In July 1999, two brothers called George and Richard Rebh, the founders of a small start-up company called Floorgraphics, were invited to lunch with the dominant firm in their new area of business. The brothers were excited: they had invented a new product that involved sticking giant adverts on the floors of supermarkets, and were keen to show it off to the market leaders and talk about possible joint promotions.

They met the two top executives from the big firm, News America Marketing, in a Cantonese restaurant called A Dish of Salt in midtown Manhattan. Over hors d'oeuvre, News America's chief executive Paul Carlucci said: "So, I understand you're here to sell your company?"

According to transcripts of a trial that took place 10 years after the lunch, the Rebh brothers were astonished. No, they replied, they only wanted to talk about working together and had no intention of selling. George Rebh told the jury that Carlucci then said: "From now on, consider us your competitor and understand this: if you ever get into any of our businesses, I will destroy you. I work for a man who wants it all, and doesn't understand anybody telling him he can't have it all." News America is owned by News Corporation, whose chief executive is Rupert Murdoch.

The 2009 trial of Floorgraphics versus News Corp was invoked on Wednesday by Frank Lautenberg, a New Jersey senator who has called for an official inquiry into News Corporation behaviour in the US. He has written to the attorney general Eric Holder, asking him to take into account evidence thrown up during the trial that News America had engaged in computer hacking and to incorporate it as part of the ongoing justice department and FBI investigation into News Corporation practices.

The Floorgraphics case, also recalled this week by the New York Times, is being seen as revealing the lengths to which Murdoch's American companies are capable of going in attempting to neutralise competition. When the startup decided to stand firm in the face of News America's alleged threat to destroy them, the Rebh brothers claim they experienced at first hand the empire's competitive instinct at its most intense.

As the lawyer acting for the Rebh brothers summarised it to the jury: "What this case boils down to is, one small startup business that grew successful being crushed by a very, very large powerful competitor who didn't want competition."

The most controversial element of the trial was the evidence presented by Floorgraphics to the jury that its website, protected by password security, had been broken into without authorisation. The computer breach, which Floorgraphics discovered in 2004 and had taken place 11 times over four months, was traced back to an IP address registered to News America's offices in Connecticut.

The unauthorised access of the firm's computer from a News America address became the subject of a 2005 FBI and US secret service investigation. The outcome of those inquiries is not known.

The computer hacking, the jury at the Floorgraphics trial was told, gave News America access to information that could be used to damage its rival including details of every sale Floorgraphics had made, its client list and projections.

Soon after, the jury was told, Floorgraphics began to lose crucial contracts with key clients – Safeway, Winn-Dixie, the South Carolina retail chain Piggly Wiggly and others – many of whom defected to News America.

The defence lawyer at the trial, in an opening statement, said that the computer breach had occurred at a crucial time and gave access to "private, confidential, proprietary business information that they could use against Floorgraphics in negotiations for getting bids in retail contracts ... After that, one retailer, then the next retailer, then the next retailer fell."

By the time of the trial, the firm had had to lay off 60 of its 85 employees.

News America's lawyer confirmed in his opening statement that someone using one of the company's computer addresses had indeed accessed a password-protected Floorgraphics website. But News America told the jury that the site was available to hundreds, if not thousands, of Floorgraphics retailers, representatives of consumer packaged goods companies and Floorgraphics's own employees.

A News Corp spokeswoman said: "There is considerable employee movement within this industry, and we believe it was someone with an authorised password. News America Marketing condemns such conduct, which is in violation of the standards of our company."

The spokeswoman added that News Corp "categorically denies" any suggestion raised in the trial that it bullied and threatened a startup company. The company's lawyer also disputed during the trial George Rebh's account of the conversation at A Dish of Salt. News America claims that over the years Floorgraphics had approached them about selling the company.

After only a couple of days of testimony, the trial was halted without prejudice as part of a deal in which News America bought Floorgraphics outright in return for Floorgraphics dropping the case. The New York Times put the cost to New Corp at $29.5m (£18.2m).

During the trial, the jury heard from a former News America manager, Robert Emmel, who recalled the chief executive Carlucci telling his staff: "If there were individuals concerned about doing the right thing – bed-wetting liberals in particular – then he could arrange for them to be out-placed from the company."

In 2005 Carlucci was rewarded for his stewardship of News America by being appointed publisher of the New York Post, Murdoch's prime tabloid newspaper in America. News Corp said the promotion, despite the allegations of tough-guy tactics, was "entirely appropriate".