Bribes Alleged, Nortek Sued For Antritrust Violation

By: Dan Gelinas, Published on Jul 23, 2018

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].

IPVM Image

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, * ********** ********** ******* ** ***********:

IPVM Image

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

Overview ** ****

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

IPVM Image

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

IPVM Image

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

IPVM Image

** **** **...

IPVM Image

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

IPVM Image

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

IPVM Image

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

IPVM Image

******

IPVM Image

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

IPVM Image

Questions ** ******

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

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

IPVM Image

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

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

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

IPVM Image

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

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

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

IPVM Image

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

IPVM Image

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

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

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

IPVM Image

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

IPVM Image

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

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

IPVM Image

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

IPVM Image

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

IPVM Image

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

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

IPVM Image

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

IPVM Image

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:

IPVM Image

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?

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

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).

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.

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. 

Waves prices recently went way up 

Gosh, I wonder what changed.

Who knows, but I say we blame Trump!

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

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.

 

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. 

 

 

 

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.

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

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

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.

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

s/b Louisiana Court, no? 

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. 

Read this IPVM report for free.

This article is part of IPVM's 6,538 reports, 881 tests and is only available to members. To get a one-time preview of our work, enter your work email to access the full article.

Already a member? Login here | Join now

Related Reports

JCI Sues Genetec For Patent Infringement on Jul 13, 2020
Surprisingly, security giant JCI has sued their partner, security software...
X.Labs Sues FLIR on Sep 16, 2020
X.Labs, the maker of Feevr, has sued FLIR, the publicly traded thermal...
Vape Detection Legal Battle: Soter Sues IPVideo Corp on Jul 22, 2020
The crosstown vape detection rivals are now in a legal battle. While IPVideo...
Axis Exports To China Police Criticized By Amnesty International on Sep 21, 2020
Axis Communications and other EU surveillance providers are under fire from...
Hikvision Sues Over Brazilian Airport Loss on Sep 24, 2020
Hikvision was excluded from a Brazilian airport project because it is owned...
Axis / Avigilon Patent Litigation Ends With 3 Invalidated Patents on Sep 09, 2020
The multi-year, multi-district patent litigation between Canon and Axis...
UK Court Rules Police Facial Recognition Needs Reform on Sep 01, 2020
A UK court has ruled that the South Wales Police use of facial recognition is...
Verkada Falsely Claims "First Native Cloud-based Access Control and Video Security Solution" on Jun 18, 2020
Verkada's false claims continue, this time to be the first native cloud-based...
Convergint Refuses To Fix Faked Fever Marketing, FTC Complaint Filed on Jun 19, 2020
Since Convergint has refused to fix their faked fever camera marketing, IPVM...
Dahua Taunts Australian Government, Continues To Sell Illegal Fever Cameras on Aug 10, 2020
Dahua is effectively taunting the Australian government by continuing to sell...
Faked Convergint Fever Camera 'Expert' Marketing on Jun 16, 2020
Convergint touts they are "THERMAL CAMERA SOLUTION EXPERTS" while faking...
FLIR Suspends Agreement With Feevr on May 07, 2020
Thermal manufacturer FLIR has suspended its agreement with Feevr (aka...
Gait Recognition Examined on Sep 14, 2020
Facial recognition faces increasing ethical and political criticisms while...
Industry Study: 83% of US Temperature Screening Sellers Falsely Say Not Medical Devices on Jun 29, 2020
83% of US companies selling temperature screening devices, aka 'fever'...
"Beyond Reprehensible" Email Leads To Boycott of CPI Security on Jun 10, 2020
One of the largest US security integrators, CPI Security, with $100+ million...

Recent Reports

Hanwha AI Object Detection Tested on Sep 28, 2020
Hanwha has added detection and classification of people, cars, clothing...
Favorite Access Control Manufacturers 2020 on Sep 28, 2020
200+ Integrators told IPVM "What is your favorite access control management...
New Products Show Fall 2020 Starts Tomorrow! on Sep 27, 2020
Tomorrow, IPVM's sixth online show will feature New Products from over 25...
OnTech Smart Services Partners With Google and Amazon To Compete With Integrators on Sep 25, 2020
A pain point for many homeowners to use consumer security and surveillance is...
The Future of Metalens For Video Surveillance Cameras - MIT / UMass / Immervision on Sep 25, 2020
Panoramic cameras using 'fisheye' lens have become commonplace in video...
Hikvision Sues Over Brazilian Airport Loss on Sep 24, 2020
Hikvision was excluded from a Brazilian airport project because it is owned...
China General Chamber of Commerce Calls Out US Politics on Sep 24, 2020
While US-China relations are at an all-time low, optimism about relations...
Verkada Disruptive Embedded Live Help on Sep 24, 2020
Call up your integrator? Have someone come by the next day? Verkada is...
IP Networking Course Fall 2020 - Last Chance - Register Now on Sep 23, 2020
Today is the last chance to register for the only IP networking course...
Drain Wire For Access Control Reader Tutorial on Sep 23, 2020
An easy-to-miss cabling specification plays a key role in access control, yet...
Norway Council of Ethics Finds Hikvision Human Rights Abuses "Ongoing" on Sep 23, 2020
Hikvision's involvement in "serious human rights abuse" in Xinjiang is...
IPVM Camera Calculator User Manual / Guide on Sep 23, 2020
Learn how to use the IPVM Camera Calculator (updated for Version 3.1). The...
Installation Course Fall 2020 - Save $50 - Last Chance on Sep 22, 2020
This is a unique installation course in a market where little practical...
SimpliSafe Business Security Launched Examined on Sep 22, 2020
SimpliSafe has launched "SimpliSafe Business Security" that the company...
FLIR CEO: Many New Fever Entrants "Making Claims That The Science Just Won't Support" on Sep 22, 2020
FLIR's CEO joins a growing number calling out risks with fever / screening...