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Blowout Cards’ parent company sues Upper Deck over distribution policy

By Chris Olds | Beckett Baseball Editor

Blowout Cards‘ parent company, Frontline Collectibles Inc., counter-sued Upper Deck in a U.S. District Court on Wednesday, alleging that the Carlsbad, Calif.-based card company’s distribution policies introduced earlier this year are illegal under antitrust laws and have “manipulated the pricing of its products” and “have harmed and continue to harm competition for the sale of hobby sports trading cards.”

Frontline claims that Upper Deck’s limited selection of distributors in the United States and Canada — which does not include it, despite an 18-year history of selling in the industry — is an “unlawful campaign to erect artificial barriers to entry, restrict output and maintain its monopoly power” with a select few licenses (NCAA, MLS) and a roster of exclusive athletes whose autographs can only be found in Upper Deck products such as Tiger Woods, Michael Jordan, LeBron James and Landon Donovan.

In March, Upper Deck Sports Marketing and Social Media Manager Chris Carlin wrote on UD’s blog about the genesis of its program, saying “this course of action was important in order to strengthen and protect the company’s brands, while also streamlining and better-defining the company’s channels of distribution. UD crafted this program by working in collaboration with our Certified Diamond Dealers (hobby shops), Authorized Distributors and legal team.”

On Thursday, Carlin said Upper Deck declined to comment on the case.

“We cannot comment on any ongoing litigation,” he said, “[nor] can I share information regarding how we select our business partners.”

Frontline, which in its court filing readily admits its business strategy is to sell more volume at a lower profit as “of one of the largest volume and the lowest-cost providers of hobby sports trading cards,” cannot purchase UD products from any other authorized dealers, who aren’t allowed to sell to those who would re-sell the products, as part of its agreement.  Specifically, it contends that “Upper Deck intended to specifically exclude or reduce competition from Frontline because Frontline was engaged in price-cutting to offer the best prices to its customers.”

Specifically, Frontline contends that Upper Deck is in violation of Sections 1 and 2 of the Sherman Antitrust Act and Section 3 of the Clayton Act with its policy.

Previously, Frontline had been a direct buyer of product from Upper Deck since it opened for business, according to the court filing. In an April meeting between Frontline’s Thomas Fish and Upper Deck, Fish was told, according to the filing, that Upper Deck would not recognize its Virginia retail location as a storefront and that enhancements would not help.

Furthermore, Frontline claims that “for pretextural and factually unsupportable reasons” Upper Deck refused to grant it status as an authorized Internet retailer, which has “severely damaged Frontline through lost sales and profits.” Frontline has been an online seller since at least 2004.

Upper Deck’s new policy, which started in April, requires that authorized distributors can only sell to UD-approved dealers, according to the filing. It also requires that those dealers maintain a permanent brick-and-mortar storefront. These dealers and the authorized Internet dealers cannot sell current products to anyone who is not an “end-consumer” within 90 days of the product’s release. Dealers found to be violating these rules — which Frontline contends are selectively enforced — risk losing their ability to sell products. The requirements to become an authorized distributor or online retailer were not disclosed to the public, though an authorized online retailer apparently must also have a storefront and be an authorized dealer, according to one familiar with the policies.

If a customer has a problem with a product which was not purchased through an authorized dealer, they will not be helped by Upper Deck — also a move that Frontline contends has hurt its business.

Frontline has requested a jury trial to decide on compensatory damages, an award triple the amount of damages, restitution and incidental damages as well as attorneys’ fees and any other relief deemed proper by the court.

The counterclaims are in response to a court filing earlier this month by Upper Deck, which requested a southern California district court judge declare that its policy doesn’t violate anti-trust laws in the wake of Blowout/Frontline’s public insistence that the policy was illegal. At that time, Blowout was given until Wednesday to respond.

Chris Olds is the editor of Beckett Baseball magazine. Have a comment, question or idea? Send an email to him at colds@beckett.com. Follow him on Twitter by clicking here.

We cannot comment on any ongoing litigation, not can I share information regarding how we select our business partners.

21 Comments

XstreamINsanity

Honestly, I hope Upper Deck wins. But my question is, didn’t Panini just come out with something like this?

Posted July 21, 2011 at 11:48 am | Permalink
XstreamINsanity

Sorry, I correct my previous comment, I meant I hope Blowout Cards wins. I have no idea why I said Upper Deck, I probably meant to say loses. I know there’s a lot in this in terms of trying to keep brick and mortar stores up, which may be more jobs than an online distributor, but the difference in price is crazy. You pay quite a bit more for the same product that you can online, and this is supposed to be a hobby for adults and KIDS, KIDS who can’t afford the extra $20 to get the same box at the LCS rather than online (through their parents of course).

Posted July 21, 2011 at 11:50 am | Permalink
A retailer for over 20 years

I am in the retail business (not sports cards). As was explained to me and upheld in courts may times, manufacturers have the legal right to decide who can sell their products. They can drop a retail store and have no legal obligation to explain the specific reason. Although I believe Blowout Cards is a fine company, Upper Deck has the right to decide what is best for their product and company.

Posted July 21, 2011 at 12:22 pm | Permalink

Upper deck will probably lose this in a court because of its business monopoly like it or not and will probably send them into a further downward tailspin their inability to still perform in a timely manner still makes their reputation hold the same as always it is a hobby for adults and kids (mostly adults) and just because you can grab alot of the higher end products cheaper than anywhere should not have been a reason to go trough all this bs dealers can still get upper deck through their friends and the constant huge markup of their products will continue to drive people away it is a business and they should make money but a product that has a cost od $75 should not be marked up to $150 just because the word allocated or short printed is used do your research are these things that allocated? print runs of xxx cases? and i the things are all over the place panini needs to watch itself also they are overproducing everything they make and will turn the hobby into an early-mid 90′s crash again

Posted July 21, 2011 at 1:32 pm | Permalink

Upper Deck is acting foolishly and childishly. As much as I cringe every time I see yet another example of why Topps should NOT have a Monopoly on baseball cards, Upper Deck does something else mind-blowingly stupid. If buying UD product from BO means that I cannot get damaged/missing card replacement from UD, then I just won’t spend any $ on UD. Blowout Cards is a staple in the online trading cards industry and I appreciate how they treat me as a customer. UD certainly does not invoke those same feelings of trust and appreciation. A LeBron James or Tiger Woods collector, for instance, does not have this same luxury unfortunately.

Posted July 21, 2011 at 2:28 pm | Permalink
John P

Blowout has no hope. It’s your product, you can distribute it however you want. Blowout. Waste of skin.

Posted July 21, 2011 at 2:48 pm | Permalink
dante

I hope Blowout wins but, in reality I think UpperDeck is completely right to do what they want in that sense. It sucks, but it is what it is. Think about the brick and Mortar guys, they are gonna do much better now in theory.

Posted July 21, 2011 at 2:56 pm | Permalink
Dallas_Booker

I buy local and online, the end user/buyer in this deal gets the short end of the stick. Lest UD comes out with a better product and protects the end user value, no amount of distribution fixing will help the company in the long term. The major producers need to heed the warning, short term “fixes” equal long term “nixes”. Sign of the times, I hope not. Keep it simple. “Player’s, play, Owner’s, own, Collector’s, collect, Distributer’s, distribute, and Lawyer’s, bottleneck.”

Posted July 21, 2011 at 2:57 pm | Permalink
Jason

Will the kiddies on BO’s forums please stop commenting like you have any legal knowledge. This won’t affect your 1-box-every-other-month buying pattern, lol. Just stay out of it and stop embarassing yourselves.

Posted July 21, 2011 at 3:06 pm | Permalink

Once Upper Deck sells the item to their Direct Distributors, they have no legal right to determine who the Distributors sell the product to. Hope Blowout wins. This just adds to the dislike of Upper Deck and their practices.

Posted July 21, 2011 at 3:09 pm | Permalink
Michal S.

Cool. NHL and NHLPA helped Upper Deck to win Monopoly over In The Game back in 2005. Since then, they (UD) destroyed the hobby, the collectors’ base, flooded the marked with waste and now, they are going to destroy their own dealer network. Good luck with digging your own grave and do not expect even single cent from me. And please tell also your tiny pannini minions…

Posted July 21, 2011 at 3:23 pm | Permalink
Larry

I also think UD is retarded. They say if i don’t buy from an authorized dealer they won’t help me if I have a problem. Well just let me say UD hasn’t helped me in the past anyway so why would they start now? I said screw you UD a year ago, and I’m glad I did. I haven’t bought and won’t buy any of their crap until they gain some respect for the hobby (which will probably never happen since they are so arrogant). Upper Deck you Suck and have Sucked for quite some time now!!!!!!!!

Posted July 21, 2011 at 4:28 pm | Permalink
Jonas

I hope Upper Deck loses, i buy exclusively online because i am over 100 miles to the closest hobby shop. And now my selection is cut because i can not buy product for 90 days after release. I guess i don’t really mind, Panini is a good product and i can buy whatever whenever. UD just won’t get my money anymore, their loss.

Posted July 21, 2011 at 6:03 pm | Permalink
Tom Waldron

Intresting so I got this box from blowout andmy Michael Jordan auto is missing hey Ud can you help me No u didn’t buy it from my approved store so nanana boo boo.
Really …. once you sell you product who cares you made your money now get out of the way and back up what you contend is in your boxes. Not sure the leagieze of the suit but who would want to be in the ud plan anyway this is silly in the fast paced market economy of today.
Not well thought out Upper Deck sounds like they are trying ot squeeze every dollar so they can pay off their losses from kanomi. I mean you conterfeted gamming cards and got caught wow !!!
Release the exclusive licences and let free market decide that includes kids too.
I wonder if we will see Lebron and Jordan and co jumping ship soon I would. But money talks and …. you know the rest . jus saying

Posted July 21, 2011 at 6:06 pm | Permalink
eric a.

“Frontline, which in its court filing readily admits its business strategy is to sell more volume at a lower profit as “of one of the largest volume and the lowest-cost providers of hobby sports trading cards,” cannot purchase UD products from any other authorized dealers, who aren’t allowed to sell to those who would re-sell the products, as part of its agreement.”

I find this ludicrous. How can UD ensure that NO UD products are sold to Frontline, esp. from UD AUTHORIZED DEALERS? Now THAT is something I would definitely have a beef with.

How can they try to manipulate the market once it leaves their factory and lands in the hands of PAYING distributors?

Sounds like UD should just sell their goods through UD brick and mortar stores.

But it sounds more like a BLACKLIST of Frontline/Blowout and other distributors.

Posted July 22, 2011 at 12:58 am | Permalink
Trey

I find it fascinating how the jailhouse lawyers on here have determined that Upper Deck has done something wrong by establishing a distribution policy that determines WHO they sell to (and thus excludes Blowout Cards).

If you look at this from a big picture level and move outside the trading card world, there are plenty of manufacturers in other industries (i.e. Nike is the first company that comes to mind) that protect their brand by limiting who is and isn’t allowed to sell their product. It can be argued that controlling who sells your recently released product is necessary because of the destructive effects of dealers whose sole method of distribution are auction sites like eBay (since they only way to distinguish yourself on a multi-seller auction platform is pricing).

Further, the Supreme Court ruled in 2007 that manufacturers are allowed to determined HOW their product is sold because they’re allowed to establish MAP (Minimum Advertised Price) Pricing on their products.

Posted July 22, 2011 at 8:35 pm | Permalink

upper deck dont stand a chance. they are a bunch of cry babies,blowout whip that canday ass. as for topps they are doing a good job

Posted July 22, 2011 at 10:33 pm | Permalink
Scott

Upper Deck can lay an egg and sit on all of their products for all I care. The only thing they will have is the Hockey MLS product and contracts with a couple of over paid douche bags M.J. Lebron and Woods. wich I am fine with because I could care less about NHL hockey and MLS. I would prefer that Blowout would win but I highly doubt it. All you have to do is wait 90 days and the brick and motar stores will dump the over priced cards to blowout for cheap. Most of theBrick and Motar stores buy their cases from Blowout. What a joke the sportscard world has become.

Posted July 23, 2011 at 9:30 am | Permalink
actual collector

I hope Ud wins, while they are not perfect, Blowout does nothing but they to turn a small profit on alot of boxes and the hobby be damned. Anybody that supports them will save a few dollars on some boxes but get screwed when a product gets hot. Remember Topps Gypsy Queen, at my local shop is was 99.00 per box while the mighty blowout had it at 159! If BO and others are allowing to keep screwing the b&M’s, then where do you plan to sell your cards when you need quick cash, want info and a rare pull, or simply want to hang out with like minded people and talk about sports. You can try that at a online store but good luck getting them to care after the order is placed. Less to you pay for something the Less is worth in the long run

Posted July 23, 2011 at 9:39 pm | Permalink
hurt

does any one buy ud’s trash any more any way. why would any one buy there stuff knowing that it’s worth less. I mean who would spend 120.00 a box for about a 40.00 return. I stopped buying there trash years ago. as soon as any of there products come out they tank. stop buying there trash and they will wither and go away. we as collectors can get rid of this terrible company. you never get your redemptions from them because they never intend to give them out. nor do they have them in the first place there just ripping us all off.

Posted July 24, 2011 at 6:28 am | Permalink

Upper Deck and other card companies should have in the first place, made it where retail stores and on line buisnesses could only get the product from distribitors. that way, blow out cards and retail stores get the same prices on boxes and no one has to complain. Sports Cards is one of the only products where buisnesses can actually buy straight from the company instead of having to go thru a distributor. What UD is doing is its trying to make it where the LCS still exsists and where if you want a product when it comes out, you can only get it from them. I do like LCS and love looking thru cards and pack, but when you live 50 miles away from the closest one, you cant do that very ofton (at least i cant). Online is kinda what the world is coming too and if LCS were smart, they’d go do buisness online as well (some do ofcourse). my point is, is no matter what UD does, Online buisnesses, large or small, will always be here selling cards weather anyone likes it or not. If UD was smart, They would have made it where the product was only bought from the distributor by other buisnesses.

Posted July 25, 2011 at 11:25 pm | Permalink

3 Trackbacks

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