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INFORMATION RESOURCES v. A.C. NIELSEN CO.

November 28, 1984

INFORMATION RESOURCES, INC., PLAINTIFF,
v.
A.C. NIELSEN COMPANY, DEFENDANT.



The opinion of the court was delivered by: Parsons, District Judge.

MEMORANDUM OPINION AND ORDER

Marketing research service is the furnishing of usable statistical information to the manufacturers of various goods about the movement of consumer goods through the retailers to the consumer. The raw data from which this information is processed is obtained by counting. Counting here involves the use of sampling traditional to the concept of survey research. Counting can be done at several points along the path taken by the goods from the manufacturer to the consumer; at the manufacturer's shipping dock, at the entrance and exit docks of the distributors or warehousemen, at the entrance doors and in the store rooms of the retailer, at the place of the shelving or deshelving of the goods in the store of the retailer, at the check-out counter of the retailer, and indeed, at the shelving or deshelving of the goods in the consumer's house.

The statistics that can be developed from the raw data, and the uses to which they can be put, vary in meaning, in reliability and in usefulness to the producer, both in his production planning and his advertising planning, according to the point or combination of points at which the raw data is gathered, the frequency with which it is gathered, and the selectivity of the sampling used in the system.

The defendant in this case, one of the old and experienced firms in the field of sampling survey research has devoted one of its departments to the selling of marketing research services to consumer goods manufacturers (principally manufacturers in the food industry) for over thirty years. With a wide spectrum sampling base, its research statistics were relatively predictable nationally. It concentrated on using raw material gathered from storage room and shelf counts in the retailer's stores. It did not use the manufacturer or warehousemen's storage racks or docks for raw data, and it did not use data gathered from the consumer. For purposes of counting it used human beings; its own employees going into the stores, counting from their shelves and store rooms, equipped with pencils and pads. Its product delivered to its manufacturing customer has been a substantial bi-monthly publication and interim advisories called the Nielsen Food Index.

Recently, an innovation called scanning developed in the grocery store business, and particularly in the chain supermarkets for helping to speed along the long lines at the checkout counters, and for improving accuracy in cash register totalling. Now there has developed among manufacturers universal product codes which they place on packaged products at the time their products are packaged. Then at the checkout counter these codes are picked up by an electric reading lamp when the package of goods are scraped across a glass screen. The process is called scanning.

Scanning has revolutionized the whole field of retail-exit counting and is particularly adaptable to the field of marketing research of consumer goods. Now scanners not only can make computer read-outs for the store itself but the information can be transferred to the computers of businesses engaged in marketing research of consumer goods.

The plaintiff in this case was founded seven years ago for the express purpose of selling a research service to manufacturers, using the process of scanning. It has several research products, the most important of which are BehaviorScan and the Marketing Fact Book. Its founder and Chief Executive Officer described his business in these words:

  "IRI began selling BehaviorScan its first product, in
  1979. BehaviorScan is a test marketing service. IRI
  has installed scanning equipment which is able to
  read the Universal Product Codes (UPC) on packaged
  grocery products at the checkout facilities in
  supermarkets representing approximately 90% of the
  total supermarket sales volume in each of eight
  markets. IRI also has assembled consumer panels
  consisting of approximately 2,500 households in each
  market. By using this scanning equipment and IRI's
  computerized data collection system, IRI gathers
  household-by-household data on the purchasing
  behavior of its consumer panels, as well as data on
  the total sales of all UPC coded packaged goods made
  by the participating supermarkets. These data are
  used to analyze consumer response to new products,
  advertising, pricing strategies and other marketing
  techniques employed by manufacturers and distributors
  of packaged consumer goods.
  "Each of IRI's eight markets has cable television.
  IRI is able to direct alternate television
  advertising to its consumer panel households.
  Together with IRI's scanning data collection
  capability, this permits the measurement of direct
  consumer response to television advertising. IRI also
  administers, supervises and performs product test
  marketing and various other merchandising activities
  on behalf of its clients in each of the eight
  markets.
  "IRI developed and in 1981 began selling its second
  major product, the Marketing Fact Book (MFB). The MFB
  constitutes a separate and distinct application of
  IRI's scanning data base. Whereas BehaviorScan is
  essentially a test marketing service, the MFB tracks
  weekly sales results together with reports on ad
  features, store displays, shelf price reductions,
  coupons and other "causal" marketing information.
  These data enable packaged goods manufacturers to
  measure the effect of price changes and promotions on
  sales. The MFB data base also contains demographic
  data which permit manufacturers to determine the
  types of customers who are buying their products.
  "The MFB is issued in hard copy quarterly and
  annually, but its real value lies in the fact the the
  MFB data base is directly accessible by computer.
  IRI's clients can therefore use the vast MFB data
  base to perform frequent and timely analyses of
  product sales performance and measure the effect of
  price changes and promotions on sales."

There are several other market research service companies which have been coming into this business during the last few years, using one type or another data base in an effort to produce a distinctive service product, but none of them including the plaintiff here has developed anything near the size of the defendant. One of them appeared by witness to testify on behalf of the plaintiff in this first case testing the products of marketing research in the scanner computer age. Several years ago, even Nielsen began experimenting with the use of scanner data in place of manual audit procedures, and set up two programs; one called Local Markets and one called National Markets.

Because of the imminence of this so called Transition Period, plaintiff has asked this court to issue a preliminary injunction forthwith, basing its claim on the "tying concept" of the Anti-Trust Laws. Plaintiff says that defendant is tying its new product to the old product over which it has exercised extensive economic power for many years and that this action is in Restraint of Competition, conduct proscribed by Section I of ...


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