Bribes Alleged, Nortek Sued For Antritrust Violation

By Dan Gelinas, Published Jul 23, 2018, 10:18am EDT

A case of an unhappy distributor rival or did a manufacturer accept bribes?

Nortek Security and Control has been sued by distributor Security Data Supply (SDS), alleging antitrust violations and violations of state laws governing fair trade for sales of 2GIG products. Also named in the complaint are competitor Wave Electronics and former Nortek employee Earnest Bernard [link no longer available].

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In this note, we examine the case, who is involved, what they claim, what they want and what the defendants' response is.

Key ********

*** ******* **** ****** Nortek, *** * ****** salesperson, ** **** ****** and ******* ******* **********:

  • *** ** ***** *** ~$30 *******, ****** *** damages **** *****
  • *** * ********** ****** the ***********, ******** *** couldn't *******
  • *** ** *** **********, the **********, **** *** deny ********* ******, *** does *** ** *** "just * ********"

Distribution *******

*** **** ** **** case ** ******* **** is ****** ************ ***** distributors ** ******* **** and ****** **** ********* against ***** ************.

***** ****** ***** **** far-fetched, * ********** ********** ******* ** ***********:

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** *** ***** ****, this **** *** ***** bribes ** **** ****.

Overview ** ****

***'********* ************** ** **** ** anti-trust **********:

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*** *************** ******* ********* ********, * ********** ** SDS, ** ******** *********** like ***. *** **** claims **** *** **** by ******** * "**** Star" ****-****** ****** ******* exclusively ** ****.

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*** ********* **** *** if *** ** ****'* dealers ****** **** **** able ** ******* *** a ****-****** *******, *** that *** ********** ******* Bernard *** **** ******* the *********** ** **** dealers’ ****** ******** ** one ****** *** ******* sell ****** ********* ** retail *** "**% ****" than *** ***** *** it ********* **** ******.

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** **** **...

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*******, ***, **** ********* the ***** ********, ***** that **** *********** ****** 2GIG ******** ** *** price **** **** **** for, ********* ******** *****:

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***** ************** ** ******* ** the **** ** **** payments, ******* ****** ******** **** ** ********* for ******* **** ****'* sister ******* **** *****.

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**’* ******* ******* ** not ******* *** ***** or ******** ***** *** complaint ****** **** ** two ********* *****.

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******

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*** ** *** ******* conspiracy, *** ****** ** have **** ** ******* to **** ******* **** almost $** ******* * year.

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Questions ** ******

[**** ** ****** *********]

*** ** *** **** Star ******* *** ********* than *** ***** ***** buy **** *********** **** PSA, ***.? *** ***** Nortek **** ** ****** with ****, ***********? **** would **** ***** ** gain? ** ***** *** a ********** ** *****, was ** *** **** of *** ***, ******* Bernard [**** ** ****** available]? ** *** ****** aware ** **** **’* sales *** ******* *** allegedly *****? *** *******, as *** *** ********* alleges, *** "******" *** his ********, ********** ***** ill-gotten *****?

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Nortek ****** *****, ****** ***

**** ******** *** ********* exhibits **** *** ******* case, ********* *********** ** recorded ***** ************* **** paints **** ** * long-time ******.

* ********** ** * conversation ******* *** ********* Ron ********* *** *******'* replacement, ****** ******** ***** Manager **** ******* [**** no ****** *********], ********* *, ****** ** ***** to ********** ** ******:

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******* *** ***** **** Nortek *** **** ** Anixter, ********* ** *** LinkedIn ******* [**** ** longer *********].

Rival ************ **** ******** *******

******* ************ (******* *) ******* *** ******** DeMarcay *** **** ***** [link ** ****** *********], Tyco ******** ******** ********* Sales *******, **** **** large ******** **** **** from **** ** ******* and ******. *** ******** were ** *****, ** fact, **** *** ****** was ********* **** ** fill * *** ***** he'd **** ***** **** $60,000 ***** ** ** equipment.

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***** ***** ** * competitor,***** ****:

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Rebuttal - *** ****** ** *** ***********

**** **** ******** *** responses **** *** ***** defendants, *** ** **** moved ** ******* *** case.

**********'* ******:

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****** *** **** ******* that *** ***'* ******* due ** *** ************ but **** **** *** whole ********* ** ******* more **** * ******** story ** ******** ******** to ****** * ********** and ********** ********** ** the ****-****** *** ******** distribution *****.

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*** *********, *********** *** ****** as *******.

******* ***** ** ******* because ** ***** ** Fort ***** ***** *** doesn’t **** ***** *** jurisdiction ** *********. ** also ******* **** ** simply * ***** ***, he ****’* ******** ***** the ***. ***********’* ******:

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*******, * *********** ****** "he *** *** ****** in *** "*****", ** least *** *** ********-****** Act ******* **:

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*******, **** ***** ** dismiss, ******** ***** *** not ********** ******** ** support *** ******. **** asserts **** ******* ***' complaint ** ***********, ** means *** **** ** a **** ***. ********’* ****** ** *******:

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'Kickback' ******* **** ****

** ** *********** (*** more **** * ****** funny) ** **** **** while **** ******* ** has **** ******* *****, the ******** **** ** its ****** ******* *** dealers ** '********':

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*** ** **** ********* if **** **** ***********, trying ** ** ****** or ********* *****:

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No ********

***** **** ******** ********* details **** *** ***** filings, ** ******** ** formal ******* ******** **** the *******. **** ******* out ** *** ********* Ron ********* *** **** he ***** *** ******* on ******* ********** *** referred ** ** ******** Larry ******** [**** ** longer *********] *********** ****** ***** & Mayer, ***, ******* *** *** plaintiff. ******** **** ** could ******* ** *** record ***** ********* *** started. **** **** ****** input **** ****** *** left * ********* *** Nortek *** *** ******* Counsel *** ******. ** deadline **** ******** *** not **** ********. ** email ** **** ******* comment ******** ** **** corresponding **** **** ***********’* corporate ******* **** **********, who **** ** *** unable ** ******* *** case *** ******* **** involved **. ****** ** Qolsys, ******* *******'* ******* employer, *** * ******** request/message ** ******* *******, were **** **********.

Concerns ***** ****

*** ** *** *** only *********** **** ******** about ****. **** ****************'* ************* ** ****:

*** **** **** ** sell ** ****** *******. We ****** ****** ******* with **** ******** ****. Absolutely * *** ** compete **** **** *** selling ***** *** ****

*******, *****'* **** **** things **** ******** ***** the ******* *** *****, noting:

**********, **** ******* ****** preferential ******* ** **** this **** **** **** implemented *** *** *******.

** *** **** ******, A **** ***** *******, in ******* *, *** a ******** **** ** Wave:

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Court **** **********

*** **** ** *********** in ***** ***** ***, if **** **** ** settlement ** *** *******, we ****** * ***** to ***** ** ****. IPVM **** ****** ** this **********.

Vote / ****

Comments (15)

Dan, good work!

Manufacturers, distributors, curious to hear if you have any experiences or have you heard of companies offering bribes?

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Thank you, John. Looking forward to hearing everyone's experiences in the following discussion.

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Due to the alleged conspiracy, SDS claims to have lost 59 dealers to Wave costing them almost $10 million a year.

While this scheme seems shady as hell to me, I take issue with the way SDS is claiming damages. 

Nobody "owns" a customer relationship. They certainly have no claim over three years worth of customer relationships (even assuming they're all going to hold steady over the next three years, which I find unlikely).

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Great Article. There was definetely preferential treatment given to Wave. Honestly, I still think there is. 

I would like to hear from any other 2gig distributors as well.

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Wave does massive volume in the door to door market. I have friends who purchase thousands of panels from them each year and tens of thousands of sensors. I'd be surprised if SDS did the kind of Nortek volume wave did. That being said, Wave probably does get better pricing. 

All that being said, Waves prices recently went way up and it's cheaper to purchase from ADI. 

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Waves prices recently went way up 

Gosh, I wonder what changed.

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Who knows, but I say we blame Trump!

(This is meant as a joke. Please take it as such)

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I haven’t played a lawyer on television or radio and I’m not pretending to be one or provide a legal interpretation or advice here.

I have attended countless on-line legal trainings over the past 20 years about what is legal and what isn’t by my employers.

I have also signed a few employment agreements in my career.

The FCPA of 1977 rings a bell for bribery and the risk to the business and individual from a corruption standpoint.  The penalties can be severe and issued to both the company and the employee.  Yes, it’s foreign corruption, but 

I can’t remember signing an employment agreement that allowed me to earn money from another source in the same industry.  I would imagine selling Amway would have been okay.  Of course, I haven’t read or signed a Nortek agreement.

 

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Interesting scene playing out here, where the customer is allegedly bribing the vendor, but not unheard of in the corporate world.  It reminds me of a situation in a prior life when I owned an IBM PC dealership in the 80's.  

TLDR version: We had a national PC dealership network and they gave out the 'IBM Dealer of the Year' award every year.  This one guy kept winning it, until one day he was de-authorized as an IBM dealer.  Turned out he had been grey marketing IBM PC's to Latin America by the container load and his local IBM dealer rep had turned a blind eye to it all.  Why? because the IBM rep's wife was a real estate agent and the dealer listed his house with her and bought and sold it multiple times generating side gig income for the IBM rep's family.

 

Full version:

Part 1: The designation of "authorized IBM dealer" was a gate holder key to being a legitimate player back then. That was akin to being Axis/Milestone Platinum in our industry like maybe 10 years ago. The corporate world was undergoing a seismic shift from dumb terminals to 'intelligent workstations', and if you weren't migrating, you were getting left behind.  With PC's costing about $2500 and up, back then, it was nothing to get a request for a quote for 100 of them from a regional bank, govt. dept, or school.  That brought out the gray marketeers, wanting to get a piece of the action.  The 'grays' as they were, were computer dealers selling IBM's who were not, in fact, authorized IBM dealers.  Where did they source their product you ask?

Part 2: We used to have an annual dealer convention of all the PC dealers in our chain.  They gave out awards for 'top IBM dealer', 'top Compaq dealer', top HP dealer, etc.  This one dealership from New Jersey kept winning the Top IBM dealer, year after year.  Then, the next year, we got word he was de-authorized by IBM.  Well, it was discovered that this dealership was the source of a lot of the gray marketing.  Selling shipping containers of IBM PC's to Latin America and other locations. 

Part 3 How did he get away with it for so long you ask? Well, just like the subject article, every mfg. has a rep that monitors his territory's dealerships.  They help with sales opportunities, tech support issues, and police compliance.  I would hazard a guess that things had gotten cozy enough for an occasional blind eye to be turned in light of the eye popping numbers this dealership was moving.  And it gets better: this particular IBM rep had a wife who was a real estate agent.  As I was told, the IBM dealer decided to put his house up for sale and listed it with guess who. As the story goes, this house was bought and sold so many times, flip or flop would have been jealous. I think it changed hands between the husband and wife, and left no real paper trail. 

 

 

 

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Them were the days:

I can almost see the green phosphorous burnt into the crt.  And they were HEAVY.  The keyboard alone weighed more than a small child.

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So why have hik and dahua been able to get away with it

dahua in UK sold directly to our customers 20 percent below our cost price

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Very interesting article 

I don’t know Wave at all so I will not comment on their behavior 

I do know Ron and he has always been a gentleman 

I am impressed that he has done this

I hope he can affect change

My 2gig sales are virtually non existent 

When I complain to my Nortek rep

I get typical canned answers

We have gone so far as to remove 2gig products from our shelves in our West Coast facility 

It has been impossible to compete with Wave

2gig is not that popular on the East Coast, we do some sales 

Now it all makes sense

With regard to the allegation of bribing reps

That is something that should not be tolerated at all

The idea of the campfire chat is definitely common

I have seen many a relaxed manufacturer rep spill too much info when they are either relaxed or inebriated 

The only thing I think of at that time is

”ok, lets be careful with what I say to this guy since he probably does this elsewhere too”

We are an industry that basically functions on relationships 

Considering that 

The human element will always play a factor 

The possibility of abuse will be there

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The most blatant case of bribery in my experience is when a regional CEO of a large engineering company not only demanded a kickback for a project but also approve prices *much* higher than market average so we could give him more...

On average, most clerks who approve deals of hundreds of thousands of dollars earn not that much and are more than happy to receive a small gift in exchange for choosing the "right" offer among many others.

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"The case is progressing in Texas court..."

s/b Louisiana Court, no? 

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The original complaint was filed in Louisiana, but the court decided to transfer to Texas after the defendants all filed for dismissal on grounds of lack of jurisdiction. 

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