Trader Joe's drags a pirate to court

[y4m]

Because I can't resist an innovative/disruptive business model:

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www.sfgate.com/news/article/Trader-Joe-s-drags-a-pirate-to-court-4736782.php


Vancouver, British Columbia -- Michael Hallatt has spent more than $350,000 at Trader Joe's in less than two years. But the popular grocery chain doesn't ever want to see him again.

"I'm their best customer," he said with a mix of pride and indignation.

Every week, the former Bay Area resident drives his panel van across the border to buy a few thousand dollars worth of merchandise at Trader Joe's stores in the States. He then turns around and resells the goods at his own shop in Canada for a profit.

Now, despite the obvious affection Hallatt and his customers have for the eclectic grocer, he finds himself the subject of a lawsuit filed in May by the California company, which has no presence in Canada. The suit seeks to shut down the store he owns in Vancouver that is entirely devoted to reselling Trader Joe's products.

His response: removing the "P" from his front window, turning Pirate Joe's into Irate Joe's. And his cross-border shopping trips continue, even though more and more Trader Joe's markets are posting his picture.

"Almost all the stores in the Pacific Northwest have asked me to leave," said Hallatt, 53, a British Columbia native who lived in the Bay Area from 1996 to 2004, lured by the dot-com boom. "This is a little bit David versus Goliath and a little bit Occupy Grocery."

The lawsuit, filed in federal court in Washington state, alleges federal trademark infringement; unfair competition, false endorsement and false designation of origin; false advertising; federal trademark dilution; injury to business and reputation; and deceptive business practices. Earlier this month, Hallatt's Seattle lawyers filed a motion to dismiss.

"Trader Joe's thinks Canadians are too ignorant not to tell the difference between the empire and my little shop on Fourth Avenue," said Hallatt, whose store is in Vancouver's thriving Kitsilano neighborhood. Even so, he's not taking any chances. A sign on the sidewalk proclaims: "Unauthorized. Unaffiliated. Unafraid."

In the Bay Area
Hallatt became a Trader Joe's fan when he was working in Emeryville for the search engine then known as Ask Jeeves. When he fell in love with a woman from Vancouver, he returned to his hometown and opened Transilvania Trading in January 2012 to sell Trader Joe's products. Late last year, he changed the name and moved to his current location.

"I love this," said Brook Halford of nearby Burnaby, who'd just spent $110 shopping with her mother-in-law and 2-year-old son, Grayson. "And my boy is addicted to the crushers (fruit snacks). He doesn't like the other brands."

Given the cost of gas, goods, duty, rent and salaries for employees and "shopping helpers," Hallatt said he is "barely" getting by. He offers 1,000 products and does not carry fresh or frozen foods. Markups are usually $2 or $3, and keeping items in stock is a perennial problem.

"You know your business model is shaky when your supplier hates you. It's a little bit risky, a little bit cheeky. But I'm Irish, so I like that sort of thing," said Barry Hogan, 26, an immigrant from Dublin who works for Hallatt.

Records indicate that Trader Joe's has obtained a Canadian trademark, which it applied for in October 2010. When asked about the lawsuit and plans for Canada, Alison Mochizuki, Trader Joe's director of public relations, said, "Unfortunately, we don't comment on pending litigation."

Weekly shopping trips
Hallatt usually spends $4,000 to $5,000 in cash during his weekly shopping trips. He used to go mainly to Bellingham, Wash., where more than 40 percent of credit card transactions are with non-U.S. residents, according to the suit. But being in Trader Joe's crosshairs has driven him south, into Seattle, Portland and even California. He said San Francisco is his dream territory.

"You've just got to have unlimited temerity," Hallatt said.

But the gray-market game is challenging. The chocolate Hallatt bought at an L.A. Trader Joe's melted during a heat wave. Chicken jerky dog treats were confiscated at the border because a special permit was required. And his unmarked white van, which can hold well over 100 bags of groceries, often invites suspicion. Once, to avoid being recognized, he decided to cross-dress. He was putting on a leopard muumuu, earrings and flowered flip-flops in a Rite-Aid parking lot when somebody called the police, figuring he was going to rob the drugstore.

"My nail polish was not even dry when three cops showed up," Hallatt recalled.

Can such an enterprise survive much longer, especially in light of the lawsuit by the German-owned chain, which has roughly 400 stores in the United States?

"I don't think Trader Joe's really has a chance, suing here in the U.S.," said lawyer Greg Owen, a trademark, copyright and unfair competition expert with Owen, Wickersham & Erickson, an intellectual property firm in San Francisco.

Perishable items
If Trader Joe's had sued in Canada, or if Pirate Joe's were operating in the United States, the claim might be more viable, said Owen, who reviewed the lawsuit and motion to dismiss. He added, however, that the first-sale doctrine, which Hallatt is fond of citing and which lets people resell what they've bought, is more nebulous when perishable items are involved.

"On the flip side, Trader Joe's is certainly benefiting from Hallatt purchasing the products," Owen said. "They're making money off him."

Pirate Joe's prices
Bought Sold
(U.S.) (Canadian)
Milk chocolate-covered potato chips $2.99 $4.99
Organic extra-virgin coconut oil $5.99 $8.99
Lavender dryer bags $3.99 $5.99
Gluten-free granola, fruit & nut $3.49 $5.99

[ChillyMcFreeze]

I love that he's still calling TJ's his "supplier." It's like that guy you try to break up with and suddenly you realize it's 6 months later and he still thinks you're together.

Also, lol @ calling TJ's "the empire." They're pretty much one of the fairest, most ethical companies out there, no? (Please don't shatter my dreams.)

[secretlyevil]

Wow, he really thought that would work?

[msmerymac]

I got to this point and figured he's way more crazy that I realized:

Once, to avoid being recognized, he decided to cross-dress. He was putting on a leopard muumuu, earrings and flowered flip-flops in a Rite-Aid parking lot when somebody called the police, figuring he was going to rob the drugstore.

"My nail polish was not even dry when three cops showed up," Hallatt recalled.



And also, I feel bad that people have to spend $100 in Vancouver to get probably $30 worth of TJs products. I can count on one hand the number of times I spent more than $100 at TJs and that was when I lived in a state where they could sell alcohol.

[pixy0stix]

I sort of like this guy, and I sort of don't.

[y4m]

I kind of like him. He's buying products and bringing them into a market where they would otherwise not be available. TJ's could easily put him out of business by opening their own store. As long as they don't, who is he hurting?

[Velar Fricative]

I did not know TJ's is German-owned. Thank you Germany!

Also, this guy is like Robin Hood for deprived Canadians, except no actual shoplifting is involved. Maybe there's a better analogy out there.

[msmerymac]

Andplusalso, Trader Joes rebrands a bunch of brand-name products. Obviously they have permission (well, they pay the manufacturer to use the brand), but it's kind of funny that they are flipping their shit about him selling "their" products. Like you're the first ones to come up with chocolate-covered potato chips, Trader Joes.

[Deleted]

I didn't know it was illegal to buy something, and then sell it, lol.

[ChillyMcFreeze]

I mean, if someone opened a Pirate Joe's here, I'm not saying I wouldn't shop at it. I will pay some ridiculous prices for pumpkin cream cheese and butternut squash ravioli.

[Deleted]

Meh, he was price-gouging. No sympathy here. He had to have known this would piss TJ's off once they found out what he was doing.

Remember the outrage on this board over someone buying PBK Halloween costumes and then selling them for a profit on eBay? I don't see how this is any more eithical.

[IIOY]

I adore "Irate Joe's."

Generally you can restrict resale of sample items, but not items of this nature. Without knowing more about the legal technicalities, I'm not sure what's wrong with this.

[ttt]

Aug 17, 2013 6:32:12 GMT -5 sunmoonstars said:

Meh, he was price-gouging. No sympathy here. He had to have known this would piss TJ's off once they found out what he was doing.

Remember the outrage on this board over someone buying PBK Halloween costumes and then selling them for a profit on eBay? I don't see how this is any more eithical.

I don't see how it's similar. People were buying up the PB costumes so that they would be sold out. Then buying them from a reseller at a huge profit was people's only choice.

In this case, the profit isn't huge *and* it's something that wouldn't otherwise be available to people (without a good deal of effort) if this guy didn't exist. The PB resellers weren't offering any sort of added value - this guy is.

[caden]

Aug 16, 2013 15:39:38 GMT -5 y4m said:

I kind of like him. He's buying products and bringing them into a market where they would otherwise not be available. TJ's could easily put him out of business by opening their own store. As long as they don't, who is he hurting?

ditto. I don't know why TJ's cares enough to sue. If anything he's preparing his market for a real TJs if they ever move into Canada. He can't be making so much money doing this that he'd be a threat to a real TJ. I hope this guy wins.

[IIOY]

Aug 17, 2013 6:55:49 GMT -5 caden said:

Aug 16, 2013 15:39:38 GMT -5 y4m said:

I kind of like him. He's buying products and bringing them into a market where they would otherwise not be available. TJ's could easily put him out of business by opening their own store. As long as they don't, who is he hurting?

ditto. I don't know why TJ's cares enough to sue. If anything he's preparing his market for a real TJs if they ever move into Canada. He can't be making so much money doing this that he'd be a threat to a real TJ. I hope this guy wins.

He's actually *helping* TJ's by firming up the market price when he buys items at TJ's and then sells them for a profit.

[Deleted]

Aug 17, 2013 6:51:11 GMT -5 ttt said:

Aug 17, 2013 6:32:12 GMT -5 sunmoonstars said:

Meh, he was price-gouging. No sympathy here. He had to have known this would piss TJ's off once they found out what he was doing.

Remember the outrage on this board over someone buying PBK Halloween costumes and then selling them for a profit on eBay? I don't see how this is any more eithical.

I don't see how it's similar. People were buying up the PB costumes so that they would be sold out. Then buying them from a reseller at a huge profit was people's only choice.

In this case, the profit isn't huge *and* it's something that wouldn't otherwise be available to people (without a good deal of effort) if this guy didn't exist. The PB resellers weren't offering any sort of added value - this guy is.

But TJ products aren't available anywhere in Canada, so buying from the pirate is the only realistic choice the locals have. They have about the same amount of choice that people seeking PBK costumes have - buy from the reseller, or not at all.

Whether or not the profit is "huge" I am certain is a matter of opinion, but I would think the pirate's profit has to be significant to be worth the efforts he's making. As for added value - what added value is he offering?

[redheadbaker]

Are there any laws related to bringing food items over the border from the US into Canada that he would be breaking?

[bugandbibs]

Isn't this what Capitalism is all about? He's just taking advantage of good old fashioned supply and demand.

I would take issue if he were using sweat shops to make knock-offs, but he's buying legit product at full retail and reselling.

[caden]

Locals can buy from the foreign stores like he does. The value he adds is getting the goods moved to become local. For that he upcharges $2 or $3, according to the article. I fail to see how that gouges consumers. Since he has problems keeping the goods in stock it seems his canadian customers agree his prices are fair, esp considering the effort he puts in.

ETA this was to SMS

[rugbywife]

Aug 17, 2013 11:07:08 GMT -5 caden said:

Locals can buy from the foreign stores like he does. The value he adds is getting the goods moved to become local. For that he upcharges $2 or $3, according to the article. I fail to see how that gouges consumers. Since he has problems keeping the goods in stock it seems his canadian customers agree his prices are fair, esp considering the effort he puts in.

ETA this was to SMS

And I don't know if this applies but if the Canadians don't have to pay tax they might be saving money anyways (depending on the item).

[rugbywife]

hmmm, based on the photo I imagine that he has to charge clients taxes. I am actually interested as to what the Canadian government knows about his business, since really he should be paying tariffs on what he imports (maybe he does?)

Also, are the labels on TJ products bilingual? That is a federal law here, you can't sell any product in Canada that isn't labelled in both English and French (not that I think his clients care...it's just Federal law).

[ringstrue]

I thought most retail items were not for resale, which is why most have "not for resale" on them.

If you buy whole sale that's different.

Was the Pirate really getting a better deal by paying TJ prices instead of going directly to (actual) suppliers?

[Deleted]

Aug 17, 2013 11:07:08 GMT -5 caden said:

Locals can buy from the foreign stores like he does. The value he adds is getting the goods moved to become local. For that he upcharges $2 or $3, according to the article. I fail to see how that gouges consumers. Since he has problems keeping the goods in stock it seems his canadian customers agree his prices are fair, esp considering the effort he puts in.

ETA this was to SMS

The customers may be fine with it, but I can't fault TJ's for not being fine with it, especially if he's infringing on their trademark.

[IIOY]

Aug 17, 2013 11:20:34 GMT -5 ringstrue said:

I thought most retail items were not for resale, which is why most have "not for resale" on them.

If you buy whole sale that's different.

I don't think this is true for most consumer goods, and in at least some cases those labels aren't legally binding anyway. IME food items restricted from resale generally lack the requisite nutritional information on the label. Again, I am not familiar with Canadian law so YMMV there.

[caden]

Aug 17, 2013 11:27:23 GMT -5 sunmoonstars said:

Aug 17, 2013 11:07:08 GMT -5 caden said:

Locals can buy from the foreign stores like he does. The value he adds is getting the goods moved to become local. For that he upcharges $2 or $3, according to the article. I fail to see how that gouges consumers. Since he has problems keeping the goods in stock it seems his canadian customers agree his prices are fair, esp considering the effort he puts in.

ETA this was to SMS

The customers may be fine with it, but I can't fault TJ's for not being fine with it, especially if he's infringing on their trademark.

obviously TJ isn't fine with it. I was responding to your claim that this guy was price gouging.

[caden]

Aug 17, 2013 11:20:34 GMT -5 ringstrue said:

I thought most retail items were not for resale, which is why most have "not for resale" on them.

If you buy whole sale that's different.

Was the Pirate really getting a better deal by paying TJ prices instead of going directly to (actual) suppliers?

I usually only see that for items sold in a group and the label says not for individual resale. But I don't know the law at all.

[Deleted]

Aug 17, 2013 11:40:26 GMT -5 caden said:

Aug 17, 2013 11:27:23 GMT -5 sunmoonstars said:

The customers may be fine with it, but I can't fault TJ's for not being fine with it, especially if he's infringing on their trademark.

obviously TJ isn't fine with it. I was responding to your claim that this guy was price gouging.

I know. But honestly, I have a hard time believing he's not making a good profit given the amount of effort he's putting into this endeavor.

[y4m]

Why is how much profit he makes relevant?

[caden]

Aug 17, 2013 11:46:21 GMT -5 sunmoonstars said:

Aug 17, 2013 11:40:26 GMT -5 caden said:

obviously TJ isn't fine with it. I was responding to your claim that this guy was price gouging.

I know. But honestly, I have a hard time believing he's not making a good profit given the amount of effort he's putting into this endeavor.

good profit =|= price gouging. And profit isnt based on effort anyway. I can't imagine he IS making a good profit considering the thin margins on those goods and the complications of border crossings, duties, currency rates, dealing with TJ, gas prices, product loss during transport, etc all in addition to running the store.

[Deleted]

Aug 17, 2013 11:50:25 GMT -5 y4m said:

Why is how much profit he makes relevant?

Because if it was a small profit, what would be the point of investing all the time, money and effort into traveling across the border, transporting cargo, maintaining his store, paying his staff, etc?