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HP, Staples Antitrust Lawsuit Focuses On Market Development Funds

Jack McCarthy

The lawsuit, filed in U.S. District Court in Boston by Ranjit Bedi, says the companies entered "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, Reuters said.

The suit alleges HP paid Staples, the largest U.S. specialty retailer of office supplies, more than $100 million in MDF to stop selling lower-priced printer cartridges for HP printers, Reuters said. The suit does not make clear how Bedi, of Pacific Palisades, Calif., determined the $100 million number.

HP partners who aren't big box retailers said the agreement would be improper if true. "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."

Tom Senecal, president of Laser's Resource, Grand Rapids, Mich., an HP partner and solution provider, said he doubted HP would enter into such an agreement, but said Staples might have acted on its own to favor HP.

"I have a hard time believing HP paid Staples market development funds because of the way the industry works," Senecal said. "HP does not permit use of market development funds for discounting products. HP states throughout their market development program that market development funds can't be used for discounting products. I don't believe they would make a whole separate agreement with Staples from the entire channel."

Seneca said it is possible Staples is acting on its own to further sales of HP printing products. "I'm sure Staples is trying to differentiate itself as a reseller of HP by being more attuned to the HP product line," he said. Owen Davis, a Staples spokesman, said the company would have no comment while it reviewed the lawsuit.

HP released a statement 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."

The suit asks for class-action status and says the actions violated the Sherman Act and Clayton Act, which prohibit noncompetitive behavior. It seeks unspecified money damages and asks the court to stop HP and Staples from engaging in noncompetitive acts, Reuters said.

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