Class action suit accuses Apple of unlawful practices, misappropriation of trade secrets
A class action lawsuit has been filed against Apple Computer with two classes, one for Apple resellers and the other for consumers, AppleInsider has learned.
In the 26-page complaint, filed in the San Francisco County Superior Court in California on Thursday, a group of consumers and Apple resellers allege that Apple has engaged in acts of unfair and unlawful business practices, breach of contract, and misappropriation of trade secrets. These actions have also resulted in violations of the Consumers Legal Remedies Act and Song Beverly Act, the suit claims.
The class action lawsuit was filed by three firms on behalf of Jack Branning, James Seybert, Stacey Blevins, Tom Siechert and Joe Weingarten. Together they accuse Apple of repackaging and selling refurbished machines to resellers and consumers as 'new products' without notification to the reseller or end customer. They say Apple has not always honored its extended warranty contracts known as Apple Care, and have often shorted consumers on the term of new product warranties.
The plaintiffs also charge the company with further warranty abuse, and failure to extend warranty dates based on the time it takes to repair a product. For example, if Apple spends a month to repair a customer's iBook, the suit says that Apple is obligated to extend the warranty period one month because the product was not in the consumer's hands. Apple's refusal to correct warranty dates has resulted in the reseller or consumer being wrongfully charged for repairs, the suit says.
Resellers are also charging the company with unfair and unlawful competition, saying Apple has stocked its own retail stores before the retail channel in an effort to recruit customers to its own sales channels. They also allege Apple has used unfair pricing policies. The suit says Apple has sold Macs to end users at prices below their own wholesales costs, and that Apple has made promises to sell its products below the price of any other Authorized Apple Reseller.
Resellers also argue that Apple is not properly reflecting the repair costs or requirements on equipment, which unfairly places warranty repair burden on the reseller channel. The court documents also reveal allegations that Apple at times has refused to compensate for, or accept returns of, defective parts provided for repairs.
The plaintiffs say they can prove that Apple has consistently shipped product directly to end consumers faster than they have to resellers, resulting in additional losses to the reseller channels. They further accuse Apple of providing educational and government discounts to persons not qualified, which in some cases fall below or at reseller costs.
Ironically, the lawsuit also accuses Apple of misappropriating of trade secrets, saying the company is taking confidential reseller information and using it to develop customer lists for its own in-house sales force. This allows Apple to bypass resellers and secure large direct orders originally intended for the resellers. In recent months, Apple has been scrambling aggressively to protect what it claims are its own trade secrets, filing a lawsuit against ThinkSecret and subpoenaing other journalists to reveal their sources.
This latest class action lawsuit joins similar ones filed against Apple by resellers in recent years. MacAdam vs. Apple, filed in 2003, alleges breach of contract and fraud by Apple. The suit is still awaiting trial in the Santa Clara Superior Court in San Jose, Calif, following a recent change in the plaintiff's counsel.
The class action suit also comes just hours after Congress passed legislation that would transfer most large, multistate class action lawsuits to federal court. The bill, which is backed by President George Bush and expected to be signed into law, will move such lawsuits from state courts to federal venues. State courts have earned a reputation for issuing multimillion-dollar verdicts, republicans argue, where lawyers receive large fees and the class members receive virtually nothing. However, democrats say the aim of the bill is not to help the consumer, but rather to help big business escape multimillion-dollar verdicts from state courts at the ultimate expense of the consumer.
In the 26-page complaint, filed in the San Francisco County Superior Court in California on Thursday, a group of consumers and Apple resellers allege that Apple has engaged in acts of unfair and unlawful business practices, breach of contract, and misappropriation of trade secrets. These actions have also resulted in violations of the Consumers Legal Remedies Act and Song Beverly Act, the suit claims.
The class action lawsuit was filed by three firms on behalf of Jack Branning, James Seybert, Stacey Blevins, Tom Siechert and Joe Weingarten. Together they accuse Apple of repackaging and selling refurbished machines to resellers and consumers as 'new products' without notification to the reseller or end customer. They say Apple has not always honored its extended warranty contracts known as Apple Care, and have often shorted consumers on the term of new product warranties.
The plaintiffs also charge the company with further warranty abuse, and failure to extend warranty dates based on the time it takes to repair a product. For example, if Apple spends a month to repair a customer's iBook, the suit says that Apple is obligated to extend the warranty period one month because the product was not in the consumer's hands. Apple's refusal to correct warranty dates has resulted in the reseller or consumer being wrongfully charged for repairs, the suit says.
Resellers are also charging the company with unfair and unlawful competition, saying Apple has stocked its own retail stores before the retail channel in an effort to recruit customers to its own sales channels. They also allege Apple has used unfair pricing policies. The suit says Apple has sold Macs to end users at prices below their own wholesales costs, and that Apple has made promises to sell its products below the price of any other Authorized Apple Reseller.
Resellers also argue that Apple is not properly reflecting the repair costs or requirements on equipment, which unfairly places warranty repair burden on the reseller channel. The court documents also reveal allegations that Apple at times has refused to compensate for, or accept returns of, defective parts provided for repairs.
The plaintiffs say they can prove that Apple has consistently shipped product directly to end consumers faster than they have to resellers, resulting in additional losses to the reseller channels. They further accuse Apple of providing educational and government discounts to persons not qualified, which in some cases fall below or at reseller costs.
Ironically, the lawsuit also accuses Apple of misappropriating of trade secrets, saying the company is taking confidential reseller information and using it to develop customer lists for its own in-house sales force. This allows Apple to bypass resellers and secure large direct orders originally intended for the resellers. In recent months, Apple has been scrambling aggressively to protect what it claims are its own trade secrets, filing a lawsuit against ThinkSecret and subpoenaing other journalists to reveal their sources.
This latest class action lawsuit joins similar ones filed against Apple by resellers in recent years. MacAdam vs. Apple, filed in 2003, alleges breach of contract and fraud by Apple. The suit is still awaiting trial in the Santa Clara Superior Court in San Jose, Calif, following a recent change in the plaintiff's counsel.
The class action suit also comes just hours after Congress passed legislation that would transfer most large, multistate class action lawsuits to federal court. The bill, which is backed by President George Bush and expected to be signed into law, will move such lawsuits from state courts to federal venues. State courts have earned a reputation for issuing multimillion-dollar verdicts, republicans argue, where lawyers receive large fees and the class members receive virtually nothing. However, democrats say the aim of the bill is not to help the consumer, but rather to help big business escape multimillion-dollar verdicts from state courts at the ultimate expense of the consumer.
Comments
Originally posted by kiwimac
OMG, you americans never fail to amaze me. If apple has done some thing you strongly dont like don't use apple products, write letters to them, don't how ever try and make lots of $$$ out of it thats just as bad as what they are doing (if they are doing it that is)
That's funny, I didn't know all 300 million of us Americans were taking part in this lawsuit.
OTOH, outcompeting your resellers - that in itself is not illegal or wrong any way. The only way it can be wrong is if Apple breaches terms of contract they have with the resellers.
Either way, if this behavior continues, of course the resellers would be wise to reassess if they can rely on doing business with Apple.
Originally posted by Gon
Either way, if this behavior continues, of course the resellers would be wise to reassess if they can rely on doing business with Apple.
That's what Apple is hoping, they want these resellers to fall flat on their face or give up. This will be the second time Apple destroyed their competition, clones anyone. Everyone hailed Steve when he came back to Apple except for the thousands of people that lost their lively hood because of the clone ax. Maybe Apple didn?t like Powercomputing, Radius, UMAX or Motorola making a better Apple then Apple, god forbid if you stand in the way of a monopolistic thinking CEO.
Originally posted by Gon
Selling refurbished as new, not honoring warranties, not honoring agreements - these are flat out wrong and if Apple did this I hope they slapped hard enough that they desist.
OTOH, outcompeting your resellers - that in itself is not illegal or wrong any way. The only way it can be wrong is if Apple breaches terms of contract they have with the resellers.
I wholeheartedly agree that the competitive practices are not wrong, unless there is a breach of contract. In my mind, there's practically no such thing as "unfair and unlawful competition" or "unfair pricing policies." However, I'm not so sure that damages would never be awarded to the plaintiff who makes such charges. Don't forget that our government has a policy of "protecting" people from companies that charge too little for their product.
I'm concerned about my Apple stock. At first I thought we'd likely see a small, brief dip in price. Then I thought, This story just broke, it could possibly be big.
Is anyone here placing a stop-loss on their Apple stock?
Originally posted by Relic
That's what Apple is hoping, they want these resellers to fall flat on their face or give up. This will be the second time Apple destroyed their competition, clones anyone. Everyone hailed Steve when he came back to Apple except for the thousands of people that lost their lively hood because of the clone ax. Maybe Apple didn?t like Powercomputing, Radius, UMAX or Motorola making a better Apple then Apple, god forbid if you stand in the way of a monopolistic thinking CEO.
I don't think you are making sense there. If Apple wants to shut down the resellers, they stop selling their machines to them - end of story. No?
It's good to be a monopoly. Every company wants to be, nothing wrong with that. It's a whole different question whether the "clone" affair helped or hindered Apple in terms of marketshare and profits.
The important question about retail is that if these resellers go, is Apple able to fill their shoes more effectively. In this age of Apple Stores on one hand, cheap Internet distribution and electronics chain partnerships on the other, I'm not quite sure there is demand for the specialized resellers anymore. And the specialized media etc. shops that are resellers, probably will remain so. They are not price competetive and do not need to be, because they sell whole solutions and not "boxes".
Originally posted by Ryan1234
Is anyone here placing a stop-loss on their Apple stock?
I already sold my Apple stock two weeks ago; I thought it was a good idea since I bought at 17 initially. This of course was three years ago after Apple fell below 14. I'm thinking of shorting 100 lots before the split, there is no way Apple can keep up this momentum.
Originally posted by AppleInsider
Together they accuse Apple of repackaging and selling refurbished machines to resellers and consumers as 'new products' without notification to the reseller or end customer. They say Apple has not always honored its extended warranty contracts known as Apple Care, and have often shorted consumers on the term of new product warranties.
You have got be kidding me. If this is true then Apple needs to punished because this is unacceptable by any standard.
Originally posted by AppleInsider
For example, if Apple spends a month to repair a customer's iBook, the suit says that Apple is obligated to extend the warranty period one month because the product was not in the consumer's hands. Apple's refusal to correct warranty dates has resulted in the reseller or consumer being wrongfully charged for repairs, the suit says.
This is also very wrong but I think this will not hold up in court. It may be moraly wrong but I don't think this is breaking any laws. Almost all buisness's follow this practice.
Originally posted by Gon
I don't think you are making sense there. If Apple wants to shut down the resellers, they stop selling their machines to them - end of story. No?
Two words: NOT LEGAL.
As you can see from this lawsuit, even treating their competition badly is reason enough to get sued.
They deserve to get 0wn3d on this count alone. After all, when the dual 2.5 G5s were so rare only a chosen few were getting them, Apple's retail stores were getting a handful in here and there.
Hell, even I got my G5 at the local apple store a month before mine was supposed to ship (I then canceled the order).
Retailers of Apple products MUST be given equal chances as Apple direct, otherwise it's considered collusion. Although it might seem strange, this is the law.
Besides, if Apple is selling computers under wholesale prices to their retailers to inflate their profit, that's not legal either.
part of it is our demand for the "no questions asked" return policies. you can open a box these days, do unmentionable things with it, and then take it back to a store and just say "it clashes with my drapes," and, in an effort to make everyone happy, the store takes it back, "no questions asked." and then others pitch a huge fit over a %15 restocking fee. well, if that 15% goes to pay to verify the unit truly is in working order like the customer said it was, as well as resetting the unit back to brand-new conditions, then i am all for it.
i am NOT saying that reselling used merchandise as new is a good thing. but i know where it's coming from, and lawsuits like these are simply symptomatic of the root illness. i would like to see a similar class-action against best buy, circuit city, compusa, etc., etc. etc. let's not JUST make apple the whipping boy for all the rest...
But this sounds like some genuine exceptions that DO need to be addressed. If the charges are not fiction, then this is no frivolous suit.
Originally posted by rok
part of it is our demand for the "no questions asked" return policies. you can open a box these days, do unmentionable things with it, and then take it back to a store and just say "it clashes with my drapes," and, in an effort to make everyone happy, the store takes it back, "no questions asked."
You can't do that with Apple.
Originally posted by kiwimac
OMG, you americans never fail to amaze me. If apple has done some thing you strongly dont like don't use apple products, write letters to them, don't how ever try and make lots of $$$ out of it thats just as bad as what they are doing (if they are doing it that is)
Did you read the specific complaints? Apple is accused of doing illegal things, and using the law to correct that (not just to "make $$$") IS appropriate.
Using Windows is the way to make Apple change? Hardly. And rather a high price to pay for us
[i]I am NOT saying that reselling used merchandise as new is a good thing. but i know where it's coming from, and lawsuits like these are simply symptomatic of the root illness. i would like to see a similar class-action against best buy, circuit city, compusa, etc., etc. etc. let's not JUST make apple the whipping boy for all the rest... [/B]
This doesn't happen at APPLE'S retail stores, which is why this suit was brought up--it gives an unfair advantage:
"if you want to get new products, you'll have to go to apple direct"
Originally posted by rok
i do hope all of you arguing against apple's repackaging of used goods as new realize that all of the tech vendors do this... for everything. i bought a wireless phone from best buy, and not only found it preconfigured, but is had a list of phone numbers still logged in its recently dialed list. and this phone was shrinkwrapped and put back on the shelf as brand-new.
part of it is our demand for the "no questions asked" return policies. you can open a box these days, do unmentionable things with it, and then take it back to a store and just say "it clashes with my drapes," and, in an effort to make everyone happy, the store takes it back, "no questions asked." and then others pitch a huge fit over a %15 restocking fee. well, if that 15% goes to pay to verify the unit truly is in working order like the customer said it was, as well as resetting the unit back to brand-new conditions, then i am all for it.
i am NOT saying that reselling used merchandise as new is a good thing. but i know where it's coming from, and lawsuits like these are simply symptomatic of the root illness. i would like to see a similar class-action against best buy, circuit city, compusa, etc., etc. etc. let's not JUST make apple the whipping boy for all the rest...
If this is true as you say with the formerly mentioned companies then I agree they should be sued. I myself had no idea this practice was so wide spread if what you say is true.
As for Apple being the whipping boy, I say if you have found a company doing this red handed then they should be punished. You have to start with one and move on from there.
I personaly as I believe everyone else here loves most of Apple's products. But with that being said I personaly will not give them a pass or turn a blind eye just because I would like to see the company prosper.
IMHO
The reply by Apple won't get the same press coverage as the original suit and this suit will probably spend a year or so progressing through the courts.
Also try to remember that large companies get hit with law suits on a continual basis - I would hate to think how many active ones Wal-Mart has going at any one time.
Apple Store do compete with resellers in a lot of areas and, if the reseller cannot take care of customers at the same level as the Apple Stores, the resellers are going to have a hard time staying in business. There have been too many complaints about various resellers who have gone out of business because of grubby stores, poor service and not taking care of the customer to make supply issues the only factor in a reseller closing their doors.
Unfortunately for many resellers Apple has set a new standard of what a computer store should be. They are now caught between the very well designed & operated Apple Stores and the mass merchants, like CompUSA.
Other factors in supply issues are things like how well the reseller handles paying invoices (pay slow and you get deliveries slow), their ordering speed (if they put their order in after the Apple Stores they get delivery after the Apple Stores), etc.
Originally posted by slughead
Two words: NOT LEGAL.
As you can see from this lawsuit, even treating their competition badly is reason enough to get sued.
They deserve to get 0wn3d on this count alone. After all, when the dual 2.5 G5s were so rare only a chosen few were getting them, Apple's retail stores were getting a handful in here and there.
Hell, even I got my G5 at the local apple store a month before mine was supposed to ship (I then canceled the order).
Retailers of Apple products MUST be given equal chances as Apple direct, otherwise it's considered collusion. Although it might seem strange, this is the law.
Besides, if Apple is selling computers under wholesale prices to their retailers to inflate their profit, that's not legal either.
I object to the law, then.
There's no moral responsibility for anyone to sell anything to anyone else. None. If they don't want to sell, that is their property and their business. A law that says otherwise is morally wrong.
Any pricing strategy is similarly up to the persons responsible for the sale/trade and should be legal. I don't fully understand what you mean by "selling computers under wholesale prices to retailers" in this case, and why you assert it is illegal.
Originally posted by Gon
I object to the law, then.
There's no moral responsibility for anyone to sell anything to anyone else. None. If they don't want to sell, that is their property and their business. A law that says otherwise is morally wrong.
Any pricing strategy is similarly up to the persons responsible for the sale/trade and should be legal. I don't fully understand what you mean by "selling computers under wholesale prices to retailers" in this case, and why you assert it is illegal.
I meant if Apple is selling products at less than wholesale prices to Apple-brand Apple retailers (the resalers Apple owns), then that's not legal.
There are TONS of stupid rules corporations have to abide by, but on the other hand, corporations are unconstitutional anyway. They're basically tiny little branches of the government. Congress can make hordes of stupid laws governing them, and there's a reason corporations put up with it:
Limited liability, and "public" market stock exchange.
Limited liability means nobody in the corporation is responsible if the corporation makes products that tarket babies for termination, or pollute to the point of mass extinction. All that can happen is the corporation dissapears. Meanwhile, everyone who profitted off of those misdeeds get away without criminal or civil suits, and probably sold their stock so they have a ton of money as well. This, of course, is unconstitutional, but, as any libertarian will tell you, nobody freakin cares but us.
If Apple doesn't like it, they should've stayed a partnership and never become a "public" corporation (where anyone may buy your stock). Once you cross that line, you have to take it in the botox from the government, and they can change the deal whenever they feel like.
Example: After enron, congress passed a law saying CEO's had to sign their financial statements, and certify them; this means they're held responsible if anything goes wrong. If any corporation has a problem with it, they can either go to another country, go F themselves, or become a proprietorship/partnership.
Edit: I know I spelled a lot of things wrong, believe me if I had the time to correct them.. I probably still wouldnt
Originally posted by rok
i do hope all of you arguing against apple's repackaging of used goods as new realize that all of the tech vendors do this... for everything. i bought a wireless phone from best buy, and not only found it preconfigured, but is had a list of phone numbers still logged in its recently dialed list. and this phone was shrinkwrapped and put back on the shelf as brand-new.
Yeah and when that's happened to me, I've promptly packed it up and headed back to the store to return it for a new one. If they're out of stock, I have them take it as a return without restocking fees since I never used it.
Originally posted by slughead
They deserve to get 0wn3d on this count alone. After all, when the dual 2.5 G5s were so rare only a chosen few were getting them, Apple's retail stores were getting a handful in here and there.
Hell, even I got my G5 at the local apple store a month before mine was supposed to ship (I then canceled the order).
Retailers of Apple products MUST be given equal chances as Apple direct, otherwise it's considered collusion. Although it might seem strange, this is the law.
You should also realize that there could be reasons that certain stores are favored. For example, if a particular store is a high volume store, Apple Corporate may favor it and give it hot products sooner than others. Other rating factors may be how many complaints come in, how well they pay their accounts, how many AppleCare contracts they sell, how many accessories they sell with the computer, etc.
If the resellers are low volume stores or whatever, Apple may place them lower in the totem pole. For example, outpost.com had stock of the hot iPod mini last year the day of release! I was able to order one and get it shipped overnight (w/a Saturday shipment nonetheless) and all 3 of my local Apple stores had none to speak of.
This happens in the auto dealership industry all the time. My local Audi dealership got fewer of the new A6s than the Audi dealership 30 miles away because they've been racking up complaints in their service department (so says a third Audi dealership anyway). Hot cars go to the dealerships that sell well, have good customer service ratings, etc.
Anyway, the Apple stores are a godsend. I know of no local Apple resellers and don't remember any going as far back as 98.