Friday, August 31, 2007

A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad. Theodore Roosevelt


I always thought that manufacturer registration programs were a bit shady, and now the government is looking into the practice. According to the Wall Street Journal...

"Justice Department filings in the cases don't specify how much the kickbacks may have cost the government. However, in the case the department filed against Hewlett-Packard, it cited numerous payments that H-P refers to as "influencer fees." According to the court papers, H-P in 2004 paid $611,969 to Accenture; $599,962 to Capgemini, a Paris-based outsourcing and consulting company, and $514,238 to GTSI Corp., a Chantilly, Va., systems integrator. Capgemini said it hasn't been charged and doesn't comment on investigations into other companies. GTSI didn't respond to emails.

In a statement, H-P said it "is confident its business practices are appropriate. We plan to vigorously defend this action and look forward to demonstrating that H-P has done nothing wrong."

The Justice Department says such fees undermine the contract process. For example, the government says companies that Sun called its "Government Alliance Partners" received "a back-end rebate of 2% in return for" a Sun sale. Sun also paid 10% rebates under its "competitive knock-out program" if a partner persuaded a government organization to replace a customer's systems with Sun products. The government said Sun paid "millions of dollars" to its partners in 2003 to 2006 under these programs, which weren't revealed to the government.

In a statement, Sun said it "has not paid kickbacks" and that the rebate and discount programs at issue "were conducted in an open and aboveboard manner."

But the government disagrees...

"The government argues such fees and discounts are kickbacks, which are illegal under the Anti-Kickback Act of 1986. The act defines kickbacks as money or "compensation of any kind" provided to a government contractor to "improperly" reward favorable treatment. The act says it's illegal to give or solicit such payments and to include any kickback amount in the contract price."

Registration programs lock out competition for accounts, and inevitably favor friends of the manufacturers against the end user. Registration does nothing to help the end user and stifles competition. It is a bad idea and it should be stopped.

Either you have a competitive environment or you don't, you can't have it both ways.

No comments: