News Corp – the parent corporation of Fox News – is finding itself in even more hot water, with new accusations filed in court this morning. The Dial Corp, makers of soap, personal-care and household cleaning products, have filed suit against News Corp along with subsidies News America, News America Marketing FSI, and News America Marketing In-Store Services, alleging that the company engaged in anti-competitive and illegal practices in order to monopolize the market, even forcing competition out of business through its illegal and immoral tactics. The accusations are lengthy, detailed, and specific, and paints a picture of a company out of control.
Having already had their largest newspaper News of the World close their doors in light of the hacking scandal within the United Kingdom, there is a magnifying lens over News Corp to identify similar scandals. The new lawsuit opens up a can of worms, looking into the heart of the News Corp advertising divisions and finding tactics which even News America Inc.’s Chief Operating Officer, Paul Carlucci, compared to those used by Al Capone in the movie “The Untouchables.” The allegations continue, detailing out threats by Mr. Carlucci to fire anyone “concerned about doing the right thing” and not supporting the firms aims of eliminating competition in the retail advertising space.
How the tactic worked was as simple as it was devastating to the market. There are only a handful of nationwide print advertisement firms. These firms set up the inserts which go in newspapers nationwide. These inserts are key to promotions for many businesses, including Dial. In addition, there are in-store promotions also handled through these agencies. What the lawsuit alleges is that News Corp is doing is using its numerous other businesses, such as its extensive newspaper holdings, to force companies into exclusive advertising contracts. This locks these businesses out from advertising elsewhere. If enough businesses are forced to a News Corp advertising contract, they can now go to their newspapers competitors and force those into exclusive contracts.
By this ruthless, exclusionary tactic, utilizing the different branches of News Corp in a coordinated manner, the company has managed to drive one of its competitors, Floorgraphics Inc., out of business entirely. The remaining competitors simply lack the ability to coordinate with other entities in the manner News Corp can. Because News Corp can partner up its branches, they can force their competition out of business. Now, due to this effort, News Corp is now ready to purchase newspapers which they have forced into a downward spiral of profits through these ruthless tactics.
But, to get this level of access, News Corp needed to know what their competition was doing. The most damning piece of the lawsuit is the allegation, with evidence, that News Corp subsidies hacked into their competitions servers. They did so in order to gain customer lists, and costs, in order to then undercut the competition. News Corp subsidies could then offer sweetheart deals which would drive their competition out of business by driving the sale price to below costs. News Corp did this knowing that they would turn a profit with one of their other divisions, while their competition without this multi-faceted multi-national structure could no longer engage in business at all. It is the clear sign of a monopoly.
News Corp now dominates the insert and retail advertising industry. For his use of Al Capone inspired tactics, Mr. Carlucci was promoted to Chairman and Chief Executive Officer of News America Marketing, Inc. And News Corp reported $34 billion in revenue, despite billions in losses in many divisions. This is how News Corp works. For example, News Corp undercuts the competition by slashing the fees paid by cable companies for Fox News, which puts their propaganda machine in to more homes than its competition. Add in the other channels which News Corp opens, and can use as blackmail material to strong-arm Fox News into every home in the United States.
News Corp has abused its position to destroy the very market structure which enables capitalism to work. They are the enemy of capitalism, instead believing in corporatism and monopoly. The lawsuit is exposing the soft underbelly of the multinational corporation which seeks the destruction of the American Dream and way of life.