Posted in: Comics | Tagged: diamond, gamestop, lawsuit

Diamond Comic Distributors Sues GameStop For Three Million Dollars

Comic book store direct market distributor of 40 years Diamond Comic Distributors has filed a lawsuit in the district court of Maryland against GameStop, the largest gaming retail chain in the USA, who also sell a number of comics, statues, toys and other products distributed by Diamond. Diamond Comic Distributors usually distributes products on a direct non-returnable basis to stores, in return for an increased discount than the rest of the market receives. Diamond is suing for a total of $2.8 million for items that it claims Gamestop ordered but then tried to cancel orders on.

It states that GameStop first opened an account with Diamond in 1997, when it was known as Babbage, before changing its name to GameStop in 2006, And that business dealings were fine until April 2022, when they claim Gamestop attempted "to cancel certain accepted purchase orders that were not yet fulfilled (i.e. delivered). This included a list of 87 previously submitted and accepted purchase orders, with a total contract price of in excess of $950,000.00."

Diamond claims that they told GameStop that "the products at issue were already ordered and paid for by Diamond (or that Diamond had partially paid for and was obligated to pay the full price for those goods). Diamond reminded Gamestop that pursuant to the agreement(s) and/or decades long course of dealings between the parties, accepted orders were not subject to cancellation without consent from Diamond. Gamestop nonetheless confirmed that it did not intend to accept or pay for the products."

And then GameStop asked Diamond about its other outstanding orders, and everything they had ordered from Diamond in total. In June Diamond alleges that "Gamestop submitted a purported "cancellation and reduction" demand to Diamond which either entirely cancelled 105 additional outstanding accepted purchase orders or substantially reduced the number of products to be purchased pursuant to those accepted purchase orders. For each of these products, Diamond had already submitted production orders to vendors, and had paid the upfront costs for production, and/or had become fully obligated to pay for the products. Diamond confirmed to Gamestop that those orders were therefore non-cancellable. The contract price of these additional cancellations and reductions were in excess of $1.8 million, bringing the total attempted cancellations and reductions to more than $2.8 million."

Regarding its status as a distributor, Diamond states that it "operates on a "production to order" basis, meaning it receives purchase orders from retailers, and then places production orders with vendors to begin the manufacturing process. The goods ordered are then specifically manufactured for the Buyer and are generally not suitable for sale to others. Often, the products ordered are specifically designed for one unique retailer, and therefore there are no other available vendors for the products that were ordered and manufactured.  In order to submit its production orders to vendors to begin manufacturing, Diamond is required to pay some or all of the cost or become obligated for the cost of the goods charged by the manufacturer in advance (i.e. before the manufacturer accepts the order and begins manufacturing the product(s)). For that reason, in its agreements with retailers, Diamond does not permit cancellation of submitted and accepted purchase orders since it is unable to recoup the costs once a production order is placed."

In recent years, Diamond Comic Distributors has had to make cutbacks after losing Marvel, DC and IDW as exclusive customers. GameStop also had suffered from a decline in business, though was the recipient of a short squeeze investor backlash in 2021.  GameStop has yet to file a reply to this lawsuit. We look forward to reading it with interest.

Enjoyed this? Please share on social media!

Stay up-to-date and support the site by following Bleeding Cool on Google News today!