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Independent Dealers Accuse IKON of Unfair Business Practices

6 Oct, 2004 By: Editorial Staff imageSource

Independent Dealers Accuse IKON of Unfair Business Practices

independent copier dealers have filed a complaint against IKON accusing the
company of improper business dealings.

complaint, filed July 12 in the United States District Court in Northern
California, claims that IKON and its former 100 percent-owned subsidiary IOS
Capital, LLC used nationwide business practices to “defraud office equipment
customers, to obtain unlawful payments from such customers and plaintiffs, to
monopolize and foreclose markets from the competitive alternatives provided by
plaintiffs and other competitors of IKON and to avoid compliance with state and
federal laws.”

“We’re looking to clean up the industry and level the playing field for all
dealers,” said the plaintiffs’ attorney James A. Hennefer, adding that five more
plaintiffs would be joining the mix. “Given the practice IKON is engaged in, I
feel a whole segment of customers has been precluded from getting their fair

question is the cost-per-copy contracts sold and administered and the practices
used to enforce them by IKON and IOS Capital, according to the complaint.

contracts themselves are obtained under false pretenses,” the complaint states.
“Subsequently, fraudulently obtained amendments to these contracts, known as
“flexes,” extend this period for years beyond the original term and unreasonably
restrain competition in the relevant markets for equipment, supplies, parts and
service during or after the expiration of the original term of the contract."

According to the complaint, IKON and IOS Capital used the cost-per-copy
contracts to also “obtain exorbitant “buy out” payments for termination of the
contracts and amendments.”

complaint alleges that IKON salespeople intended to extend the customer
contracts through the flexing practices by offering items such as free machines,
but eliminating language in the amendment which warned that the original
contract could be extended.

“Suggestions by IKON administrative personnel who received complaints from
customers who had been “flexed” that such clarifying language should be added
were rebuffed,” the complaint states. “Amendment forms were devised where blanks
that were not filled in, like the length of the amendment term, would default to
an extension of a length equal to that of the original term, usually 60 months.
IKON sales representatives were trained not to bring the original contract and
not to mention the original contract or machines under that contract in meeting
with the customer to obtain the amendment.”

complaint continues, “IKON sales representatives were allowed and trained to get
a signature on the amendment from the lowest ranking person in the customer’s
office, not from the person in charge of contracts. IKON sales representatives
took advantage of dire needs of customers such as defective or broken equipment
which needed replacing immediately to obtain a signature on the amendment. If a
customer discovered they had signed a “flex” amendment, IKON sales
representatives would often obtain another “flex” allegedly to alleviate the

complaint also alleges that “the anticompetitive purpose and effect of the
fraudulent extension of the original term was made clear in the IKON Field
Training Manual. The manual stated that flexing makes it “[v]irtually impossible
for competition to penetrate [the] account.” The manual explained that, “[I]t
creates separation from the competition at the end of the original Agreement
term . . .”

are also claims in the complaint that if a customer complained about the flex
service to their equipment would be cut off and if a customer was seeking to
leave IKON, the company would quote an “exorbitant” buy-out and refuse to
itemize the charges.

Media Relations Manager Steven Eck said in an email that IKON does not comment
on pending litigation. He pointed out, however, “We believe that this complaint
is without merit and will vigorously defend ourselves against the allegations in
this complaint. In addition, IKON will shortly be filing a motion to dismiss
this action in its entirety.”


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