Blog Post

Apple sued over third-party reseller inventory practices

Apple (s aapl) has an immensely successful self-run retail arm, but it wasn’t always that way. Once, it depended heavily on the kindness of strangers, and those same strangers (third-party resellers) are now bristling at what they see as unfair business practices. The latest example is a new suit by eBizcuss, Apple’s largest reseller in France, which accuses its partner of favoring its own stores with inventory shipments and undercutting its ability to compete for small business customers.

According to its CEO François Prudent, who spoke to French newspaper Le Figaro (via AppleInsider), eBizcuss saw a 30 percent decline in business during the third quarter of 2011 due to stock shortages of iPad 2 and MacBook Air computers. That wasn’t due only to their popularity, Prudent claims. Apple’s tendency to prefer its own retail outlets when shipping new stock contributed significantly to its inability to meet customer demand. Likewise, the iPhone 4S has been in short supply in the fourth quarter, Prudent says.

EBizcuss has spent around $6.5 million getting its point-of-sale system up to scratch with Apple’s very specific criteria. Also, Apple also has taken away eBizcuss’ business customers by offering them prices that the third-party reseller can’t possibly match, since they undercut what it pays Apple itself for the hardware.

Apple’s practices have been the subject of legal action before. MACadam, an Apple reseller that shuttered its business in 2005, joined together with other third-party Apple partners to file a class-action lawsuit alleging unfair business practices, among other alleged wrongdoings. According to both that suit and this new one, Apple has preferred its own retail operations for available inventory since they began opening around the world.

Almost every time Apple unveils a new product these days, especially in the mobile space, early demand leads to supply shortages. According to Apple executives, these shortages result from Apple’s not being able to make product fast enough to keep up with consumer appetite; but these accusations suggest that when new stock does come in, it goes to Apple’s stores and online customers first. That would indeed harm the business of outside resellers, since customers will go with the retailer most likely to be able to meet their needs in a pinch.

Back in February, Dave Greenbaum talked about how Apple’s approach to dealing with its third-party reseller and service partners is beginning to look like outright hostility. This latest suit suggests that the problem isn’t improving as Apple’s own retail reach expands and its website continues to be a hit with consumers. After all, if Apple can sell direct, it will: It recoups more money and builds a stronger direct relationship with customers than through third-party sales. But is it worth costing the Apple user community the benefits of the local independent Mac shop forever?

13 Responses to “Apple sued over third-party reseller inventory practices”

  1. I work with resellers in a different line of business and resellers always complain about something. It’s the constant dance of contract negotiation – more new product sooner, deeper discounts on the product, more marketing support/dollars to spend, greater bonus on selling off inventory when a new product turns, and so on.

    I don’t know what the Apple deal is with more and more stores opening and their relatively small and simple product line with fairly fixed and readily obtained nationwide pricing. All the hack jobs over the years of stuffing cheap memory into boxes or shoveling in CDs of third party software seem to have been the basic tools for the mail order reseller. For the local store, it has to be reputation and service. When your customers don’t have to see that much, it has to be a tough sale.

  2. Ryan and others—
    Your an Apple dealer for many years, then Apple comes along and promises you it is going to open a few showcase stores so that all dealer will do better. But instead it withholds new product and only makes it available via its own stores, then it combs the lists of customers and calls then and tells them if you buy direct we will work a better deal for you. As it turns out both of these are against the law. But it is civil law so the dealers had to sue. Now for years and years Apple has dragged this in the courts to avoid having to change the way they conduct their cut throat business methods and driving the dealers out of business. They hope they all go out of business and therefore the suit goes away. This would be like McD only selling its new McRib in company owned McD’s.
    And Ryan yes all the stores had a contract and Apple does as it pleases in spite of that contract. Then they change the contract every year and tell the dealer you sign or your out of business. Apple is one of the most hand handed companies in the US.

  3. hey bunny, nice try to drag me into an apple/android fight when that wasnt the topic being discussed. the topic was actually companies should follow through with their contracts, but ill play your game.

    im actually a fan of android os and have had a few droid phones, but i hate the custom interfaces these companies throw on the phones on top of android. most are just plain crappy.

    as for the rest of your moronic, android, drooling statement, sub in google, ms, hp, dell, or any other tech company for apple in my statements and i agree with it as well. any company does not owe resellers anything more than whats stated in their contracts. any company should be sued if they breech a contracts terms, but the reseller has the right to settle out of court. did that clarify things a bit for your one track mind?

    • Then why constantly berate someone from a company who has already clearly stated that their company, and others in a possible class action suit, feel aggrieved enough on the contracts they have signed, to take the most wealthy company in Tech to court. They even have some belief that they have a chance of winning against the highest paid lawyers in the world if they are considering a class action suit.

      You have a hole in your ability to use logic, a comprehension problem, or you are a fanatic so “all of the above” applies.

      Oh, I am typing this on my 17″ MBP. I own a 64GB iPad2 (terrible terrible POS), an android tablet and four Windows tablets for my company (my staff and I can use Photoshop, Painter, ArtRage and Sketchbook with accurate pen input. Can’t get that on OSX, even with a Wacom Cintiq). I have OSX and Windows machines at home and in my business. Windows for real graphics work, and OSX as an online buffer on a separate network from the work machines. So you were saying? Just how many Apple machines do YOU have?! Just how many Windows machines do YOU have?! How many Android machines do YOU have?! Over the past six months Apple fanatics like yourself have been getting frantic and have claimed they own all sorts of Android machines and claim they are not Apple fanatics until someone does some background checking on their comments and it is revealed that they only use OSX and iOS products.

      • last time i checked, replying to a direct comment, as i did with thomas, wasnt berating them. but nice try.

        im glad your still on your apple fanboi, apple vs. android kick. im not a big fan of pissing contests, but ill humor you to hopefully shut you up. i own two macbook pros and two windows laptops, a dell and toshiba. all my mobile devices are currently apple, but ive had several android devices, including the droid and droid 2. i run a gamet of video and graphic software, including final cut suite 3, adobe master collection CS4 (mac)/CS5 (pc), windows office, movie magic, final draft, processing and a variety of other software. nice try on trying to trip me up on what i use, but it clearly didnt work.

        have fun with the total bs youre clearly fond of putting out under your cute name. im done playing games with a tool.

  4. Thomas Karkowski

    Ryan, as a reseller their is as contract which all resellers must sign before they can resell product. But most companies work with their resellers to promote a healthy business enviroment. NOT APPLE… they have been sued numerous times and each time they paid off the resellers.. WHY.. it’s wrong to have resellers and stab them in the back. Wwe spend thousands on advertising and promotion then when a new product comes out we can’t get any but the local apple store has a great supply. No thats not proper business. but it is normal APPLE tactics..screw anybody they wish…

    • youre fully missing the point. you signed a legally binding agreement that apple would provide you x number of iproducts if you met a number of conditions that you both agreed to. apples only obligation is to provide you with the number of iproducts you signed a contract for, not keep you in supply as much as you want and hurt their own business. thats not proper business. you chose to become an apple reseller to make money, the same thing apples trying to do. why should they be forced to provide you with more units than your contract states? as for ‘paying off’ other resellers, they chose to settle their cases, it was their business choice, not yours. if apple doesnt hold to your contract, you can make your choice then, until then, dont whine. business boils down to making money, they have no obligation to provide a ‘healthy business environment.’ if you have a problem with the way they work, when the next contract rolls around, dont sign it. take a stand. but im sure youll sign it because the apple products you resell make you money.

      • Ryan, are you the designated Apple religious fanatic on Gigamom today?

        You are doing your job really well. Pushing everyone with any sort of IQ away from Apple and their products with ridiculous claims and/or lies.

        So if resellers take your advice, they should sign no more contracts with Apple, stock no more Apple products and fill their shelves with Android products. I agree with you fully. In fact I believe these resellers were morons to start with for ever trusting Apple. They should sue Apple for any breaches of contract immediately, get their money back and then advertise that they have superior Android products!

    • Your store is no longer part of Apple’s business model. This is what happens when you let yourself become dependent on one supplier and that supplier doesn’t become dependent on you. Your fault, not theirs.

  5. is this a joke? unless apple has a legally binding document or contract they have absolutely no obligation to third party resellers whatsoever when it comes to inventory or anything else for that matter. period. they develop the product, they make the product, and they can sell their product however they want. why should they be forced to sell their own product to a rival, at a loss, just so that rival has inventory? and it is a loss because theyre selling it to the rival cheaper than what they would sell it in the store. grow the hell up.

  6. Damien Moye

    This is why people can’t suceed or prosper. As good as third parties have been to businesses, and they want to pull this stuff. Don’t they understand how many jobs will be lost over the third parties being cut out?

    • who cares how many third party jobs will be lost because apple wants to keep its inventory. how many jobs does apple create or keep when they make profit by selling their own product and filling their stores first?