Tupperware dispute is no party

"We grew our sales one year to $1.3 million and still could not pay all of our bills," MacInnis of Barrie writes on the CAFO website. "They kept us in poverty for eight years."

The Toronto Star
September 18, 2004

Tupperware dispute is no party
James Daw

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The parties are over for four disillusioned distributors for Tupperware Canada Inc.

The women from Hamilton, Barrie, Whitby and Ottawa spent years organizing hundreds of other sociable women to schmooze and deliver rugged plastic products to homes across most of Ontario, winning trips for their sales and organizational prowess.

But they are now in a court battle with Tupperware that will provide the public a peek under the lid of a company striving to avoid the status of mouldy corporate leftover.

Tupperware Canada of Markham is an arm of Tupperware Corp. of Orlando, Fla., founded in 1946 by an inventive DuPont chemist named Earl Tupper. Sales of his premium-priced products took off once the company started using house parties instead of stores for sales.

Over the past several years, however, Tupperware has seen its profit and cash flow slip. Standard & Poor's Corp. cut its debt rating to BB+, or junk status, last December. Tupperware sales have remained around the $1.1 billion (U.S.) mark for years, coming in at $1.17 billion last year. The company's net income fell to just $47.9 million last year from $90.1 million the year before.

According to a Wall Street Journal report in February, Tupperware undermined and drove away U.S. sales reps by selling through Target Corp. discount stores and mall kiosks. In Canada, where distributors were encouraged to rent mall kiosks, the company is accused in court filings of cutting the percentage paid to sales reps, making frequent changes to sales programs and jacking up prices despite a strengthening Canadian dollar. The right to distribute product in this environment has not met expectations, claim Rose Milne of Hamilton, Deborah Ellison of Whitby, Michelle MacInnis of Barrie and Julie Hanna of Ottawa.

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They cite a long list of complaints and accusations on the website of the Canadian Association of Franchise Operators (http://www.cafo.net) and in pleadings filed with the Ontario Superior Court of Justice in Toronto. None of the allegations has been proven in court.

"We grew our sales one year to $1.3 million and still could not pay all of our bills," MacInnis of Barrie writes on the CAFO website. "They kept us in poverty for eight years."

This spring, MacInnis and two others served notice they wanted to rescind their contracts on the grounds they had been misled, according to their statements of defence and counterclaim.

Meanwhile, Hanna refused to sign a promissory note to pay the cost of products already supplied by Tupperware. Like the others, she claims she had been told by Tupperware to pay other debts first if she was losing money.

Tupperware quickly filed similar suits against each of the four women, their companies and three husbands, who were co-owners, claiming they owed a total of $1 million.

The company wants to collect what it says the distributors have yet to pay for their one-year, renewable contracts that gave them the right sell Tupperware to sales reps in their territories. It also wants payment for supplies of product.

But the former distributors are fighting back. They recently filed statements of defence and counterclaims for damages totalling $3.4 million. They dispute how much money they owe, and claim the right to refunds and compensation because of the way they say they have been treated.

The four women had each bought one or two distributorships between 1996 and 2002. Tupperware claimed the territories had 2,270 active sales consultants and 149 managers, with the possibility in most territories of more than $1 million in annual sales.

The sales territories included the area of Mississauga, the northern half of Ontario including a swath as far south as York Region, an area from Markham east to Brighton and north to Peterborough, and the area of Ottawa, Eastern Ontario and Hull, Que.

Tupperware claims the women each signed promissory notes agreeing to pay tens of thousands of dollars, plus 7 or 8 per cent interest on unpaid amounts, by monthly instalment. If they ever missed an instalment payment, terminated their agreement or failed to pay for products, the entire outstanding sum was to become due and payable.

Julie Hanna claims she was told she would be able to draw a salary of $35,000 per year if she acquired the rights to an Ottawa territory with gross sales of $1.6 million, 400 active sales consultants and 40 managers. She agreed in 2000 to pay $220,322 for the territory.

Toronto lawyer Michael Webster has replied on behalf of all of the distributors that they were provided false information about sales, profit, sales reps and potential salary.

He argues Tupperware was selling franchises, considering all of the control and direction it exerted. So he argues the women should enjoy the right under Ontario's Arthur Wishart Act (Franchise Disclosure), 2000, to rescind their contracts and get a refund for lack of proper disclosure at the time of annual contract renewals since the legislation came into force.

If not, then Webster argues the lack of fair disclosure was contrary to requirements set for multi-level marketing companies in the federal Competition Act.

Tupperware Canada has yet to file a reply to the counterclaims. President Regina Panozzo-White said she could not comment while the matter is before the courts.

James Daw, CFP, appears Tuesday, Thursday and Saturday. He can be reached at Business, 1 Yonge St., Toronto M5E 1E6; at 416-945-8633; 416-865-3630 by fax; or at ac.ratseht|wadj#ac.ratseht|wadj.


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