerous alternatives for their marketing dollars. We are proud so many companies find our products to be valuable and we are committed to providing them with the best possible service.”
KC's View:
It has always been our impression that the deals that News America are usually better for it than its customers, and the company has long been attacked for having all the ethics and subtlety of a mob enforcer. (In fact, company executives used to show a clip from the film “The Untouchables” – in which Al Capone, played by Robert DeNiro, hit a guy o repeatedly on the head with a baseball bat – as a way of motivating underlings.)

It is worth pointing out that last September, a jury trial in the US District Court for the Northern District of California found News America Marketing guilty of antitrust violations and of engaging in unfair competition. The suit had been brought against News America by San Francisco-based Theme Co-op Promotions, which charged that Murdoch’s $55 billion company was signing and enforcing exclusivity contracts for free standing inserts with consumer packaged companies, contracts that were designed essentially to put Theme out of business.

In addition, the January 2004 edition of Inc. magazine had a big story about the battle for supermarket marketing dollars between Floorgraphics Inc. and Rupert Murdoch's News Corp. Essentially, the magazine portrayed it as an ongoing David vs. Goliath story, with the much smaller Floorgraphics struggling to maintain its industry position against the enormous resources of News Corp. - which didn't mind using every available tool, including intimidation, to put the smaller company out of business.

It seems to us that for retailers to simply hand over control of their in-store opportunities to News America – or any single entity – is a mistake. It compounds a continuing mistake in American food retailing – to use space and shelves as a way of simply peddling other people’s brands, as opposed to creating store environments that emphasize the company’s brand identity.

(Full disclosure: Subsequent to our reporting on that Inc. article several years ago, Floorgraphics became an MNB sponsor, and actually used our site for a time to distribute PDF copies of the Inc. story.)