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AHMA Sues Reed Over Hardware Show
Jan 6, 2004
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The American Hardware Manufacturers Association (AHMA), longtime sponsor of The National Hardware Show that has been held in Chicago, IL, U.S.’s McCormick Place for more than 25 years, has sued Reed Exhibitions, part of Reed Elsevier Inc., the London, England-based owner of the show.

The AHMA, based in Schaumburg, IL, U.S., filed a lawsuit on Dec. 30, 2003, in the U.S. District Court in Chicago, IL, U.S., in which the hardware group alleges that Reed inflated costs to exhibitors. This led to a subsequent decline in attendance, according to the lawsuit filed in federal court.

Reed Exhibitions denies the allegation and said the suit brought by the AHMA is meant to disparage the company as it organizes a competing hardware show in Las Vegas, NV, U.S. in May, according to a Chicago Tribune report.

The AHMA also alleges that Reed defrauded the organization and damaged its reputation with trade show exhibitors, according to a Crain’s Chicago Business report.

Rob Cappiello, Reed's head of the hardware show, told the Chicago Tribune that he believes AHMA’s filing of the lawsuit was more of a public relations move than a serious lawsuit. He also told the newspaper that the association is "trying to hurt us in the marketplace with this meritless lawsuit."

The lawsuit is the latest in the feud between the one-time business partners who split in August because of disagreements about ways to revitalize the National Hardware Show, once one of the five largest trade shows in the U.S.

The Chicago-based show has been shrinking, from a peak of 1.26 million sq ft in 1999 to about 460,000 sq ft in 2003, due to a weak economy and hardware industry consolidation, according to the Chicago Tribune report.

Reed's planned alternate show would compete with the AHMA, which plans an April 18-20 Chicago hardware convention at McCormick Place. The AHMA web site said it has about 430 planned exhibitors.

Reed has signed up nearly 1,700 exhibitors which plan to use about 400,000 sq ft at its May 10-12 show at the Sands Expo and Convention Center in Las Vegas, NV, U.S.

"It's clear that one show is winning," Mr. Cappiello told the Chicago Tribune. "That's why they are suing."

According to the same report, Timothy Farrell, CEO of the 103-year-old trade group, which has 869 members, declined to comment on the suit. He took over this week from his father, William P. Farrell, who ran the AHMA for 20 years and remains as vice chairman.

The suit was filed by another son, William P. Farrell Jr., who is a partner at Gardner, Carton & Douglas and outside general counsel for the AHMA.

Until their separation, the trade group and Reed had worked together since 1977. The AHMA received a percentage of the hardware show's revenues -- up to 37 percent, according to Mr. Cappiello -- for lending its name to the convention and agreeing not to put on a competing show, the report stated. The show made up nearly three-quarters of the AHMA's revenue of U.S. $13.4 million in 2001, according to its tax return from that year, the most recent available.

The AHMA contends in the suit that Reed concealed some revenue it received from vendors. In particular, it alleges Reed received kickbacks from one vendor, Freeman Decorating Co., which was the show's general contractor.

Mr. Cappiello says the charge is without merit.

Among other allegations, the AHMA claims Reed received some goods and services from Freeman for free and allowed the vendor to shift those costs to exhibitors in breach of its contract with the AHMA.

AHMA's research showed the increasing cost of exhibiting as a primary reason why attendance declined.

Mr. Cappiello said Reed's vendor contracts had no bearing on AHMA's cut of revenue.

"What we've done is to negotiate the best deals with vendors," he said. "Have we gotten some freebies? Of course. That is simply the leverage a large customer uses with its vendors."

The AHMA seeks more than $10 million in damages. (Chicago Tribune, Crain’s Chicago Business)

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