General Nutrition Centers, Inc., the ubiquitous brick-and-mortar supplement retailer and franchisor, has taken a group of GNC franchisees to task for speaking out. GNC has filed suit in the Western District of Pennsylvania against several franchisees who formed the General Nutrition Operators Association (GNOA), a group that purports to represent GNC franchisees and their economic interests.
The complaint is posted here. In it, GNC claims that the GNOA and several franchisees committed cybersquatting, trademark infringement, dilution, unfair competition, trade libel, and an assortment of state law causes of action.
Among other things, GNC alleges that the defendants violated the Anticybersquatting Consumer Protection Act by registering gncoperators.com, a domain that contains the GNC registered trademark.
In light of a number of court of appeals decisions, like Bosley Medical Institute v. Kremer, that hold that “gripe sites” that use a trademark owner’s mark in the domain name do not violate the Lanham Act, this may be a difficult claim for GNC to sustain. Working against the GNOA are GNC’s allegations that the GNOA had a commercial purpose in promoting products from non-GNC approved suppliers.
The really interesting part of this case though it the tug-of-war going on between GNC and its franchisees. The franchisees have a number of what appear to be legitimate gripes with GNC, as described in Exhibit K to the complaint, a letter sent by GNOA to GNC franchisees rallying the troops. GNC, on the other hand, considers these dissident franchisees to be in violation of their franchise agreements for speaking out in the way they have, as evidenced by the complaint and a cease and desist letter attached to it as Exhibit J.
What are the franchisees’ complaints?
“The GNC Corporation has been steadily reducing franchise operators’ ability to make a living”; “GNC Corporation’s business model is a disaster for franchisees”; “[T]he average franchisee cannot make a decent living by following the GNC plan”; GNC “owned stores [are] undercutting franchisee product prices”; “There are issues that are internally destroying the structure of the Franchisor franchising system”; GNC is “[t]erminating franchisees for a host of self-serving reasons”; and GNC is possibly involved in “a coordinated cover-up of the
GNC claims that by making these statements and others the defendants have violated their franchise agreements with GNC. Fair comment or actionable breach of contract? You be the judge.