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Worldhomecenter.com, Inc. v. L.D. Kichler Co.

March 31, 2009

WORLDHOMECENTER.COM, INC., PLAINTIFF,
v.
L.D. KICHLER CO., INC., D/B/A KICHLER LIGHTING, DEFENDANT.



The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM AND ORDER

Defendant L.D. Kichler Co., Inc. d/b/a Kichler Lighting ("Defendant" or "Kichler") moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure ("Rule") 12(c). In its complaint, Worldhomecenter.com, Inc. ("Plaintiff") seeks damages for Kichler's alleged violation of New York General Business Law ("GBL") § 369-a. For the reasons that follow, Defendant's motion is granted.

Background

The following summary of facts is taken from the Complaint.

Plaintiff is an online retailer of home improvement products, selling to and servicing customers exclusively through its web site, known as "HomeCenter.com." Defendant manufactures and sells lighting products exclusively to its authorized dealers.

Plaintiff purchases Kichler products for value from both exclusive and independent distributors for online resale to Plaintiff's customers. (Compl. ¶ 8.) Because of the relatively low overhead and maintenance associated with on-line retailing, and because Plaintiff purchases a high volume of products from distributors, Plaintiff alleges that it is able to sell genuine Kichler products to consumers at sharp discounts compared to identical products offered for sale by traditional display room retailers. (Id.)

Plaintiff has resold Kichler products over the Internet for several years without incident or complaint. On February 1, 2005, however, Defendant initiated an Internet Minimum Advertised Price ("IMAP") policy that is the basis for the present litigation. That policy provides in pertinent part:

Kichler Lighting ("Kichler") has unilaterally adopted this Policy applicable to all Kichler customers effective February 1, 2005 with respect to the customer's advertising over the Internet of products supplied by Kichler.

1. Each Kichler customer remains free to establish its own resale prices. However, a customer may not A) advertise or otherwise promote Kichler Products over the Internet at a net price less than the Internet Minimum Advertised Price ("IMAP") Kichler establishes from time to time or B) sell Kichler Products to any other person who advertises or otherwise promotes Kichler products over the Internet at a net price less than the IMAP Kichler establishes from time to time. The initial IMAP Kichler has established is 1.8 times Distributor net price.

2. If a customer violates the policy, Kichler will withdraw from the customer all rights to sell, display or list Kichler Products on the World Wide Web for a period of six (6) months, and the customer will cease all sales, displays and listings within (30) days from the date of Kichler's notice to that effect. (Compl. ¶ 13 & Ex. A.). Plaintiff received Kichler's "THIRD AND FINAL NOTICE" advising its customers of potential penalties should any distributor fail to abide the IMAP policy. The notice provides as follows:

Dear Valued Customer:

Once again we are writing to inform you of a new policy from Kichler that will become effective February 1, 2005. We are instituting an Internet Minimum Advertised Price (I.M.A.P.) policy to help our dealers compete with companies that advertise our products at reduced prices on the web.

Due to the growth of the Internet channel of commerce, we are seeing more and more of our distributors losing sales to these low price Internet web sites. Our showrooms and electrical distributors make Kichler what it is today. We recognize the substantial financial investment you have made on our product line. With that investment in mind, it's just not possible to compete with the prices now being advertised on some Internet sites. Therefore we have created this policy to help protect our distributors, allow you to be competitive on the web, and to maintain the integrity of the Kichler line.

We'd like to reiterate one more time the responsibilities of our distributors that supply 3rd party websites. You, the dealer, must only supply web businesses that comply with Kichler's I.M.A.P. policy. If a distributor is found supplying a web site that does not comply with the policy, that distributor will suffer the consequences that are outlined in the policy. We ...


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