A small plastic hanger supplier is staging a David-and-Goliath court battle against a subsidiary of Tyco International Ltd. that dominates that market.
New York-based Accessory Corp. has accused Tyco's A&E Products Group LP of using trade-restraining practices to convince its department-store customers not to use Accessory's hangers.
The lawsuit alleges that Federated Department Stores Inc., previously one of Accessory's largest customers, dropped the company last year because of questionable tactics by Secaucus, N.J.-based A&E.
U.S. District Court of New York ruled Dec. 7 that six of Accessory's 10 claims against A&E were valid enough for the suit to move forward. Accessory has until Feb. 12 to file a new argument with the court, said Accessory lawyer Robert Rimberg. In addition, Federated might be added to the suit, Rimberg said.
Tyco's decision Jan. 22 to sell its plastics business, including A&E, has no immediate bearing on the case, said a spokesman for Rimberg's New York office.
One of Accessory's claims is that A&E, with more than 80 percent of the U.S. garment-hanger market, is threatening smaller manufacturers. Tyco lawyers did not respond to a request for comment, and a Federated spokeswoman said the company could not discuss an ongoing lawsuit.
Accessory works through a series of outside injection molders to buy and distribute plastic hangers to retail stores worldwide. The 10-year-old company has only 20 employees. President Steven Sutton claims the loss of the Federated business cost Accessory about $20 million in sales last year.
Federated owns Macy's, Bloomingdale's, Bon Marche, Burdines and the Rich's, Lazarus and Goldsmith's stores.
``There are standards and guidelines that [retailers] follow,'' Sutton said. ``A&E is getting customers to bend those rules. We expect all hell to break loose once this gets to court.''
Many retail stores follow floor-ready hanger standards set by a Lawrenceville, N.J., group, the Voluntary Interindustry Commerce Standards Association. Federated's purchasing manual says it follows the VICS hanger program.
Federated no longer lists Accessory as an approved supplier, even though Sutton said his hangers meet VICS guidelines.
The suit contends that A&E coerced Federated to drop Accessory. Tactics included a charge that an A&E recycled-hanger subsidiary would not accept Accessory's hangers.
Tyco-owned FRM Services Inc. gives a credit to Federated and other companies for the used hangers it purchases, the suit alleges.
Another independent hanger manufacturer, Randy Hangers LLC of East Rutherford, N.J., said A&E has not affected its business.
``Federated takes my hangers, and I don't think we've been harmed by A&E,'' said Randy Hanger President Ellen Stein. ``There seems to be some other issue here between Federated and Accessory.''
In 2000, A&E filed a lawsuit claiming patent infringement by Accessory. That suit also is ongoing.
Pembroke, Bermuda-based Tyco has gained attention for its control of the plastic-hanger market. In 1999, the company purchased the No. 2 player, Batts Inc. of Zeeland, Mich. In September, it bought New York hanger supplier W.A.F. Group Inc.
L. Dennis Kozlowski, Tyco chairman and chief executive officer, made a passing reference to A&E's growing might during a Jan. 22 meeting with analysts to announce the company's breakup.
``It's sort of the Microsoft of the hanger world,'' Kozlowski said.