Grainger Responds to Allegations of Overcharging the Government

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Government Sales Require Extra Care

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February 11, 2008

Grainger Responds to Allegations of Overcharging the Government

By Lindsay Young

Chicago-based Grainger responded to a complaint filed in U.S. District Court in Eastern Wisconsin alleging the distributor had overcharged the U.S. government as well as illegally relabeled products manufactured in non-trade agreement countries so they could be sold to the U.S. government.

Grainger said in a press release that it will meet with the Justice Department to address the issues brought up in the complaint, which was recently unsealed by the U.S. Department of Justice. "The company takes this allegation seriously," Grainger said. "Although Grainger believes the company has fully complied with its contract, it intends to carefully review the allegations to ensure it meets its obligations to its customers."

The complaint was initially filed by Brian M. Holbrook, a former district sales manager of government sales at Grainger, in 2006. He worked for Grainger starting in December of 2004.

According to the complaint, Grainger entered a contract with the government that said the government would accept a 26% markup for each item sold. Holbrook alleges that in the course of his work, he found the distributor was charging more than a 26% markup – to at least one government customer, the U.S. Postal Service, a consistent 30% to 60% markup.

In response to Holbrook's complaints, made while still working for the distributor, Grainger credited about 40 accounts, the lawsuit says. However, Holbrook alleges the overcharging continued, and was more widespread than those 40 accounts.

In the complaint, Grainger is also accused of re-labeling products manufactured in non-Trade Agreement countries, publishing them for sale in its catalogs and selling them to the U.S. government.

Grainger is required by contract with the General Services Administration to prevent product from countries that do not have reciprocal trade agreements with the U.S., including China and Taiwan, from being offered for sale to government agencies. (See MDM Article, "Government Sales Require Extra Care.")

This is required under the Buy American Act and the Trade Agreements Act, which stipulates that unless otherwise indicated, products sold to the U.S. government must be made in the U.S. or in a country designated as an approved country. The acts apply to products sold through the GSA Web site, www.gsaadvantage.gov.

The complaint says that Grainger's products branded as Westward, Condor, Blackhawk, LumaPro and Dayton are made in China, Taiwan and other non-Trade Agreement countries.

Original Complaint Filed by Holbrook

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