Back in June, Home Depot said it intended to defend its position as power tool market share leader. Now the giant chain finds itself a defendant in a lawsuit filed by Orchard Supply Hardware.
In a 43-page complaint, San Jose, Calif.-based Orchard said it's being iced by power tool makers Milwaukee and Makita at the urging of the world's largest home improvement retailer. "Orchard Supply vs. Home Depot, Milwaukee Electric Tool and Makita USA" was filed in December in U.S. District Court in San Francisco. OSH claims the defendants are running an unlawful group boycott.
"Milwaukee and Makita both unexpectedly cut off all further supplies to Orchard at around the same time in June 2012, doing so very shortly after Home Depot had publicly announced that it planned to lock up the supply of key hardware products in order to counter the competitive threat posed by Amazon and other online retailers," reads the complaint.
Included as Exhibit 4 in the complaint is an article that appeared June 7 onHomechannelnews.com, "Home Depot will defend its lead in power tools." In the article, Craig Menear, VP merchandising told investors and analysts that Home Depot is developing strategic relationships with suppliers.
According to a Home Depot spokesman, all is fair in the power tool aisle. "We'll present the specifics of our defense in the proper forum," said Stephen Holmes of Home Depot. "But I can assure you that The Home Depot is committed to fair competition."
Milwaukee and Makita, which declined comment, account for 50% of all sales of 12-volt impact drivers in the United States, the complaint said. They combine for 46% of reciprocating saws and 44% of 12-volt cordless tools and combo kits.
Without Milwaukee and Makita products, Orchard said its ability to remain a viable competitor in the power tool market is threatened, especially when it comes to selling to tradesmen. Orchard estimates its losses attributable to the cutoff at about $2 million per year.
Furthering the controversy, the complaint alleges that Ace Hardware Corp. and other wholesalers are also being denied Milwaukee and Makita products, but an Ace spokeswoman dismissed the idea: "Makita and Milwaukee both enjoy excellent relations with Ace Hardware Corp. and our stores," she said.
It's going to take the courts to figure it all out.