Leclerc Machines de cuisines

Case 4

Overview Date: July 1994

Involved companies : Leclerc machine de cuisines (Paris)

Creative cuisines (Atlanta)

Reliable restaurant and Home Kitchen Supplies (New Jersey)

Participants : Bill Lewis : President of Creative cuisines

Marie Dominic : Attorney representing Creative cuisines

Jane Watson : Sales Manager

Albert Rose : President of Reliable Restaurant and Home Kitchen Supplies.

Sandra Jordan : Account Executive at Feingold Advertising.

Dialogue between Mr. Bill Lewis and Ms. Marie Dominic

Explain a possible legal action against RR and HKS.

“If Reliable is getting its products direct from LeClerc in violation of your exclusive distribution agreement, it’s illegal. Or, it's illegal if the LeClerc products it's selling are counterfeits, not genuine LeClerc products.”

Legal Illegal

Exhibit 1 : Letter sent by LeClerc to all distributors

“If by chance you have supplied Reliable Restaurant and Home Kitchen Supplies with these items, please do not do so in the future.

It is a direct violation of our agreement with Creative Cuisines and will not be tolerated.”

Exhibit 2 : Letter Dominic to Albert Rose, President, Reliable Restaurant and Home Kitchen Supplies

Extract:

“Your distribution of LeClerc products is a grievous violation of this agreement. Full legal proceedings shall be brought…..”

Exhibit 3 :Memo from Jane Watson to Bill Lewis

“It is without a doubt a genuine LeClerc LMC Standard”

Coun

terf

eit

Gen

uine

Exbihit 4: Memo to Creative Cuisines Sales Department from Jane Watson

Extract :

“This is a temporary two-month price cut to head off illegal competition from Reliable.”

SOL

D

20%

30%

LMC

professionalLMC

standart Save

90$

Save 89$

2 Months

Exhibit 5: Reliable’s Ad in Number of Consumer food Magazine and professional journals

Important facts: “Save 30% off” Low price

“Get The Best. Get A Leclerc Food Processor” Confirm that they sell a genuine Leclerc Product.

“Factory Warranty” Show that the are connect with the factory.

Exhibit 6 : Letter to Bill from Sandra Placement of ads in September issues.

Extract :

“Concept: Aggressively take on Reliable. Ad should inform customers of Reliable's "pirate" actions. Emphasis will be placed on possibility that warranty will not be honored.”

No

Warranty

SituationPrevious Situation Troublemaker unfair

competitionActions of Creative cuisine (exhibits)

Creative Cuisines has an exclusive distribution agreement to sell LMC products. the only one who can sell LMC products in the USA.

Creative Cuisines has discovered that an other company, Reliable Restaurant and Home Kitchen, sells the LMC’s products in USA.

Creative Cuisine decreases prices immediately (ex.4)

The company hopes to make good profits with this exclusiveness in the USA and it has accepted to assume all marketing and sales promotion costs to get the contract.

Reliable sells these products at low cost.

CC sends letters to Reliable (ex.2)

LMC have to find a solution if they do not want Creative to sue them and LMC have to respect the agreement

LMC sends letters to all distributors (ex.1)

PROBLEM

How Creative Cuisine and Leclerc can fight against this unfair competition and protect their exclusive distribution agreement in the US ?

???

Solutions #1 : Status quo

#2 : Both companies launch an investigation to find the supplier of reliable

#3 : Advertisement informing illegal actions from Reliable

#4 : Decrease prices only in the US to counter any competitors

#5 :To take Reliable to court

1st : Status quo

Advantage Cost nothing for LMC

disadvantage Lose market share if Reliable keeps

selling LMC products

2nd : Both companies launch an investigation to find the supplier of reliable

Advantage Save money for LMC and Creative

Cuisine

Cover up the case without scandals

Work on long term

Disadvantage Let a competitor in the market during

the investigation.

Together

determine

who is guilty

3rd : Advertisement informing illegal actions from Reliable

Advantage Keep most of market shares

Discredit Reliable

Save Money for LMC

Disadvantage Cost an advertising campaign for CC

4th : Decrease prices only in the US to counter any competitors

Advantage Reliable will probably stop selling

LMC products.

Creative do not lose so much money

Disadvantage LMC lose some money

Not sure that it will work on long term

5th : To take Reliable to court

Advantage Keep being the only seller of LMC

products after the procedure

Can earn a compensation

Disadvantage Cost money and time

May not work

Share the market during the procedure

Our solution

#2 : Both companies launch an investigation to find the supplier of reliable

Because we do not have any answers from Reliable waiting for the response

Possibility to choose a more radical solution if it leads to nothing