Competitive intelligence, marketing, and confidentiality: The Reed - McGraw-Hill Lawsuit

A story of competitive intelligence with marketing intent has come to earth with the filing of a lawsuit by Reed Construction Data against McGraw-Hill Construction Dodge.

The suit charges that Dodge has unlawfully accessed confidential and trade secret information from RCD since 2002 by using a series of fake companies to pose as RCD customers.

The lawsuit, filed in the U.S. District Court for the Southern District of New York, seeks an unspecified amount in lost profits and punitive damages, trial by jury, and injunctive relief as a result of Dodge’s misuse of RCD’s proprietary construction project information, Reed announced in a news release.

The complaint charges that Dodge hired consultants to subscribe to RCD’s confidential data under the cover of fake names and companies. Dodge then allegedly manipulated the information to create misleading comparisons between Dodge’s and RCD’s products and services in an effort to mislead the marketplace.

The complaint cites eleven counts of misconduct by Dodge, including fraud, misappropriation of trade secrets, misappropriation of confidential information, unfair competition, tortious interference with prospective economic advantage, violation of New York’s general business law, violation of the RICO Act, RICO conspiracy, monopolization, attempted monopolization and unjust enrichment.

“McGraw-Hill Dodge has used our information to deceive and confuse the market about RCD and the data we offer,” said Iain Melville, CEO, Reed Construction Data. “This was an attempt by Dodge to force RCD out of business and obtain a monopoly over the construction data industry.”

The story is described in greater detail in the actual court filing, which can be downloaded from Reed's site here.

Business to Business Magazine reported this response from a McGraw-Hill spokesperson:

“We intend to vigorously defend ourselves against Reed Construction's legal claims. We take these allegations very seriously and are committed to ensuring that all employees comply with our Code of Business Ethics.”

The two competitors have been battling within the construction information marketplace for years. The Reed lawsuit alleges that McGraw-Hill used data obtained from unauthorized users hired by McGraw-Hill to adjust its services and adapt its marketing programs to make it look like it was delivering a more useful service. Reed's contract language includes specific provisions regarding non-disclosure of confidential information.

McGraw Hill to bid for Reed Elsevier? (2)

Here is a further news item on the suggestion that McGraw-Hill might be interested in Reed Elsevier. This Washington Post article notes that they originally believed McGraw-Hill had interest in Reed's construction titles, but the scope of interest may have widened.

In my heart, I'm not sure of the validity of this story, because as far as I know, McGraw-Hill had been following on roughly the same track as Reed in believing that the future does not lie in conventional print/advertising based publications. Sure, I understand, McGraw-Hill had no plans to ditch its existing titles, including regional construction magazines, Engineering News-Record and Architectural Record, among other. But McGraw-Hill didn't want to acquire or develop significant new print titles, regardless.

Reed may be following the lead of Thomson Reuters which had the foresight to get out of print media several years ago, focusing on value added databases and electronic services. The question is, if you are a leading player in a field you know is about to rapidly decline, do you get out or do you hold on? Your existing properties can still be 'cash cows' if you slash costs, cut resources, and adapt the brands, but you have the messy business of laying off employees, and shrinking your operations to adapt to the changing environment. So, it seems logical that you would try to find a buyer who can see value in the underlying assets, who is not afraid to be ruthless to turn them into profitable operations. Again, it doesn't make sense to me that McGraw-Hill would want to play that role.

So who is spreading these rumors, and why? The answer could relate to 'inside' employee tips and reactions with self-preservation in mind; or it might simply be that indeed McGraw-Hill is kicking some tires -- heck if your largest competitor is ready to open its books for review, would you not want to take a peek at them?

At ground level, I see these developments as natural and inevitable trends as the publishing/media industry continues to experience seismic shifts under the combined pressure of media convergence, the increasing value-focused emphasis on Internet advertising, and the breakdown of traditional models/priorities within conventional media. If you are a consumer of construction news and information, or purchase advertising to serve the industry, you need not worry -- you'll find you will continue to get more for less: with (perhaps temporary) exceptions where local or specialized circumstances exist -- which is why the large media players within the industry are changing to find new avenues for their businesses.

McGraw Hill to bid for Reed Elsevier?

This article, McGraw Hill plots bid for Reed Elsevier, in The Telegraph from London, England, is intriguing. For those unfamiliar with the competitive landscape in construction industry advertising and publishing, the story is could be compared to Coke preparing to bid to buy out Pepsi -- with Pepsi arranging the financing to make sure the deal goes through! (Or, since I'm not sure whether Coke or Pepsi are number one or number two in the marketplace, Pepsi offering to purchase Coke.)

Presumably the lawyers involved are aware of regional competition/anti-trust legislation for the world-wide publishing giants within the construction industry. Both businesses have a significant -- in fact -- leading presence within both the print and online markets; reading between the lines, Reed Elsevier wants 'out' of advertising-dependent businesses. Maybe Reed Elsevier sees the writing on the wall here and sense that relying on advertising revenue is not the way to go, possibly because of the power of online pay-per-click media like Google and other niche alternatives. I'm also intrigued because my understanding is that McGraw Hill has for several years decided to focus its new venture resources away from print media, recognizing the future is in online services. (In Canada, McGraw Hill has aligned itself with Merx, this country's leading online portal for online bidding/tender and business development opportunities.)

What will this news mean for you? If you are a consumer of either McGraw Hill or Reed's leads services or their publications, (that is you are an advertiser, rather than a free reader!), you conceivably will expect one of the the competing titles/services to merge/disappear within another. Alternatively, another bidder (unknown in this article) might appear and continue the competition.

We'll watch this story closely.