California man alleges $100 million agreement on ink sales

A California man filed suit against printer manufacturer HP and office-supply retailer Staples Inc. in federal court on Monday, alleging the two companies broke antitrust law in a price-fixing collaboration on ink cartridge sales.

Ranjit Bedi of Pacific Palisades, California accused HP of approaching Staples Inc. in 2006 with at least $100 million in “market development funds” and incentives, in exchange for an agreement to stop selling third-party HP-compatible ink cartridges. According to the lawsuit, Staples then used HP’s exclusivity to raise prices on the HP cartridges it offered.

Staples is the largest retailer of aftermarket ink in the United States, with profits from HP-compatible ink sales exceeding $300 million in 2006. Of that total, $75 million came from the sale of third party ink.

Bedi called the agreement a “naked restraint on trade” that prevented customers from purchasing “lower-priced and/or higher-quality” HP-compatible cartridges from third parties, which he claims disappeared off of Staples’ shelves around December 2006. Staples and HP are supposed to be competitors in ink sales, reads the complaint, and such an agreement reflects a “conspiracy to stop competing.”

The suit claims that the HP-Staples agreement violates the Sherman Act and the Clayton Act, which prohibits anticompetitive behavior. It seeks unspecified damages as well as an injunction that terminates the agreement and restores third-party ink cartridges to Staples’ shelves.

At the time of this writing, the Staples-HP agreement appears to still be in effect. Staples’ Ink and Toner website does not list Staples-branded HP-compatible ink, and searches for specific HP models yields only HP-branded ink. While the lawsuit only applies itself to inkjet cartridges, toner appears to be affected as well as searches for common HP Laserjet printers yield similar results.

Printer companies are notorious for protecting their interests when it comes to ink cartridges. Epson sued third-party inkjet cartridge manufacturers in early 2006 and won an preliminary ITC ruling against 24 third-party manufacturers earlier this year.

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