Ace High, Behr Low

Lawsuits topped the news last week with independent hardware cooperative Ace Hardware getting served with a summons alleging a hub-and-spoke price fixing conspiracy and Behr settling their copyright infringement case with ABKCO Music for their unlicensed use of the Rolling Stones song Paint it Black, in a marketing campaign.

The case against Behr lasted as long as I presumed when I covered the filing in January of this year, when I called Behr incompetent for allowing an intern’s mistake to litigate beyond the demand letter.  This fast settlement is evidence of that assertion.  And of the bad decision-making which often comes out of Santa Ana, the corporate headquarters for the Behr Paint Company. 

Where market share continues to drop and heads continue to roll for it. 

The case against Ace and aligned software provider Epicor alleges that the companies conspired to coordinate retail prices and orchestrate an illegal nationwide price-fixing scheme across thousands of member stores.  A claim they’ll have trouble making to a jury if this case ever sees one, which based on my understanding of the relationship between Epicor and Ace dealers seems unlikely.  Nonetheless it’s a nuisance both companies will have to deal with, likely increasing the line items for legal defense for the $10 billion hardware coop and Epicor. 

The plaintiff Sean Twomey will have a lot to overcome to achieve the class action status he’s requesting from the court, and reaching that still leaves him well-short of proving a Sherman Antitrust claim.  That just accessing that data makes an Ace dealer complicit in a “rimmed” conspiracy seems an impossible hurdle, especially considering that participants in the program are under no obligation to adjust their prices. 

And if Twomey can get over that, the case might still only apply to Ace-branded products, which likely represent less than 20% of the co-op’s yearly revenue.  The remaining 80% of what’s inside an Ace is all available down the street and around the corner at Home Depot, Lowe’s, Benjamin Moore stores and more than 10,000 non-Ace-branded independent hardware stores around the country.  All who set prices independently and establish the market for Ace dealers to price to and thinking that Ace could move that is a folly akin to Irick’s.  Making the case seem more a grab for billable hours than consumer protection, one I give Ace and Epicor some probability of winning on their early motion to dismiss. 

I make those odds about a three-legged parlay so while it might hit for Ace and Epicor, it’s more likely that the case will proceed.  So that the lawyers can make their buck, which is what class action cases like this seem mostly about, since all Mr. Twomey and other claimants who materialize can expect is a 25% off coupon to use on their next trip to a store.

I wonder if offers can be combined?

Also last week, Benjamin Moore CEO Dan Calkins addressed the press at the Berkshire Hathaway annual shareholder meeting.  Calkins said that the economy is a “headwind” for Benjamin Moore, before adding that the company had a good first quarter.  Speaking about his outlook for the remainder of the year though, my former boss seemed less sure, adding his concerns for the rising price of oil. 

Duh.

Crucially, Dan assured his dealers that Moore’s supply chain was made in the USA, similar to what Dunn-Edwards CEO Monte Lewis shared on an episode of LIVE we recorded in April.  Allowing a sigh of relief for the architectural coatings segment, but only if the war ends soon.  Because Dan went on to say that “we’re starting to see some force majeures,” a French word which translates to “shortages next week” if the war does not end soon. 

Explaining my forecast for more price hikes, perhaps as early as next quarter and certainly before the end of the year.  No matter Monte and Dan’s optimism.

Calkins added that he’s preparing Benjamin Moore for disruption from the war, having already, “cut back on our capital spend” and paused initiatives, which a man with $400 billion in the bank has no need to do.  Giving a hint to the size of the disruption which Calkins is expecting. 

Talking paint Calkins shared that his super premium and premium offerings continue to post strong results, while more moderate consumers are starting to trade down in price.  Which should not be a problem for the Montvale-based Moore, which has a line deep enough for their dealers to adapt.  As long as consumers keep buying something. 

Which I’m not convinced they’ll continue to do.        

On Monday I dropped a new episode of Boycott Sherwin-Williams, THE podcast whose title says it all about the conditions CEO Heidi Petz is creating in Rochester, Pennsylvania.  So unfortunate are they, that every day last week I spoke with a member of the unluckiest group.  Because eight years ago John Morikis didn’t give a shit about them either, so now both Morikis and Petz bathe in the riches their greed allows. 

Leaving Rochester to bathe in the tears.

My blog last week contained a flaw so fatal I had no choice but to remove the post, thankfully before my mistake had spread much further than a handful of the most fervent of you.   It was my first retraction (for real) in my memory and so had a profound impact worthy of reflection, which I plan to do in an upcoming video.  If you’re one of the few who caught the piece and can’t wait for those details, you know what to do.