Sure, we get the occasional brand vs. brand dustup in court, but the three-ring circus thatopened this week, pitting Macy's against J.C. Penney and Martha Stewart Living Omnimedia already has brought more color than that Apple-Samsung dispute last year—and that's without any of the colorful principals even making an appearance yet.
In the first day of testimony in a Manhattan court on Wednesday, the Stewart-Penney alliance and Macy's made the outlines of their arguments pretty clear.
Macy's believes that an agreement by Stewart's company to supply some of her homeware designs to a giant J.C. Penney "store within a store" violates Macy's agreement for its own Stewart-brand merchandise that has been renewed through 2018. Besides, they believe Martha Stewart and her company owe Macy's some loyalty because it struck a deal with her in 2004 when she was just out of prison for conspiracy.
J.C. Penney and Stewart, on the other hand, believe they're doing nothing wrong in planning to sell Stewart-designed stuff as long as it doesn't bear her actual name and likeness, which they concede would violate terms of the Macy's deal. Besides, this argument goes, a bunch of the stuff has already been manufactured overseas and is on boats on the way to the U.S. for their debut in Penney stores—and does Macy's really intend on asking these ships to turn around?
Even while Macy's was making Stewart the star designer in its stable of VIP collaborators, tensions started rising in December 2011, when J.C. Penney purchased a 17 percent stake in Stewart's company without asking permission from Macy's, according to New York Magazine. Oddly enough, the two retailers seem to be playing tug-of-war over a brand that, according to Bloomberg, isn't doing so hot. MSLO reportedly lost 44 percent of its stock value last year while posting declining revenues for the fourth year in a row.
Among other tidbits revealed in court today: Ron Johnson, embattled CEO of J.C. Penney, crowed in e-mails that the Penney-Stewart deal had "put [Macy's CEO Terry Lundgren] in a corner" and "on the defensive" and prone to "make bad decisions." In one email, Penney executives joked that they had given Lundgren a headache that likely was to become a full-blown migraine.
On the other hand, an attorney for Penney explained at length how the Macy's-Stewart contract possibly could have allowed her to work with his client, and then said, according to Ad Age, "It's unfortunate, but perhaps not unexpected, that Macy's has taken a contract dispute and made it a personal vendetta."
J.C. Penney's plans to field a JCP Everyday brand based on Stewart's designs are "no more than fair competition," said the Penney attorney, Mark Epstein. "Macy's should compete in the marketplace, not the courtroom."
But that ship—like the ones presumably with JCP Everyday merchandise on them plowing across the Pacific Ocean at this moment—has already sailed. So, failing a sudden settlement, this battle of brand titans will move into the next phase when any of the three company chiefs—including Stewart—could be called to the stand.
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