(June 12, 2013) — A US union-backed pension fund has sued media company News Corp and its directors, alleging their attitude to competition and assumed market monopoly has resulted in lawsuits and multi-million dollar cost to shareholders.
The Iron Workers Mid-South Pension Fund filed a complaint with the Manhattan District Court last Friday against several of the company’s directors, including founder Rupert Murdoch and his sons James and Lachlan, News America Corporation CEO Paul Carlucci, and a list of others.
“This action seeks to remedy the defendants’ violations of law, including breach of fiduciary duties, waste of corporate assets, and unjust enrichment that have caused substantial monetary losses to News Corp and other damages, such as to its reputation and goodwill,” the filing states.
The complaint alleges the company used practices to ensure their dominance within the in-store promotion industry, which includes coupons and give-aways.
“News America acquired dominance in this market through various wrongful acts designed to inhibit competition, including: (i) entering in to 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 free-standing insert coupons; (iv) hacking into competitors’ computer files to steal customer lists and marketing materials; (v) dishonestly disparaging competitors’ compliance rates and financial viability; and (vi) even defacing competitors’ advertisements.”
The plaintiff alleges News Corps top bosses knew of this practice, but did nothing to dissuade their lieutenants of its merits. The filing states CEO Carlucci engendered a “cut-throat competitive culture and once rallied his sales force by showing a film clip from The Untouchables in which mobster Al Capone crushes a rival’s head with a baseball bat.”
As a result of this behaviour, News Corp found itself in various legal wrangles, the pension alleges, and even the subject of an investigation by the FBI. All of this came at huge expense to shareholders, the pension claims.
“Despite already paying out nearly $655 million to settle these lawsuits, the individual defendants still have not completely remedied News America’s illegal business practices. As a result, News Corp continues to face growing liability.”
This liability, the pension claims, will see News Corp on the hook for billions of dollars in settlement charges and costs.
The filing details the compensation paid to each of the defendants over the period in which the pension held News Corp stock, and highlights their alleged failings.
In particular, former New York Times Editor Carlucci is cited as saying: “I will destroy you. I work for a man who wants it all, and doesn’t understand anybody telling him he can’t have it all.” The man defendant Carlucci was referring to, the filing points out, was Rupert Murdoch.
The case continues that despite the numerous red flags provided by the company’s costly settlements with competitors, the defendants have not ceased monopolistic practices.
“As a result, the company’s image and reputation has been devastated, and it faces a myriad of government (sic) investigations and lawsuits on behalf of its consumer packaged goods manufacturers clients. Accordingly, [the defendants] breached their fiduciary duties, and face a substantial likelihood of liability. Demand upon them is futile.”
The pension has asked the court to demand News Corp make a number of changes: the directors who profited from the alleged wrongdoings should return their compensation; the board should be strengthened; and massive overhauls of corporate governance practices should take place to ensure the company is run to a better standard.
In October 2011, the California Public Employees Retirement System announced it would vote against the re-election of Murdoch, his sons, as well as two other board members. A year later, state compatriot California State Teachers Retirement System followed suit with a similar refusal to back the family’s re-election.
The Iron Workers case is number 1:13-cv-03914-SAS (Pacer login required)
News Corp declined to comment.
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