The Minnesota Company Rupert Murdoch Couldn't Kill

The Roof Caves In

News America Marketing contacted Insignia at the end of 1999 to discuss partnership opportunities. According to Drill, News America proposed buying 40 percent of Insignia, then working together to charge manufacturers more and pay retailers less—a proposition that smelled like illegal collusion to Drill, who turned the deal down. That’s when News America set out on “an all-out siege to destroy Insignia,” Drill says.

If that’s true, News America’s parent has had plenty of experience with similar competitors. In the mid-1990s, a company called Heritage Media, which also owned TV and radio stations, operated a division that produced instant-coupon machines for supermarkets—a business that News Corporation was already involved in. A price war ensued: Heritage Media’s stock plunged as a result, and in 1997, Heritage threw in the towel and sold out to Murdoch. Other in-store promotional firms that have fought News Corporation include New Jersey–based Floorgraphics, whose promotional signs are placed on supermarket floors near a product’s shelf space; and San Francisco–based Theme Co-Op Promotions, which develops in-store display advertising that brings together two or more products. Both companies filed suit against News Corporation for what they term anticompetitive practices.

News America filed its first suit against Insignia in 2000, accusing it of interfering with exclusive business relationships that News America claimed to have struck with supermarket retailers. Insignia responded by claiming that News America’s exclusive deals violated antitrust laws. Besides, Drill argues, if Insignia interfered with relationships that News America had inked, why didn’t the company sue the retailers? “Insignia doesn’t see other vendors’ contracts, even if we begged” retailers to reveal them, he says.

The initial suit was settled in November 2002. “Terms of the settlement are confidential, but I can tell you from our public filings that no money exchanged hands,” Drill says. A year later, News America sued Insignia again, adding more names to the list of retailers that it claimed exclusive rights to work with, and including some technical matters regarding the types of signs Insignia was producing for Kroger. “There was not any conduct on our part to bring the suit,” Drill says. Insignia could have moved to block this second suit, given its similarities with the first, but the company says that would have been just as costly and time consuming as the approach it took instead.

“We were taking all of the punches and not playing offense yet,” Drill says. So in September 2004, Insignia filed a federal antitrust claim in U.S. District Court in Minneapolis against News America Marketing and Idaho-based grocer Albertsons, one of several chains that Drill asserts is in collusion with News America against his company. Insignia’s suit claims that News America illegally has a stronghold on the grocery signage business through long-term, exclusive contracts. Drill says that the strategy behind Insignia’s suit is to “create a level playing field” with News America Marketing. (Laura Richards, News America’s director of communications, said in September that her company can’t comment on its legal situation with Insignia “at this time.”)

Years of fighting its much larger, deeper-pocketed competitor in court forced Insignia to focus on nonbusiness matters, Drill says, and drained the company’s resources. Insignia has spent more than $6 million on legal fees since News America filed its first lawsuit. By 2005, the legal war was threatening Insignia’s viability. There was little business signed up for 2006, and morale “was as low as you can imagine,” Drill recalls. The company had hired a restructuring consultant, and Drill was staring at the probability of cutting an already reduced work force of 80 employees to as few as 25. (Insignia ended up reducing its staff by 10.) It would have been the end of the line for Drill, as well, who says he would have left the company if it had been forced to restructure.

Late last year, Vars decided to retire from the company—his cardiologist told him the stress of his job could be deleterious to his health.