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.
