Night of the Long Knives for Tier-2 resellers

Written by Matthew JC Powell Mon Apr 26 2010, 04:05pm

A number of Australian businesses supporting Apple got an unpleasant start to the ANZAC Day long weekend — notification that their support is no longer required. Multiple "tier-2" Apple resellers were sent emails late on the afternoon of Friday the 23rd of April informing them of the termination of their reseller agreements with Apple — meaning they are no longer permitted to sell Apple hardware.

Tier 2 resellers are generally businesses such as consultants and service centres that might, as part of the service they provide, sell a customer an Apple computer if required. The sale of Apple hardware is not their primary source of revenue, and only in a few cases is it even a significant portion of their income.

However, the manner in which the agreements have been terminated has more than a few backs up.

MacTheMag has been contacted by a number of resellers (who asked not to be named) informing them that their agreements have been terminated in accordance with Clause 13.B of the contracts. That clause (in section i) allows for either party to terminate the agreement at any time, without cause, on the provision of 30 days' notice. However, the letters MacTheMag has been shown specifically state that the termination is effective immediately, not in 30 days' time.

Clause 13.B (ii) allows Apple to terminate the agreement with immediate effect where: "(a) Reseller fails to fully perform any obligation under this agreement or violates any Business Practice and Procedure, (b) Reseller commits a crime or engages in any unlawful or unfair business practice, (c) there is a material change in or transfer of Reseller's management, ownership, control or business operations, or Reseller becomes affiliated, through common management, ownership, or control, with any person or entity that is unacceptable to Apple, (d) Reseller's actions ex pose or threaten to expose Apple to any liability, obligation or violation of law, (e) Reseller fails to maintain sufficient net worth and working capital to meet its obligations, has a receiver or trustee appointed for its property, becomes insolvent or makes an assignment for the benefit of creditors, (f) Reseller closes its last Authorised Location, or (g) Reseller abandons this Agreement."

Got all that?

Not only does it seem unlikely that numerous of Apple's business partners simultaneously breached their agreements with Apple in any of these ways last week, but all of the affected resellers who contacted MacTheMag are adamant they have not committed any such breach. Several expressed surprise, having previously had no issue whatsoever in their dealings with Apple. None of the letters shown to MacTheMag specify the manner in which Clause 13.B is purported to have been infringed.

There were, however, some warning signs. One such reseller, who is primarily a consultant, said he was speaking to an Apple Store employee about a month ago who mentioned, in passing, that in future Apple wanted all of his sales to go through the Apple Store but didn't elaborate. Another mentioned a colleague who had tried to renew his tier-2 agreement with Apple "about six weeks ago" only to find that the option was no longer available.

In other words, it appears Apple has been planning this move for some time and could easily have provided the requisite 30 days' notice called for in Clause 13.B (i), giving these businesses time to satisfy outstanding orders, keep their customers happy and line up alternative revenue sources. Instead, by terminating the agreements "effective immediately" Apple has invoked Clause 13.B (ii), effectively accusing a number of its partners of unspecified wrongdoing and leaving several of them with customer orders they will now not be able to fulfill. Sending the letters out on the Friday night before a long weekend, meaning the affected resellers were not even able to call Apple for clarification, is the icing on the cake.

Comment has been sought from Apple regarding this issue.

UPDATE Apple's response to MacTheMag's questions regarding this issue in full:

"Apple does not comment on its business operations".

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