Advice on chargeback against company that sold me bad product.

Discussion in 'Growing and Managing a Business' started by Red20, Oct 20, 2010.

  1. Red20

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    Oct 20, 2010
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    I own a nutrition company and paid another company to private label protein drinks for us.

    After I purchased the drinks I then started getting customer complaints that it tasted bad.

    We returned all of the product, that we still had left in our inventory, and asked the company to fix the problem. We also asked for more replacement products for the customers we had to give refunds to, who complained about the product being bad, but had thrown it away.

    We sell our products to retail stores and some of the stores had given their customers their money back, but threw the product away. So obviously we couldn't return that product, but asked that replacements be sent for those refunds as well. In total it was $25,000.

    They sent us samples that tasted good and said they were going to send us replacements, but it might take a little bit of time, because they had received so many returns. They said they received a bad batch of protein and didn't know it.

    Since the samples they sent us tasted good, and we needed more product, I went ahead and placed a new order, with the understanding they would be shipping the replacement product they owed us, also.

    We received the order, but they didn't send us the replacement products.

    We had ordered $32,000 in product and made a payment for half at $16,000.

    I called the company and said that we didn't receive our replacement product, with our order, and they said they were having "cash flow problems" and couldn't send the replacements with the order, but if I paid the $16,000 for the order they would then send me the replacement product.

    I told them I wasn't going to send them the $16,000 check until we received the replacement product we were owed.

    They replied that they couldn't do that until they received the check. The said this on August 27th.

    I then contacted my credit card company to do a chargeback. My bank approved the chargeback on Sept. 1st, but pending a final approval from their bank.

    The last I heard from them was August 27th. Then on Sept. 27th they contacted me and said that since I did a chargeback they wanted to send me replacement product. They actually said they had so many chargebacks that they might lose their merchant account if they don't get my chargeback reversed.

    I told them if we received our replacement product I would contact my bank to reverse the chargeback.

    We received the product Sept. 30th. We decided to open some random drinks and try them and they were HORRIBLE.

    We immediately returned the product to them and told them it was bad.

    They are still harrassing me for the $16,000 check for the last order we received.

    Should I wait to send this check until the chargeback is officially final or send it now?

    Also, we are 5 states apart, so if they take me to court would I have to go to their state?

    Sorry for the long winded explanation. Any advice would be greatly appreciated.
  2. Fergal

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    Nov 18, 2007
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    Hi Red20 welcome to Business Advice Forum and sorry to hear about your predicament. It sounds like a very awkward situation.
    From what you say, it sounds as if your supplier is extremely unreliable and you have already given them a lot of money, without receiving quality product in return. In addition to the direct financial loss you have also had the cost of the damage to your brand, from the customers who experienced the poor quality product, marketed under your name.

    I would not be sending any further payments to this company until they rectify all the damage they have caused and compensated you for your losses.

    The sums of money involved are large enough to warrant you getting professional legal advice on the issue. You should try to get a consultation with a lawyer to get their opinion on the matter - many legal practices will give you a free first consultation. Explain the circumstances to the lawyer and ask them what they can do to help you receive compensation.

    You might also do some research on the supplier. Try to find out if they have a record of supplying quality product and see if you can telephone some of their clients, to discuss their experience. If the company has a poor history, as I suspect they might, this will confirm to you that you do not wish to send them any more money.

    Good luck with it and please let us know how it works out.

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