The Dealer Store Owners Association, an association representing more than 200 Sears Dealer Stores, filed suit against Sears, Roebuck & Co. in federal court in Minneapolis, MN, U.S., claiming that the appliance retailer is cannibalizing their markets with unfair internal competition by selling Sears products through Kmart stores and other channels. Kmart acquired Sears in March.
"Most Dealers invested their life savings and 401K plans in these stores," said Steve Granger, president of the Dealer Store Owners Association. "Now they risk losing it all--and Sears will get a windfall--because Dealers trusted what Sears told them. This is hardly the way to build trust in a brand name."
The lawsuit charges that Sears has breached its contracts with the dealers and has violated the laws of 18 states by selling the same products through Kmarts and terminating the dealers' contracts without cause.
The lawsuit asks the court to declare that Sears is violating the Dealers' agreements and the laws of 18 states. The Dealer Stores, which are owned and operated by families or individuals, sell Sears appliances, electronics, and tools in markets that are too small for a Sears department store -- typically small towns and rural areas.
The lawsuit charges that Sears induced the owners to invest in their stores and build up their small-town markets through promises that Sears would keep them in business for life and give them something to pass on to their children. Now that they have built up the market, the lawsuit charges, Sears is selling the same products through competing Kmarts, and other channels, attracting the Dealer's customers away and giving the Dealers little or no compensation.
The Dealer Stores came into being in the early 1990s, when Sears phased out its catalog stores. There are more than 800 Dealer Stores nationwide, while there are 1,500 Kmart stores."
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