Resellers, Consumers File Suit Against Apple

A group of Apple resellers in conjunction with consumers have filed a 26-page class action lawsuit against the company accusing it of unlawful business practices, breach of contract, misappropriation of trade secrets and other practices illegal under consumer law.

The suit was filed in San Francisco Superior Court last Thursday by two former Apple resellers, one of whom, Joe Weingarten, is the head of the Apple Resellers Association, which represents some 70 resellers across the United States. Also taking part in the action are three named Mac users.

According to an interview with Weingarten on the The Mac Observer, a Mac Web site, part of the reason for the suit is Apple’s deteriorating relationship with some of its dealers. “Apple is pushing dealers to the point of where they’re going out of business because of their actions,” Weingarten claimed.

One of the accusations made against Apple is that it unfairly held back product from the channel while stocking the shelves of its own Apple stores.

The company is also accused of using discriminatory pricing to undercut dealers, selling products below cost in order to get customers away from independent stores.

Another key claim is that Apple stole customer information from dealers, approaching these customers in order to sell direct to them.

In addition to the dealer-related charges, the company is also accused in the suit of reselling refurbished equipment to dealers as new, selling product to nonqualified education and government customers at a discount, and lying to consumers in an attempt to cover up its own culpability.

Click here to read Steven J. Vaughan-Nichols’ opinion on Apple’s reseller conflicts.

The case is part of a string of complaints from dealers over their relationship with Apple. Last week, two independent dealers in California shut their doors, blaming Apple directly for the closures.

Tom Santos, president of MacAdam, claimed its closure was due to “consistently bad behaviour of our number one supplier, Apple Computer. They have made it so difficult to get product in a timely fashion and treat our customers with the respect that they treat their Apple direct customers.”

Santos had previously made headlines in 2004, when he filed a suit against Apple alleging the company had been engaged in unfair competition, breach of contract and fraud. A case management conference concerning the suit is due to take place in June this year.

The second Apple dealer to close its doors, MacOnline, made its feelings known through a statement taped to the closed doors of its offices. Headed “WE QUIT!”, the statement claimed, “Apple fills their retail stores first with new products fulfilling demand, then supplying resellers with only a few units, weeks and sometimes months later.”

Apple is also being sued by a French consumer organization over its use of DRM in music downloads. Click here to read more.

While not commenting on the cases against it, Apple has consistently claimed that its intention with its retail stores program is to expand the market, rather than to put the squeeze on its existing channel.

However, the company also has a long-term strategy of setting higher goals for dealers to achieve Specialist status, which is required in order to gain certain discounts on products and equipment. Since the end of 2003, specialists have been required to meet attach-rate targets for many products, for example, by ensuring that 60% of Macs sold have an extended warranty attached to them. The company has also beefed up its direct sales team for large accounts, particularly in the creative and government sectors.