Sears dealers sue over Kmart acquisition

In a suit that pits Mom and Pop store operators against retail behemoth Sears, a group of Sears store owners sued the chain Monday, claiming its acquisition by Kmart created unfair competition because its products are now available at Kmart and other stores.

The Dealer Store Owners Association, which represents over 200 Sears stores that are owned and operated by families or individuals, filed suit against Sears Roebuck & Co. in Minneapolis federal court, the group said in a statement.

Sears did not immediately return a call seeking comment.

The suit charges Sears breached its contracts with the dealers by selling its products at discount chain Kmart and in other channels. It also claims the company has refused to renew the contracts of two dealers.

These "dealer stores" are owned and operated by families or individuals, and sell Sears appliances, electronics and tools in markets that are too small for a Sears department store -- typically small towns and rural areas.

"Most dealers invested their life savings and 401(k) plans in these stores," the group's president, Steve Granger, said in a prepared statement. "Now they risk losing it all ... this is hardly the way to build trust in a brand name."

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The lawsuit charges that Sears convinced the owners to build up their small-town markets and promised that Sears would keep them in business for life.

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The group charges that Sears is taking away business from these operators by selling the same products through competing Kmarts, and other channels, with little or no compensation.

"It's true that you can now find Sears brands like Kenmore and Craftsman at Kmart stores. In all likelihood, the combination of Sears Holdings is putting a lot of emphasis on popularizing these brands," said Kurt Barnard, president of Retail Forecasting Group. "I don't know to what extent this might impinge or inflict loss of market share to the dealers."

Representatives of Sears Holdings Corp., which was created earlier this year when Kmart acquired Sears for $12.3 billion, could not be reached for comment.