Trader Joe’s v. Pirate Joe’s: Another Legal Food Fight, Another Bad Decision

It seems like everyone loves grocery store chain Trader Joe’s. With over 400 stores in the U.S. carrying sometimes quirky low-priced snacks and other groceries, the company has developed a fanatically loyal following. And the happy crew of Hawaiian shirt clad employees generally show the love to customers, too.

Except for the chain’s best customer. Rather than thank him, Trader Joe’s banned him from some stores, and sued him.

Mike Hallatt of Vancouver Canada told the CBS Sunday Morning Show on April 12, 2014 that he estimates spending over $800,000 at Trader Joe’s. So why did Trader Joe’s ban him from stores, and sue him to boot?

Hallatt owns a small store, Pirate Joe’s, in Vancouver. Trade Joe’s has no stores outside of the U.S. Hallatt and his confederates shop at Seattle-area Trader Joe’s stores and bring the goods across the border to sell at marked-up prices in his Pirate Joe’s store in Vancouver to Canadians who crave the Trader Joe’s products.

Trader Joe’s sued Hallatt for trademark infringement. They claimed Hallatt harmed both the store and consumers. Last year a federal district court judge dismissed the lawsuit, concluding there was no harm to Trader Joe’s or to consumers. Trader Joe’s is appealing the decision.

This case presents a good illustration of irresponsible business decision making caused by overlegalization. It also provides a lesson in reputation management.

Hallatt’s Vancouver store demonstrates that there is a demand for Trader Joe’s products in that city. So much so that customers happily pay the marked up prices. Trader Joe’s could easily open a store. Hallatt himself points out that doing so would put him out of business. One has to scratch one’s head and wonder what Trader Joe’s executives were thinking when they bought the lawsuit, and again, when they filed an appeal after losing.

Most likely, this is a case of business people delegating business and reputation management decisions to lawyers. They fell into the trap of failing to identify the problem for what it was. Namely, a reputation management question, not an intellectual property question. Lawyers being lawyers saw the question as a legal question, and recommended legal action. That was not the right business answer.

This case should stand as a reminder to business leaders to remember that just because they have a legal argument does not mean they should make it. Not long ago Unilever brought a law suit against a start-up competitor marketing an eggless mayonnaise product named “Just Mayo”. Unilever claimed to be protecting the consumer, when it was clear they were trying to use the legal system to crush a competitor. The ploy backfired in a social media firestorm, and Unilever dropped the suit. (See my prior post: Food Fight Provides Food For Thought: Overlegalization And Bad Decision-Making.)

In the wake of Trader Joe’s decision to appeal, it has been the subject of unfavorable news coverage.  A key element of Joe’s reputation—an important asset—is its image as a fun, customer friendly, socially responsible business. Everything about the lawsuit runs contrary to that image, and impairs the asset. Trader Joe’s execs took their eye off the ball.

Trader Joe’s execs might want to borrow Pirate Joe’s eyepatch, to cover their black eye.

 

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