LOS ANGELES (CN) - A federal antitrust complaint accuses Swisher International of torpedoing a former business partner by refusing to fill it orders for cigarillos.
Trendsettah claims Swisher International, its former supplier and competitor, violated state and federal antitrust law by refusing to fill thousands orders, to keep its stranglehold on the mark for mini-cigars.
Trendsettah says in its Oct. 14 lawsuit that it jumped the high barrier of entry into the cigarillo market by entering into an agreement with Swisher in January 2011. Under that contract, Trendsettah says, Swisher agreed to make cigarillos for it under the Splitarillo brand name.
But as the Splitarillo brand took off, Trendsettah emerged as a direct competitor to Swisher, according to the 17-page lawsuit.
That did not sit too well with Swisher, Orange County-based Trendsettah says, and Swisher's "view of the company soured."
To stifle Trendsettah's growth, Swisher began restricting the supply of cigarillos to the company and tried to squeeze higher prices out of its competitor, it claims.
Swisher badmouthed the company's product and told third parties that it was going out of business, Trendsettah says.
Trendsettah claims that there was no ceiling on the amount of cigarillos that Swisher was obligated to supply.
"This pattern of conduct was designed to quash competition by doing just enough to help a fledgling company get off the ground, and then crush it, with Swisher's expectation that it would be harder for a failed company to grow into an effective competitor than it would have been otherwise - had the new company built its business from scratch rather than being under Swisher's thumb," the complaint states.
In late 2012, Trendsettah says, two of its most popular cigarillo flavors, OG Sweet and Natural, were particularly in demand.
In an email to a Swisher marketing executive Jane Green, Trendsettah claims it principal Akrum Alrahib wrote: "'Jane, I'm sending you this purchase order because I am starting to get a lot of complaints from wholesalers across the USA!! ... The main flavor OG Sweet and the fastest growing100 natural seems to always be out of stock and they will not buy the other flavors without those.'
"'They are threatening and telling us that they are forced to go back to working with Good Times because of our lack of product and lack in timing of products,'" Alrahib continued. "Right now the brand and company is in jeopardy because of this main obstacle. ... Please, it is time to step up and help me get through this time and give the customers that we both depend on for growth in our brands the continuity what they are DEMANDING.'"
Alrahib placed an emergency order for 7,300 cases of cigarillos, according to the lawsuit. In response, Green said Swisher would ship 1,748 cases, Trendsettah says.
Green told Trendsettah it would ship more product but only if it paid $175 per thousand cigarillos rather than the contractually agreed upon price of $133 per thousand cigarillos, according to the complaint.
Then in September 2013, Swisher told Trendsettah it would no longer make cigarillos for the company, the complaint states.
Trendsettah says that during a visit to Swisher factories in the Dominican Republic its employees saw firsthand that Swisher had "tremendous capacity to produce cigarillos."
Alleging an unlawful monopoly of the cigarillo market under the Sherman Act, violation of Florida antitrust law, breach of contract, and other counts, Trendsettah seeks damages, restitution, a permanent injunction, and costs.
It is represented by Randolph Gaw with Gaw Poe of San Francisco.
Swisher International did not immediately respond to a request for comment after business hours on Wednesday.
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