Macy’s sues to prevent Amazon from taking back Billboard from its 34th Street store, citing “immeasurable” damage

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Macy’s is fighting to stop Amazon from advertising on the billboard atop its “world famous” outpost on 34th Street in New York City. In its September 24 complaint, Macy’s asks a New York state court to bar Rockaway KB Company, LLC (“Rockaway”), the owner of its Herald Square location, from entering into a deal to advertise on the billboard, arguing it would not only violate a long-standing restrictive covenant that prohibits Macy’s competitors from advertising on the large billboard that surrounds the side of the building housing the Macy’s store, but it would also damage the “goodwill, image, reputation of Macy’s customers and brand” in an amount that would be “impossible to calculate”.

According to the complaint, Macy’s alleges that a restrictive covenant has been in place since 1963 that explicitly prohibits the use of the 2,200 square foot billboard – which, “to the naked eye, can be found in the Macy’s department store and is iconic in itself, ”Macy’s argues – by any Macy’s competitor. The relevant terms of the 1963 amendment to Macy’s pre-existing agreement with Rockaway’s predecessor in interest, which provides for the restriction on advertising permitted on the billboard, read: “Advertising or anything else thereon. panels and structures or their replacements, will be limited forever, without limitation of duration and use by any person, company or company, with the exception of Macy’s[‘s] or any representative, licensee or sub-tenant of Macy’s[‘s] to advertising which must not advertise or refer directly or indirectly to a retail establishment or directly to a consumer.”(Underlined courtesy of Macy’s.)

(As an interesting side note, Macy’s states that the restrictive covenant also prohibits “billboard advertising” in an indecent manner or nature, such as, for example, without limiting the intent of such meaning, any scantily clad person or person, using advertising or language of an offensive nature. ‘”However, as Macy’s asserts, this part of the pledge“ is not relevant to ”the case.)

Things started to take a turn for the worse, the department store claims, when a deal that included its exclusive right to advertise on the billboard – where Macy’s own brand appeared for 60 years – expired on the 31st. August 2021. In anticipation of the deal expiring, Macy’s says that in May it attempted to negotiate a new deal with Rockaway, only to learn that the owner was already “in talks with a” very online retailer. in view “” relating to advertising on the billboard. “There was no question,” according to Macy’s, that Rockaway was referring to Amazon, and that the owner did not intend to abide by the terms of the restrictive covenant, which, according to Macy’s, “works with the earth to always “and therefore remains valid. and in force despite the expiration of the parties’ advertising contract.

image via complaint

While Macy’s says it ditched the billboard on August 31, 2020, it says any advertising from a competitor, including Amazon, that appears in its place will constitute a “clear breach of the restrictive covenant” by Rockaway, and will result in à “Immeasurable” damage, reinforced by the fact that “the billboard is located in the heart of Manhattan” and “is” seen each year by millions of tourists, locals and New York City. ”

In this context, Macy’s seeks a declaratory judgment for the court declaring that the restrictive covenant is “in force, valid and enforceable” and also seeks a preliminary and permanent injunction against Rockaway ordering him, as well as any successor in title, “to allow advertising that refers[s] directly or indirectly to any retail establishment or directly to the customer on the billboard in violation of the restrictive covenant. “

In arguing for a conclusion that the undertaking is valid, Macy’s asserts that it is both “clear and unambiguous”, and not unreasonably broad. With respect to the latter, Macy’s claims that the restriction “reasonably limits the types of advertising that can be advertised on the Billboard and by whom (that is to say, The advertisement which must not advertise or refer directly or indirectly to a retail establishment or directly to a consumer), ”And therefore does not prevent Rockaway from entering into“ an agreement with any entity or individual that is not a direct competitor of Macy’s to advertise on the billboard ”. And yet, “for the same reason that the restrictive covenant is reasonable,” namely that Rockaway “can still contract to advertise on the billboard,” Macy’s attorney asserts that “we don’t cannot say that the restriction is offensive to public order ”.

THE BROAD VIEW: It’s a fight for more than a big billboard. Of course, the billboard is at the heart of the matter, but the legal feud comes as “the attack by online merchants on traditional brick and mortar stores like Macys is real and has been well documented.” , says Macy’s in a corresponding motion. While “Macy’s online business grows every year,” the department store says “now more than ever Amazon and other online retailers are direct competitors of Macy’s.”

Amazon’s power in the retail space has of course not gone unnoticed or unnoticed by its fellow retailers and regulators, especially as it continues to gain market share in the retail segment. clothing. Wells Fargo analysts revealed this spring that Amazon had overtaken Walmart as the number one clothing retailer in the United States, “thanks in large part to the e-commerce boom fueled by the pandemic.” In a research note in mid-March, Wells Fargo estimated that Amazon’s clothing and footwear sales in the United States rose about 15% in 2020 to more than $ 41 billion, which in fact the holder of an 11 to 12% market share. US clothing market and an even larger 34% to 35% share of all clothing sold online.

“To put that into perspective, Amazon has sold nearly 7 times more clothing / shoes than Macy’s,” which is the number two player online, according to analysts at Wells Fargo. Macy’s generated $ 7.71 billion in online sales in 2020 and plans to reach $ 10 billion in online sales by 2023.

With Amazon’s e-commerce success in mind, and in light of its efforts to expand into the physical space, including the reported goals of opening department stores, the struggle for space The display – and physical space in critical locations, more in general – is a seemingly even greater threat to Macy’s given its strategy. As Fortune’s Phil Wahba said in an article earlier this year, “stores act as billboards and marketing tools for Macy’s and remind shoppers that there is,” noting that its “stores remaining ”- and presumably, its significant advertising on these stores -“ will remain key to supporting its e-commerce, maintaining customer awareness and offering them something more exciting than shopping online.

The case is Macy’s Retail Holdings LLC, et. al., v. Rockaway KB Company, 655669-2021 (NY. Sup.).


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