Exactly how does a specialty advertising company from American Metro Center in Hamilton fit into a story about Rupert Murdoch, News Corp., the death of a British tabloid newspaper, and a large-scale look into a corporate culture that bullies and buys off its enemies? Mostly as cautionary example.
News Corp., Murdoch’s multi-billion-dollar media empire, is the parent company of News International, the London-based publisher of News of the World, which is at the center of the scandal involving the practice of hacking the phones and computers of news sources and business competitors.
It also is the company that bought out FloorGraphics, a firm that was founded in 1996, took up office space on Vaughn Drive, and became one of Inc. magazine’s fastest growing companies by selling advertising on decals placed on the floors of supermarkets.
But shortly after FloorGraphics expanded to its new space in Hamilton, its growth slowed considerably. In a March 15, 2006, article in U.S. 1 co-founder Richard Rebh noted his company’s downturn and said bluntly what he thought of New Corp.’s business tactics.
“News America hired five of our people and dedicated $50 million to put us out of business,” he said. “They didn’t count on the fact that we would work 24 hours a day to keep going.”
He added: “News America broke into our password-protected computer systems in 2003 and stole sales information that they used, we allege, to improve their retail strategies.”
Two years prior to that article, in 2004, FloorGraphics had filed a lawsuit against News Corp. By 2009 the case was being heard in federal court in Trenton. Co-founders Richard and George Rebh claimed that News Corp.’s U.S. marketing arm, News America Marketing, hacked its systems, stole information, spread misinformation about FGI, and ultimately cost the company several of its marquee accounts, including K-Mart and Safeway, among others.
According to an online business news service, B-Net, FGI first was alerted to a problem when Smuckers contacted the company in 2004, curious as to why News America Marketing seemed to have confidential information about its business stored on FGI’s password-protected website for clients. Rebh said the problem was traced back to 2003 and that the IP address of the hacker led to News America Marketing. There reportedly were 11 separate hacking incidents.
In 2009 George Rebh stated in the federal court case that “the loss of the Safeway contract marked the beginning of the end of our company.” The company, named New Jersey Entrepreneur of the Year and Inc. Magazine’s 11th-fastest-growing company in 2003, downsized from 98 employees in New Jersey to about 25 soon after the loss of the Safeway account about a year later. In 2010 it listed 18.
Much of the testimony, heard in Trenton, came from a News Corp. whistleblower, Robert Emmel, whose presence in court spooked the News Corp. legal team so quickly that after just a few days of testimony they offered to settle by acquiring the company. News Corp. and FGI agreed to a price of $29.5 million, despite that the company posted only $1 million in annual revenues. FloorGraphics last year was renamed Entry Point Communications. It still has offices at American Metro Center. A staffer who answered the phone there confirmed that Richard Rebh was still the CEO, but he could not comment.
According to the settlement, the Rebhs are not allowed to discuss any details of the case.
The company started in 1996 when co-founder Fred Potok was working for a Montclair-based fleet graphics business, which had just come across a decal that could be protected from road hazards by a bullet-proof laminate. This laminate, less slippery than the floor itself, could make floor advertising viable, Potok realized.
Potok turned to George Rebh, a graphic artist and a Williams College alumnus, Class of 1973. For the CEO job they brought in George’s brother, Richard, who has a 1976 degree from Princeton University’s Woodrow Wilson School, and business and law degrees from Stanford.
Because the partners positioned the floor ads as media, manufacturers could pay for the floor space, not from display budgets, but from their advertising budgets — funds that might otherwise be used for print advertising or direct mail. This represented extra income for the store. “By creating an advertising medium that could be purchased, retailers could monetize the media value of their stores,” said Rebh.
The company grew rapidly and was able, with venture capital funding, to buy a division of 3M that makes strong vinyl film for the decals. Patents were in the works on FloorGraphics’ concepts for three dimensional and electronic floor ads.
But Richard Rebh saw the future. “Our business is challenged by the fact that we compete with News America, and News America has not competed fairly,” Rebh told U.S. 1 in 2006. “We invented a great medium, and a lot of advertisers like us, but their buys get split across News America and ourselves.”
Three other anti-trust lawsuits had been filed at the same time against News America. A federal lawsuit filed by Insignia Systems is pending in Minnesota. Theme Co-op won a judgment for anti-competitive conduct in state court in California. And in a Michigan federal court Vlasis recently filed a $1.5 billion suit that could turn out to be worth more than $4 billion.
News outlets around the world, from the New York Times to Britain’s Guardian, have turned their focus to the FloorGraphics case as an example of how News Corp.’s gangster business tactics are an ensconced part of its corporate culture. A July 17 article by David Carr in the New York Times suggested that incidents like the ones involving FGI are the bedrock of the transoceanic investigation into News Corp.’s practices.
“Time and again in the United States and elsewhere, Mr. Murdoch’s News Corporation has used blunt force spending to skate past judgment, agreeing to payments to settle legal cases and, undoubtedly more important, silence its critics,” Carr writes. And counting the almost $30 million it spent to silence the founders of FGI, News Corporation “has paid out about $655 million to make embarrassing charges of corporate espionage and anti-competitive behavior go away.”
#b#Entry Point Communications#/b#, 200 American Metro Boulevard, American Metro Center, Suite 120, Hamilton 08619; 609-528-9200; fax, 609-689-0204. Richard Rebh, CEO.