Star Club Gets Its Case on Tape
A Culver City discount electronics store, stung by a major distributor’s accusations that it was trying to pass off refurbished goods as new, struck back at its accuser with a sting of its own.
Star Club, a discount shop on Sepulveda Boulevard, has sued Canon USA Inc., the American distributor of products by Canon, the Japanese maker of photographic, video and office equipment.
To bolster their contention that authorized Canon dealers were disseminating what they say are unfounded allegations against Star Club, owner Aviv Mizrahi and his brother Alon mounted an impromptu sting operation. They posed as customers at competing stores and, using a floor-model camcorder, videotaped the proceedings.
One tape they submitted to a judge shows a Canon sales representative repeating the accusations. On the basis of the tape and other information, the brothers obtained a Los Angeles Superior Court order last August barring further dissemination of the allegations made in a letter from a Canon regional sales manager.
According to court documents and the attorneys involved, it was in July, 1989, that the Canon manager wrote to several authorized Canon dealers that Star Club was selling, as new, video cameras that had been refurbished and were not covered by Canon’s U.S. warranty--allegations that Star Club denies. The letter, from Glenn Scharaga, video division sales manager for Canon’s Western States region, said this had been discovered from a tracing of camcorder serial numbers.
“Please advise your customers not to purchase these units (from Star Club),” which is not an authorized Canon retailer, Scharaga wrote.
When the Mizrahi brothers heard about the letter from comparison-shopping customers, they went shopping themselves.
Having learned from an advertisement that a Canon sales representative would be on hand to show off some Canon products, Aviv and Alon Mizrahi went to Audio Video City in Culver City. As one of the brothers worked a demonstration Canon camcorder, the other discussed camcorder prices with sales representative Russ Avisson and mentioned that the same model at Star Club cost “a couple hundred dollars less” and was backed by a good warranty.
“That’s not an authorized dealer, and he’s selling open refurbished goods,” the videotape shows Avisson replying. “They (Audio Video City) are not going to match prices with that. That’s like buying a brand new Cadillac and then coming back and saying, ‘I found a Cadillac for half the price, but it’s four years old and it’s got 100,000 miles.’ ”
Avisson referred to a copy of Scharaga’s letter that was on display. “Canon does not even honor (Star Club’s) warranty,” he told the Mizrahis.
The sting operation was repeated at four other authorized Canon retailers, three on the Westside and one in the San Fernando Valley, Alon Mizrahi said. In each shop, Scharaga’s letter, framed, was sitting on the sales counter, Mizrahi said.
Star Club filed its suit seeking unspecified damages in August charging Canon, Scharaga, Avisson and the authorized dealers with unfair competition, libel, slander, interference with its business and antitrust violations. A trial is expected this fall in Los Angeles Superior Court.
Meanwhile, Star Club is drumming up attention to its cause. It played the sting video on big-screen TVs at a news conference earlier this month at the store, which drew, among others, a Japanese television station and newspaper. Loyal customers stood by for interviews.
“It’s just a publicity stunt,” Canon’s attorney, Carl W. Shapiro, said of the news conference.
“I need to clear my name,” Aviv Mizrahi said.
Star Club sees the situation as nothing less than a campaign by Canon to eliminate it as a competitor to Canon’s authorized dealers. The 5-year-old store, which sells below manufacturers’ suggested retail prices and will not quote prices over the telephone, is “a real force in the retail market here,” Star Club attorney Paul H. Rochmes said.
“If I sell at a volume basis, I believe I will be able to sell at a heck of a lot less than the manufacturer’s (suggested price),” Aviv Mizrahi said in an interview. “If I would decide to make less profit, it’s my business.
“Why would a major Japanese company like Canon pick on me?”
Canon attorney Shapiro insisted that there was no vendetta against Star Club. Plenty of retailers sell at discount, he noted. Canon believes that “authorized dealers are able to provide better services and support” to customers, he said. “But Canon as a company does not go out and attack unauthorized dealers.
“This is an isolated incident by a local sales manager,” Shapiro said, and only when Star Club filed suit did Canon’s headquarters learn of Scharaga’s letter.
“This is one of those things you don’t anticipate happening,” Shapiro said. “Canon would have preferred if (Scharaga) would have checked with someone” before he sent the letter. The regional sales manager, as well as sales representative Avisson, have been “counseled,” but they remain in their positions at Canon, Shapiro said.
Scharaga, at Canon’s offices in Costa Mesa, declined to comment, other than to read a statement issued by Canon headquarters in New York: “The employee involved and the person who wrote the letter acted on information they believed to be accurate. . . . Without admitting or denying the allegations . . . such alleged behavior by its employees has never been approved by Canon management and would never be condoned.”
As for the video, Shapiro said, the Star Club representatives “goaded the people into making statements.”
Star Club says its reputation has been sullied, and the lawsuit alleges that the resulting loss of sales and profits exceeds $25,000.
Although he insisted that sales have suffered at the store, Star Club President Isaac Ziv declined last week to disclose any sales figures. He said camcorders account for about one-quarter of the store’s business, which also includes televisions, VCRs, boom boxes, telephone answering machines and stereos.
“Before a person is going to spend $1,000 on a camcorder, he will go and shop around. And when you shop around in other stores and see such a letter, would you go to buy at Star Club? We have no idea how many people saw that letter--hundreds, maybe thousands,” Ziv said.
Aviv Mizrahi said: “We’ll never, never be able to know how bad it (sales) was affected.”
Canon attorney Shapiro responded, “They haven’t come forward with any evidence of any injury to their business,” such as sales figures.
Ziv, who manages the store’s day-to-day operations, said that even now, nearly a year after Canon retracted the letter under court order, “if (we get a call from a potential customer about) a camcorder, the second question is if that merchandise is new.”
THE STAR CLUB STING Here are some excerpts from the sting videotape recorded by Star Club owner Aviv Mizrahi and his brother, Alon. Alon Mizrahi: What do you mean when you say that if you find a better price within a month, you can come back?
Russ Avisson, Canon sales representative: Yeah, they guarantee their prices.
Alon Mizrahi: But we found, in Star Club. . . .
Avisson: But that’s not an authorized dealer, and he’s selling open refurbished goods. They (authorized dealers) are not going to match prices with that. That’s like buying a brand new Cadillac and then coming back and saying, “I found a Cadillac for half the price, but it’s four years old and it’s got 100,000 miles.”
Aviv Mizrahi: The guy tells me he has an American warranty.
Avisson: He can tell you whatever he wants to tell you. I don’t know what he’s telling you. . . . All it is I know is that we have traced back serial numbers and we found out that he’s selling goods that do not have a United States warranty, and they are refurbished goods. So it’s your choice. . . . But that’s what the factory found out.
Aviv Mizrahi: Give us your best price.
Avisson: Well, it’s marked here, $1,299. That’s the suggested price. What have you found so far?
Alon Mizrahi: Star Club was much cheaper.
Avisson: Yeah, but Star Club is not even selling you new goods. So I’m not even going to consider those guys. . . . He does no warranty. If it’s a warranty, it’s his own, because Canon does not even honor his warranty.
Aviv Mizrahi: You’re sure?
Avisson: You just read the letter.
