Best Buy and PC Direct locked in legal dispute

Best Buy and PC Direct are engaged in a bitter legal wrangle. PC Direct is seeking damages in the High Court, alleging comparative advertising by Best Buy breached the Fair Trading Act. Best Buy, in turn, is suing PC Direct for $250,000 over an advertisement in the New Zealand Herald which it claims misrepresents Best Buy. The Herald has since pulled advertising from both companies.

Best Buy and PC Direct are engaged in a bitter legal wrangle.

PC Direct is seeking damages in the High Court, alleging comparative advertising by Best Buy breached the Fair Trading Act. Best Buy, in turn, is suing PC Direct for $250,000 over an advertisement in the New Zealand Herald which it claims misrepresents Best Buy.

The Herald has since pulled advertising from both companies.

In a subsequent press release, headed “We’re Fed Up”, PC Direct says its credibility and that of other established industry leaders is being undermined by start-up computer retailers.

“Our sales people nationwide are spending an inordinately large amount of time having to reassure customers that our business is financially secure and that we will be around to honour our warranties and service contracts,” says director Sharon Hunter.

“It concerns us that ... there are some instances where failed companies are able to set up shop again in another guise.”

This appears to be a thinly disguised reference to Best Buy, which was set up when Cost Club went into voluntary liquidation.

Mahony, who established Cost Club, is indirectly a shareholder in Best Buy through 20% held by his family trust. The remaining shares are held by a nominee company representing a number of investors.

PC Direct’s press release outlines the legal action it has taken “for alleged trademark infringements and misleading and deceptive advertising”.

“In the same week as the Best Buy advertisements ran, PC Direct launched a ‘Consumer Warning’ campaign designed to alert computer buyers to the issues raised above,” the release says. “This advertisement featured an excerpt from an article titled ‘Hall of Shame’ in New Zealand PC World, February 1997.”

Best Buy took issue with this advertisement, in particular the out-take, alleging that it drew a link between it and failed computer retailer Cost Club Ltd.

When Best Buy was established on April 4 last year, it bought selected assets of Cost Club. Mahony says he put $50,000 into Cost Club two weeks before it went into voluntary liquidation on April 19.

Best Buy is primarily selling the Pegasus brand, assembled in Hamilton. It also offers a range of notebooks: AST, Olivetti and Pegasus. Pegasus supplies support, ironically, from premises next door to PC Direct in Auckland’s Cook Street.

PC Direct says lawyers for both parties are meeting to establish hearing dates.

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