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Onsale faces supplier lawsuit

Corporate Systems Center claims that Onsale mismanaged inventory and misrepresented winning bids on its auction site. Another supplier is trying to settle its complaint without going to court.

Onsale is involved in at least two billing disputes with former product suppliers for its auction site, and one supplier has filed a lawsuit against the e-commerce company.

The lawsuit, filed in February by Corporate Systems Center of Santa Clara, California, paints an unflattering portrait of Onsale as a company unable to keep track of the products it sold. The company alleges that Onsale mismanaged $1.08 million of inventory by misrepresenting winning bids and even returning Computer Systems' products to other suppliers.

The lawsuit is not the only one Onsale faces. A complaint recently filed by the Santa Clara County District Attorney alleges that Onsale misrepresented shipping costs in its atCost business, in which Onsale offers goods at wholesale prices to consumers but charges processing fees.

According to Corporate Systems' lawsuit, Onsale agreed to pay the supplier for goods sold through Onsale's atAuction site, minus a commission. Corporate Systems, which specializes in data storage devices, shipped Onsale more than $10 million of products between March 1997 and December 31, 1998, according to CEO Martin Bodo.

But Onsale failed to account for all of the products it received from Corporate Systems, the lawsuit alleges. In addition, Corporate Systems claims that Onsale, through purchase orders, email and voice mail, told the company that its products were selling for higher prices on atAuction than they actually were. Later, according to the lawsuit, Onsale claimed the items sold for prices lower than previously stated.

Corporate Systems' lawsuit asks for repayment of the $1.08 million, but because of the alleged misrepresentations, it is also asking for punitive and treble damages.

"For us not having that $1 million hurts us, but suing them was really a last resort," Bodo said.

Onsale spokesman Brian Fawkes said the company has responded to the lawsuit, disputing the $1.08 million claim. Onsale is waiting for evidence from Corporate Systems that would back its claim, he added.

"We've substantiated our side," Fawkes said. "The accounting issue for the money in question was not able to be substantiated from our end."

Computer Systems is not the only supplier involved in a billing dispute with Onsale. Jeff Rassas, chief executive of Scottsdale, Arizona-based CPU Micromart, said Onsale owes his company more than $100,000. But CPU Micromart is trying to settle the dispute "outside of the court system," he said.

CPU Micromart supplied components and computer systems to Onsale between December 1997 and July 1998 and was one of Onsale's largest "drop-ship" providers, according to Rassas. Neither he nor CPU Micromart president Stephen Herman would discuss the dispute in detail, but they said it involved returned items and customer expectations.

"I think that what we found was that several of their internal policies made it difficult for us to make money in supporting their customer set," Herman said.

Herman said the billing issue had been in dispute for "a substantial period of time," but said both companies were partly to blame for it.

Onsale's Fawkes said he is unaware of the dispute with CPU Micromart.

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