Starbucks sued for trying to sink competition
Independent rival charges in suit that coffee house giant tried to submarine her business through lease agreements and free drink samples.
NEW YORK (CNNMoney.com) -- An independent coffee shop owner filed a lawsuit against Starbucks Corp. Monday, charging the coffee house giant with using anti-competitive tactics to rid itself of competition.
The suit, which seeks class-action status, was filed in a Seattle federal court by Penny Stafford, owner of the Seattle-based Belvi Coffee and Tea Exchange Inc.
The lawsuit contends that Starbucks exploited its monopoly power in the specialty retail coffee market through such predatory practices as offering to pay leases that exceeded market value if the building owner would refuse to allow competitors from occupying the same building.
Stafford says Starbucks also used methods such as having employees offer free drink samples in front of her store to lure away customers, which she says ultimately forced her to closer her store.
"We contend that Starbucks' market practices are more about destroying competition than pouring a good cup of coffee," said Steve Berman, a managing partner with Hagens Berman Sobol Shapiro and attorney of Stafford said in a prepared statement.
Requests for comment from Starbucks were not immediately returned Tuesday, although the company told Reuters late Monday that it was not aware of the complaint and could not provide further comment.
Known as the world's largest retailer of specialty coffee, Starbucks operates nearly 12,000 stores in 37 countries.
The suit contends the world's largest specialty coffee retailer also used other predatory tactics nationwide including offering to buy out competitors at below-market prices and threatening to open nearby stores if the offer is rejected.
"It is clear to us that Starbucks' game plan is to completely dominate a market by forcing out competition, something they've done quite well in the Seattle area," Berman added. "We also believe that this scorched-earth approach is happening in many other major markets across the U.S."
Starbucks (up $0.11 to $34.56, Charts) stock was nearly 1 percent lower in early trade Tuesday on the Nasdaq, while competitors such as Caribou Coffee (down $0.05 to $7.74, Charts) and Diederich Coffee (down $0.04 to $3.94, Charts), which operates that Gloria Jean's and Coffee People brands, were also lower in morning trade.