Apple dealers gripe about Searchlight

In its latest move to clean up its retail channels, Apple is threatening legal action against "gray marketers" - computer dealers that sell Macs to consumers and other resellers without Apple's permission.

Responding to "reseller and customer complaints," sources said, Apple Senior Vice President Mitch Mandich last week sent a memo to Mac dealers outlining the company's new Searchlight Program. The new initiative seeks to identify gray marketers and punish those authorized resellers that sell computers to other dealers outside Apple's network.

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The Searchlight Program encourages resellers to provide detailed information about unauthorized Mac sales; Apple also threatened to cancel contracts with any reseller that buys or sells gray-market Macs.

Mandich's memo reportedly included a list of two dozen unauthorized resellers, and it warned resellers that Mac sales to any of the companies on the list "is a breach of your contract with Apple."

Several of the companies on Apple's blacklist, who requested anonymity, acknowledged that they had received a warning letter from Apple; some of the unauthorized dealers said they were leaving the Mac market. "The bottom line is we are getting out of the Apple business anyway," one dealer said. "What's the point if manufacturing is not going to support you?"

Meanwhile, other dealers defended their right to resell Macs at the lowest possible price.

One unauthorized retailer cited a March 1998 U.S. Supreme Court decision that gave resellers broad latitude to market products legally obtained from other dealers. The case, Quality King Distributors Inc. vs. L'anza Research International Inc., involved the resale of hair-care products and found that "first sale" rights allow the initial purchaser to resell the product any way they choose. In the Supreme Court case, international distributors purchased shampoo at a discount from the manufacturer and then resold it back into the U.S. market.

According to sources, the Apple memo threatened "legal action against any parties that infringe Apple's copyright or trademark rights, and against unauthorized resellers who induce authorized resellers to breach their contracts by selling to them."

Cara Lewis, a spokeswoman for Apple's public-relations firm, Niehaus Ryan Wong, declined to discuss legal strategies; however, she said the company "will protect its rights to have its contracts enforced and to prevent third parties from inducing resellers to breach their contracts.

"Apple's Searchlight program aims to reward authorized channel members I who have invested money, time and effort into promoting the Macintosh platform," Lewis said. "Apple has always enforced its contracts but is stepping up efforts to I eliminate unauthorized, unsupported sales that damage Apple authorized resellers and the buying public."

Lewis said unauthorized resellers hurt the Mac market because they don't have the product knowledge that authorized resellers have, and "they can't offer the sales support that authorized resellers can."

"If a customer is unhappy with a product bought from an unauthorized reseller, they're angry at Apple," Lewis said. "But it's not Apple's fault."

Apple reseller Steve Chappell, president and CEO of Accudata Partners Group Inc. of Sunnyvale, Calif., hailed Apple's latest effort. "Part of the reason [for the Searchlight Program] is to ensure that customers get the best education, best value, and best service and support for their products," Chappell said. "Customers [of gray marketers] really get a lack of education about Apple products."

The Searchlight Program is Apple's second step to rein in Mac resellers. Last month the company sent "Dear John" letters to nearly one-third of its U.S. reseller network, revoking contracts with "resellers who do not offer value-added solutions and who are not advocates of Apple products." Apple also eliminated about 4,500 authorized service providers from a network of about 8,000.

In its latest move to clean up its retail channels, Apple is threatening legal action against "gray marketers" - computer dealers that sell Macs to consumers and other resellers without Apple's permission.

Responding to "reseller and customer complaints," sources said, Apple Senior Vice President Mitch Mandich last week sent a memo to Mac dealers outlining the company's new Searchlight Program. The new initiative seeks to identify gray marketers and punish those authorized resellers that sell computers to other dealers outside Apple's network.

	For the latest Mac industry news, point your browser to MacWEEK Online.

The Searchlight Program encourages resellers to provide detailed information about unauthorized Mac sales; Apple also threatened to cancel contracts with any reseller that buys or sells gray-market Macs.

Mandich's memo reportedly included a list of two dozen unauthorized resellers, and it warned resellers that Mac sales to any of the companies on the list "is a breach of your contract with Apple."

Several of the companies on Apple's blacklist, who requested anonymity, acknowledged that they had received a warning letter from Apple; some of the unauthorized dealers said they were leaving the Mac market. "The bottom line is we are getting out of the Apple business anyway," one dealer said. "What's the point if manufacturing is not going to support you?"

Meanwhile, other dealers defended their right to resell Macs at the lowest possible price.

One unauthorized retailer cited a March 1998 U.S. Supreme Court decision that gave resellers broad latitude to market products legally obtained from other dealers. The case, Quality King Distributors Inc. vs. L'anza Research International Inc., involved the resale of hair-care products and found that "first sale" rights allow the initial purchaser to resell the product any way they choose. In the Supreme Court case, international distributors purchased shampoo at a discount from the manufacturer and then resold it back into the U.S. market.

According to sources, the Apple memo threatened "legal action against any parties that infringe Apple's copyright or trademark rights, and against unauthorized resellers who induce authorized resellers to breach their contracts by selling to them."

Cara Lewis, a spokeswoman for Apple's public-relations firm, Niehaus Ryan Wong, declined to discuss legal strategies; however, she said the company "will protect its rights to have its contracts enforced and to prevent third parties from inducing resellers to breach their contracts.

"Apple's Searchlight program aims to reward authorized channel members I who have invested money, time and effort into promoting the Macintosh platform," Lewis said. "Apple has always enforced its contracts but is stepping up efforts to I eliminate unauthorized, unsupported sales that damage Apple authorized resellers and the buying public."

Lewis said unauthorized resellers hurt the Mac market because they don't have the product knowledge that authorized resellers have, and "they can't offer the sales support that authorized resellers can."

"If a customer is unhappy with a product bought from an unauthorized reseller, they're angry at Apple," Lewis said. "But it's not Apple's fault."

Apple reseller Steve Chappell, president and CEO of Accudata Partners Group Inc. of Sunnyvale, Calif., hailed Apple's latest effort. "Part of the reason [for the Searchlight Program] is to ensure that customers get the best education, best value, and best service and support for their products," Chappell said. "Customers [of gray marketers] really get a lack of education about Apple products."

The Searchlight Program is Apple's second step to rein in Mac resellers. Last month the company sent "Dear John" letters to nearly one-third of its U.S. reseller network, revoking contracts with "resellers who do not offer value-added solutions and who are not advocates of Apple products." Apple also eliminated about 4,500 authorized service providers from a network of about 8,000.