SEATTLE, Sept. 25 /PRNewswire/ -- An independent specialty coffeehouse
owner filed a proposed class action lawsuit today against Starbucks
Corporation (NYSE: SBUX), claiming the company, from its monopoly position
in the specialty coffee market, engages in a range of anti-competitive
activities aimed at eliminating competition.
Filed in U.S. District Court, the suit alleges that Starbucks has
exploited its monopoly power in the specialty coffee retail market to
stifle competition through a series of predatory practices including
exclusive lease agreements, "cluster bombing" of stores and competitor
Among the allegations leveled in the complaint, Penny Stafford -- an
independent coffee-shop operator -- claims that Starbucks locks out
competition through a series of exclusive lease agreements with property
managers of Class A high-rises, preventing other specialty coffee shops
from operating in the same building.
In this practice, Starbucks frequently offers to make lease payments
higher than fair market value in exchange for a property owner's agreement
to prevent competitors from leasing space in the same building, the
In the Seattle and Bellevue markets, the majority of Class A space is
controlled by a handful of Real Estate Investment Trusts (REITs), making
such agreements with Starbucks possible, the suit claims.
"We believe Starbucks has become such a dominating force in the coffee-
house segment, it has become a monopolist," said Steve Berman, managing
partner of Hagens Berman Sobol Shapiro and attorney for Stafford. "We
intend to show that as a monopolist, Starbucks is abusing their market
power to the detriment of its competitors, and to consumers."
"We contend that Starbucks' market practices are more about destroying
competition than pouring a good cup of coffee," Berman added.
According to published reports, Starbucks controls 73 percent of the
specialty coffeehouse market.
"Fair, even bare-knuckle competition is one thing, but we believe
Starbucks has repeatedly crossed the line in denying competition the chance
to go toe-to-toe with them," said Berman.
Stafford, owner of Belvi Coffee and Tea Exchange Inc., tried to enter
the specialty coffeehouse business by seeking retail spaces located in
Seattle and Bellevue's Class A high-rise office buildings, but her entry
was repeatedly blocked despite consumer demand in these locations, the suit
Berman says the lease agreement tactic is just one of a myriad of anti-
competitive steps Starbucks uses to avoid fair competition.
According to the complaint, Starbucks also participated in predatory
actions when Stafford was finally able to obtain Class A retail space in
"Once I found a way into a Class A building, it was obvious to me that
Starbucks decided I had to go," said Stafford. "The nearest Starbucks was
around the corner, but they continually sent employees loaded with free
drink samples to stand in front of my shop, drawing away customers."
Starbucks' campaign lasted for months, and eventually led to the
store's closing, according to Stafford.
The complaint cites a number of other predatory tactics used by
Starbucks, including reports in which Starbucks offers to buy out
competitors at below- market prices, and threatens to open stores nearby if
the offer is rejected.
The complaint also cites instances in which Starbucks uses its huge
financial power to purchase other independent providers in an effort to
squash any presence of independent coffee purveyors.
For example in 2003 Starbucks purchased Seattle Coffee Company
acquiring Seattle's Best Coffee and Torrefazione Italia for $72 million,
which boasted 22 Seattle's Best Coffee and five Torrefazione Italia stores
in the greater Seattle area.
Starbucks then closed all the Torrefazione stores, and more than half
of the SBC stores.
"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."
The suit is asking the court to end what it claims are anti-competitive
activities and seeks to represent coffee shop owners who seek to occupy
retail space in commercial office buildings in Seattle or Bellevue.
According to Berman, he has heard from other coffeehouse owners across
the country who are experiencing the same treatment, and could expand the
suit to include them sometime in the near future.
Starbucks currently sells approximately four million coffee drinks
daily in the U.S. alone. With more than 1,200 stores expected to open this
year, the company continues to grow into a global empire. Its long-term
goal is to have over 15,000 U.S. stores and 30,000 stores worldwide.
For additional information regarding this suit, contact Hagens Berman
Sobol Shapiro at (206) 623-7292 or visit www.hbsslaw.com .
About Hagens Berman Sobol Shapiro
Hagens Berman Sobol Shapiro is a law firm with offices in Seattle,
Cambridge, Los Angeles, and Phoenix. The firm has developed a nationally
recognized practice in class-action litigation. The firm is co-lead counsel
in litigation to recover losses from Enron employees' retirement funds and
represented Washington and 12 other states in lawsuits against the tobacco
industry that resulted in the largest settlement in the history of
litigation. The firm also served as counsel in several other high-profile
cases including the Washington Public Power Supply litigation, which
resulted in a settlement of more than $850 million, and the $92.5 million
settlement of The Boeing Company litigation. Other notable cases include
litigation involving the Exxon Valdez oil spill; Louisiana Pacific Siding;
Morrison Knudsen; Piper Jaffray; Nordstrom; Boston Chicken; Noah's Bagels;
TAP Pharmaceutical's Lupron litigation; and SmithKline Beecham's Paxil
Mark Firmani (206) 443-9357
Firmani + Associates Inc.
SOURCE Hagens Berman Sobol Shapiro