According to the complaint, Tennessee-based Capital City Micro misled HP into believing that the discounts were needed to win the business of drinks wholesaler P & E Distributing, but then sold the products to companies and individuals for which the firm had no authorisation to sell.
P & E Distributing Company and its president, David Welker, together with Capital City Micro president Martin Meeks, are also named as defendants in the suit, which claims damages in respect of civil conspiracy, common law fraud and breach of contract.
Capital City Micro was an authorised reseller of HP products in 2001, until HP discovered the alleged abuse of its special discounts. Capital City Micro then obtained a reseller authorisation with Compaq, again claiming that P & E Distributing would be the purchaser of the Compaq products.
When HP and Compaq merged in 2002, HP again terminated Capital City Micro's reseller authorisation.
"HP is committed to supporting our authorised business partners and our customers and addressing cases of fraud and breach of contract," said Scott Anderson, acting general manager, of HP's Solution Partners Organization - Americas. "HP is dedicated to monitoring, investigating and taking appropriate steps to prevent HP products entering the market through unauthorised channels."
This so-called grey market – where goods intended for one market are bought in another, taking advantage of differences in pricing and availability – is a growing problem for the IT industry. One recent industry study by KPMG and the Alliance for Grey Market and Counterfeit Abatement reported that $40 billion worth of IT products are re-sold on the worldwide grey market annually.