Lawsuit claims HP, Staples colluded on cartridges

A suit has been filed in US federal courts claiming that Hewlett-Packard and office superstore Staples broke antitrust law. The suit claims that HP paid Staples more than $100 million to carry only HP ink cartridges in its stores, and to avoid stocking lower-cost third-party refills. The plaintiff is asking that it be made a class-action suit on behalf of all printer owners.

Whatever the outcome of the lawsuit, it does put a focus on ink prices, a major part of the income of HP and rivals like Epson and Lexmark. It has been estimated that the real cost of ink refills can be as high as $8,000 a gallon. At those prices, there’s lots of room for third-party underselling. The result has been an all-out war, where the major printer developers have tried to limit the sales of unauthorized sellers. This lawsuit, whatever happens to it, is just another skirmish in the long war.

TCO Wars

Over the past few years, the prices on low-to mid-range color laser printers have fallen ever lower even as the cost of consumables has gone up. The price of equipment acts basically as a loss leader, whereas the real money is in toner.

Are buyers of color laser printers finally starting to think about more than the sticker price? Is the total cost of ownership or TCO (a formula that combines average cost per page along with machine price) becoming a factor in purchasing decisions?

That’s an assumption that OKI Printing Solutions is working under. The company just announced consumables price reductions on its C8800 and C6000 color laser printer lines. Cost per page on the ledger-size C8800 have been lowered by 11% to 9.1 cents a page, while those on the letter/legal-size C6000 were lowered by 25% to 19.0 cents for color and 1.6 cents for black. OKI is claiming that TCO has been reduced by 30%.

Changes in consumables prices is a rare event in the printer business, and these are pretty significant reductions. The compelling reason for lowering the TCO is allowing a vendor to gain traction in what is now an extremely competitive market of very solid office color printers. The big target of course is Hewlett-Packard, whose dominant market position allows it to maintain higher consumables costs in some of its models. But beyond HP, there is a confusing array of choices from over a dozen serious rivals.

After talking to key OKI product managers, it seems clear that the price shift is likely to have most impact on large corporate and governmental purchasers, where a realization has already taken hold that more goes into costs than the sticker price. And OKI will need well-tutored salesmen and resellers to push the kind of three-year cost timeframe that’s behind total cost estimates.

Of course, the TCO argument is nothing new. Kyocera, especially, has been making it for years, with mixed success in the marketplace. Clearly, OKI is betting on a shift in thinking in the market, which is starting to get the idea that the long-term costs of color are far higher than they expected. It will be interesting to see if others follow suit.