Home Depot's War With Amazon Causes Collateral Damage: Lawsuit

A lawsuit alleges Home Depot, desperate to compete with online retailer Amazon, is cutting exclusive deals with hardware suppliers—and unfairly cutting its brick-and-mortar competition out of business.

Amazon.com clocked yet another record-breaking holiday sales season in 2012, with 26 million items ordered and 15.6 million units shipped on its peak day. It put even more pressure on the likes of brick-and-mortar stores such as Home Depot—storefront retail had its worst holiday shopping season since '08.

To add to the contention, one of Home Depot's brick-and-mortar competitors says the big box store's attempts to short-circuit online competition amounts to nefarious business practices. In a lawsuit filed two weeks ago in federal court, California hardware chain Orchard Supply claims that in June of 2012, Home Depot publicly announced that it planned to become the sole on-the-ground retailer of some key hardware products. Within a few weeks, Orchard Supply says, two of its longtime power tool suppliers cut off shipments. Makita USA and Milwaukee Electric Tool Corp, both named in the lawsuit, make a substantial portion of the power tools used in the U.S. Orchard claims it stands to lose $2 million from exclusive deals allegedly cut with Home Depot.

"On its own admission, Home Depot plans to organize, coordinate, and use these group boycotts in order to fortify its market positions and rid itself of competitive threats from other brick-and-mortar outlets while it tries to develop a successful strategy for countering the challenge posed by Amazon's online model," the complaint states.

Reached by phone, Stephen Holmes, a spokesman from Corporate Communications for Home Depot, told Fast Company, “We’ll present the specifics of our defense in the proper forum, but I can assure you that The Home Depot is committed to fair competition.”

Amazon, meanwhile, is still above the fray—selling both brands to anyone who wants them.

If true, it's certainly dirty pool. It also may be working. Home Depot had a strong fourth sales quarter, driven by big tickets—sales of $900 and up. Those are the kind of purchases made by contractors and other professionals—the same types in the market for professional-grade power tools.

[Image: Flickr user dmourati]

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