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HP, Staples Lawsuit Shows Cutthroat Competition
In
relationships between major vendors such as Hewlett-Packard and big
box retailers like Staples, vendors continuously push for preferential
selling agreements like that described in a lawsuit alleging the
companies conspired on the sale of replacement ink-jet print
cartridges, an industry analyst said.The antitrust lawsuit, filed in
U.S. District Court in Boston, alleges HP and Staples enacted an “an
illegal agreement between competitors to stop competing” in which HP
paid Staples market development funds to stop selling non-HP-branded
ink-jet printer cartridges for HP printers.The suit, filed by a Pacific
Palisades, Calif. resident named Ranjit Bedi, said HP paid Staples more
than $100 million in market development funds to sell HP cartridges and
to stop selling lower-priced cartridges.However, Andy Lippman, an
industry analyst for ink-jet cartridge markets for Lyra Research, a
Newtonville, Mass., research and consulting company, said jockeying for
position occurs frequently in the intensely competitive, $30 billion,
ink-jet cartridge market.Lippman said the practice was not necessarily
illegal. “The whole business market for HP and other printer
manufacturers is to lock the consumer into buying the products from the
manufacturers,” Lippman said. “There is a constant struggle. It’s not
just HP, but all the manufacturers are doing their best to sell these
ink-jet cartridges.”HP released a statement earlier this week denying
the claims of the lawsuit. “HP denies that it has engaged in any
anticompetitive conduct,” the statement said. “HP is confident,
therefore, that after the relevant facts are presented to the judge it
will be determined that our business relationship with Staples has been
and is entirely proper.” Staples said it will have no comment while it
reviews the lawsuit.Other leading ink jet replacement cartridge
manufacturers, including Epson, Canon and Lexmark, could not be
reached for comment.Staples at one time sold its own brand of
replaceable printer cartridges, which competed with HP’s, Lippman said.
HP asked Staples to use the HP brand instead.”HP, which is the big
partner with Staples, told Staples they were not being treated fairly,”
Lippman said. “HP said to Staples, ‘We provide you with a lot of good
products, but you are selling your own brand of products and taking
revenue from us.’ Staples was selling cartridges a couple of dollars
cheaper and putting it next to the HP brand. It’s an obvious choice to
go with the cheaper product.”Lippman said the amount of money listed in
the lawsuit to describe the market development funds provided to
Staples in the agreement appeared accurate. “We also heard it was $100
million,” he said. “We think HP gave Staples a couple of percentage
points of profit on the cartridges as well. So Staples gets a cut
whenever they sell them.”Lippman said such agreements may not
necessarily use the term “market development funds” to describe
payments. “A lot of money is exchanged in what are called ‘shelving
fees.’ To get a key shelf or kiosk, you have to pay,” he said. “It’s
easy for HP to say, ‘We decided to pay for the space.”‘However,
not all customers are happy that Staples cartridges are replaced with
HP products, Lippman said. “Staples told the public, ‘We are going to
stop selling our own brand of cartridges, but you get a better quality
of cartridge from HP,”’ Lippman explained. “A lot of customers would
say, ‘We save money on the Stapes product and will go to another office
supply store or online to make the purchase.”’ Some HP partners said
the actions would depress printer cartridges, making it difficult for
them to compete.”I wouldn’t be surprised a bit [if the lawsuit claims
were true],” said Jay Tipton, vice president of business solutions for
Technology Specialists, Fort Wayne, Ind., an HP partner. “That is how
big box retailers can make their money [selling products like printer
supplies], by sometimes selling at ridiculously low prices. I can’t
beat those prices. The only way I can make money is through services.
In turn, Staples probably has an agreement with HP to sell a certain
amounts of cartridges.”
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