US giant Home Depot, the world's largest home improvement retailer, is being taken to court by rival Orchard Supply Hardware after the supply of Makita and Milwaukee power tools to Orchard dried up.
A federal judge has given the go-ahead for the California-based Orchard chain to challenge Home Depot, claiming that it illegally restrained trade by making exclusive deals with the tool suppliers.

The case follows an unsuccessful attempt late last year by Orchard to sue Home Depot, Makita, and Milwaukee for running an illegal group boycott. Orchard claimed that the two suppliers froze off their supply of tools to it shortly after Home Depot announced plans to lock up the supply of key hardware products so it could compete with Amazon and other online retailers. However, the judge threw the case out through lack of evidence.

Now, though, Orchard is being allowed to challenge Home Depot on the basis that it violated the Sherman Act, which prohibits "unreasonable restraints" of trade. US District Judge Jon Tigar was satisfied that Orchard had put up a sufficiently convincing case over the existence of two vertical agreements between Home Depot and Makita and Milwaukee.

"Orchard has alleged that the agreements are foreclosing competitors from competing in a market," he said. "Orchard alleges in extensive detail the nature of the professional power tools market, stating that the market is comprised of three leading manufacturers, including METCo [Milwaukee Electric Tool Company] and Makita.

"Orchard also alleges that the majority of professional customers will view a store as 'deficient' if it does not carry METCo or Makita tools, which will result in those customers ceasing to purchase any products at that store. Without the ability to sell METCo and Makita tools, Orchard will cease to remain a viable seller of professional power tools. By limiting the supply of METCo and Makita power tools, defendants have foreclosed Orchard's ability to compete in the professional power tools market."

Between them, Milwaukee and Makita take half of all sales of 12-volt impact drivers in the US and almost half of sales of reciprocating saws and 12-volt cordless tools and combo kits. Orchard claims that its problems with getting supplies of the two manufacturers' products have cost it around $2m a year.

Orchard is on the brink of being acquired by the Lowe's home improvement business after filing for bankruptcy in June. Only around 70 of Orchard's outlets are involved in the the deal, making the business look like a positive minnow alongside Home Depot, which has stores right across North America, including Canada and Mexico.