HP Launches Suit Alleging Gray-Market SalesBy Steven Vaughan-Nichols | Posted 2004-09-03 Email Print
Hewlett-Packard claims that a former reseller bought computer hardware at a discount but then sold to companies to whom it had no authorization to sell.Hewlett-Packard Co. announced Thursday that it has filed suit in a Tennessee federal court to recover more than $8.6 million in pricing discounts for computer equipment it says was purchased under false pretenses by Capital City Micro Inc. of Murfreesboro, Tenn., for resale to Hopkinsville, Ky.-based P&E Distributing Co.
In this gray-market case, Hewlett-Packard's complaint sets forth claims for damages that include civil conspiracy, common-law fraud and breach of contract against both companies.
In its complaint, HP is alleging that Capital City Micro and its president, Martin Meeks, told HP that Capital City Micro had opportunities to sell HP and Compaq Computer Corp. products to beverage wholesaler P&E Distributing that required significant discounts from HP to win the business.
After the termination, Capital City Micro obtained a reseller authorization with Compaq, again claiming P&E was the purchaser of the Compaq products. Soon after the merger of HP and Compaq in May 2002, HP stopped all dealings with Capital City Micro and terminated the relationship.
In attempts to reach Capital City Micro, The Channel Insider was unable to find a working phone number for the company. P&E referred calls about the matter to its attorney, who had not returned calls at press time.
"HP is committed to supporting our authorized business partners and our customers and addressing cases of fraud and breach of contract," said Scott Anderson, HP's acting general manager of the Solution Partners Organization in the Americas. "HP is dedicated to monitoring, investigating and taking appropriate steps to prevent HP products entering the market through unauthorized channels."
One recent industry study by KPMG and the AGMA (Alliance for Gray Market and Counterfeit Abatement) reported that $40 billion worth of IT products are resold on the worldwide gray market annually.
It defines the "gray market" as the sale of goods and products outside authorized distribution channels. It believes the gray market threatens to undermine the integrity of legitimate sales channels and disrupts agreements manufacturers make with their distribution partners.