HP denies direct selling allegations

HP has officially denied allegations that it has used end-user data gleaned via channel marketing programs to go direct, cutting out resellers.

The hardware giant has repeatedly refused requests for interviews or comment following accusations by resellers in recent months.

Instead, HP issued an 'open letter' on 2 March with the caveat that the contents not be published until 9 March, when the letter was scheduled to arrive on HP partners' desks.

In the letter, addressed to 'all HP supplies channel partners', HP Imaging and Printing Group (IPG) head Rebekah O'Flaherty said that HP had sold '100 percent' of its supplies via the channel for the past 20 years.

'HP strictly adheres to Australia's privacy laws and would never use customer data to bypass the channel,' O'Flaherty said.

In a CRN report 20 February, Brisbane consumables distributor Dynamic Supplies called for resellers and distributors to act against vendors allegedly harvesting end-user details from channel records to bypass resellers.

Kerry McKevitt, financial controller at Dynamic Supplies, said then that vendors were increasingly using marketing to glean customer details – and alleged that HP was one vendor doing so (see story on page 37). Such techniques might be legal but were unfair and could kill off parts of the channel, he said.

Dynamic Supplies sent a February letter to all its resellers warning them of such vendor practices, using HP's February announcement around an HP ink twin pack promotion as an example.

That promotion offered a $10,000 prize to resellers – but required resellers to provide end-user data to be eligible.

McKevitt said at the time that one of Dynamic Supplies' resellers had first-hand experience of HP using subterfuge to go direct that had lost that company $100,000 in profits in less than a year.

That reseller requested anonymity as a result of legal threats from at least two third parties involved, but further alleged that a distributor was 'colluding' with HP to go direct, putting the reseller's business in jeopardy.

HP's O'Flaherty did not directly address those allegations in the 2 March letter, instead criticising news media for reporting resellers' and distributors' claims.

'Our approach to date has been to ignore the spin-doctoring because we are confident that the Australian channel is made up of professionals who simply want to grow their businesses and are able to distinguish sense from nonsense,' O'Flaherty said in the letter.

The letter went on to say that HP would continue to support only resellers that buy from authorised distributors Phoenix Toner, Synnex and TechPac.

'And we will continue to remind resellers of the potential relationship between unauthorised imports and counterfeit product,' O'Flaherty said.

She promised that HP would maintain worldwide pricing parity. She also said that HP had spent 'more than' $10 million generating demand for its 'supplies products', seemingly implying that any vendor that had invested so much money would not also see value in going direct in certain circumstances.

'We ... appreciate the vital role resellers play in serving customers,' O'Flaherty said.

Dynamic Supplies' McKevitt said he had found O'Flaherty's letter 'patronising' and 'full of rhetoric'.

'If there is a good motive for gathering [end-user] data, tell us what it is!,' he said. 'We note that O'Flaherty attempted to address only one issue raised in our letter and even in that she misquoted us.'

McKevitt said Dynamic Supplies never suggested HP would bypass 'the channel' as a whole. Further, HP's letter had neither disproved Dynamic Supplies' claims that vendors could bypass resellers nor addressed whether HP had been gathering end-user data.

'Her strong statement about adherence to Australian privacy laws is rather irrelevant as those laws apply to individuals, not companies,' he added.

Further, O'Flaherty's 'attempt to place any doubt' on Dynamic Supplies' sources of HP product was 'wholly unjustified', McKevitt said.

'We want vendors to respect the strategic importance of a reseller's proprietary data and stop gathering and using that data,' he said.