Company Calls Nielsen Ratings Pay-to-Play

MANHATTAN (CN) - Nielsen, a "once-noble company," colluded with a former competitor to publish ratings data that had been corrupted by a bribery scheme, a New Delhi-based broadcaster claims in a $580 million lawsuit.

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New Delhi Television Ltd. sued Nielsen and a slew of other defendants, including Nielsen's alleged former competitor, Kantar Media Research, and the J. Walter Thompson ad agency, in a 194-page complaint in New York County Supreme Court.

New Delhi Television (NDTV) claims the ratings agencies displayed "unabashed short-term greed and reckless disregard of its duties and of its noble origin. It is a case of the two largest audience measurement conglomerates in the world, Nielsen and Kantar, formerly competitors, operating worldwide through a deliberately complex web of subsidiaries and joint ventures, creating, at least in India, a monopoly and abusing the power of that monopoly."

The complaint continues: "This is also a case of the Nielsen Board of Directors, as proxies for the world's largest and most powerful group of corporate takeover specialists (referred to herein and in Nielsen's 2011 Annual Report as 'Sponsors') that, since 2006, control Nielsen, recklessly disregarding, in New York City, the worldwide operating headquarters of Nielsen, their explicit responsibilities to customers under the Dutch laws to which they are subject, the country of Nielsen's incorporation being the Netherlands.

"The sponsors consist of KKR, The Blackstone Group, The Carlyle Group, Thomas H. Lee Partners, Alpinvest Partners, Hellman & Friedman and Centerview Partners."

The Sponsors are not named as defendants.

The complaint continues: "Cost cutting and cost avoidance measures to maintain revenues are the basic tenet of leveraged buyouts. For example, The Blackstone Group's 2011 Annual Report explicitly acknowledges that 'highly leveraged entities are inherently more sensitive to declines in revenues'. The cost cutting and cost avoidance measures adopted by Nielsen are the direct result of the Nielsen Directors and [defendant Nielsen CEO] David Calhoun acting solely in their own short term interests and the short term interests of the sponsors, while disregarding their explicit obligations to thousands of customers such as NDTV. The sponsors benefit from such cost cutting measures in the short term, during which short term they have commenced, since January 2011, to 'cash out' their controlling interest in Nielsen and/or otherwise siphon resources from Nielsen.

"The sponsors, through the Nielsen Directors and David Calhoun, order cost cutting and cost avoidance measures to maintain share prices in the short term, so they can 'cash out,' as part of the typical leveraged buyout 'exit strategy,' making billions of dollars in profits.

"The sponsors have already begun such process. As of January 2011, they owned 100 percent of Nielsen. As of March 2012, they own 66 percent.

"Thousands of Nielsen's customers, such as NDTV, are the victims of such cost cutting measures. "Nielsen's wrongdoings, including, but not limited to, negligence, gross negligence, false representations, prima facie tort and negligence per se (based on violations of the Foreign Corrupt Practices Act and the Dutch Corporate Governance Code), have had catastrophic effects on customers, on the television industry, on advertisers and on and viewers in the US and overseas."

NDTV claims the ratings agencies negligently allowed violations of the Foreign Corrupt Practices Act by creating the entity Television Audience Measurement, or TAM, to implement ratings in the Indian market. NDTV says it learned about the corruption of TAM from an unidentified "consultant."

"The consultant stated that the corruption involving TAM is so widespread that he decided to become a whistle blower," the complaint states.

NDTV it met the consultant this year at a Feb. 28 meeting with Nielsen representatives at the J. W. Marriott Hotel in Mumbai.

"At the said meeting, the representatives of Nielsen interrogated the consultant as to how the bribes were paid and who was/were the person(s) responsible for taking bribes on behalf of TAM to fix ratings. The consultant named several employees of TAM who took bribes through other consultants to fix ratings for channels," the complaint states.

NDTV claims it learned more about ratings corruption during an April 3 meeting at Mumbai's Ramada Plaza hotel with two field staff employees of TAM.

"[The TAM staffers] claimed to have effected manipulations in the past for other channels and were willing provide the same 'services' for 'any' channel that was ready to pay the demanded consideration (bribe)," the complaint states. "They were confident that they could triple channel ratings of NDTV in Mumbai over a period of two to three weeks in the required target group. They stated they had direct access to homes and visited those homes periodically (at least 3 to 4 times a week) and were in a position to easily influence what the households watched/viewed. They said by paying a bribe of US $250 to US $500 per household per month, the TAM households could be made to watch only those channels which they insisted upon."

NDTV claims it confronted the ratings agencies with evidence of the corruption, but the agencies broke their promises to stop publishing the corrupt data.

"Not stopping publication of data in India, even after direct and unequivocal notice of such violations, is consistent with the objectives of the sponsors, and is done in reckless disregard of customers' rights," the complaint states.

NDTV says that Nielsen and Kantar's monopoly left it with "no choice but to rely on corrupted TAM data."

It seeks $580 million on 42 counts, including negligence, gross negligence, false representations, prima facie tort and violations of the FCPA and Dutch Corporate Governance Code. It claims that the Dutch Corporate Governance Code requires that Nielsen, a Netherlands-based company, act in the interests of all corporate "stakeholders."

Defendants include five Kantar entities, TAM and 14 Nielsen group entities, Nielsen CEO David Calhoun and its directors James Atwood, Jr., Richard Bressler, Simon Brown, Michael Chae, Patrick Healy, James Kilts, Iain Leigh, Eliot Merrill, Alexander Navab, Robert Reib and Scott Schoen.

NDTV is represented by Adam Finkel and Rohit Sabharwal with Sabharwal & Finkel.

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