Valassis Communications, Inc., the freestanding inserts marketer, has settled Federal Trade Commission charges that it attempted to collude with rival News America Marketing to eliminate competition between the two companies.
Under the consent order, Valassis is barred from engaging in, or attempting to engage in, similar anticompetitive conduct in the future.
According to the FTC, during a quarterly call with securities analysts in July, 2004, Valassis invited News America, to join in a scheme to allocate FSI customers and fix prices and thereby end an ongoing price war between the two companies. Valassis’ goal, the FTC contended, was to raise FSI prices, which had decreased from about $6.00 per full page per thousand booklets in 2001, to less than $5.00 per full page per thousand booklets in 2004.
During that call, Valassis’ president and chief executive officer opened the company’s second quarter earnings call by detailing its strategy to increase FSI prices, according to the FTC.
The FTC charged that Valassis’ conduct was anticompetitive and violated Section 5 of the FTC Act. The complaint further alleged that Valassis acted with the intent to facilitate collusion and without a legitimate business purpose.
If Valassis’ invitation to collude had been accepted by News America, the complaint states, the likely result would have been higher FSI prices and reduced output, according to the FTC.
Specifically, the strategy included:
* Abandoning its 50%market share goal.
* Aggressively defending its existing customer base and market share.
* Submitting price bids at levels substantially above current market prices for current News America customers.
* Monitoring News America’s response to its new business strategies.
If News America competed for Valassis customers and market share in the future, then the price war would resume, according to the FTC.
Thus, according to the FTC, during its earnings call, Valassis communicated to its only competitor proposed terms of coordination for the FSI market, and did so in a very specific manner. Valassis would stop competing for News America customers, only if News America similarly stopped competing for Valassis customers. Valassis also proposed restoring the pre-price war price level of $6.00 per FSI page per thousand booklets and $3.90 per half page per thousand booklets.
The consent order prohibits Valassis from inviting an FSI competitor to divide markets, allocate customers, or fix prices. It also prohibits Valassis from entering into or participating in an agreement with any FSI competitor to divide markets, allocate customers, or fix prices.
The order will expire in 20 years.
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