July 16, 2012, 5:06 PM

Macy’s wins a key injunction in its exclusivity battle with Martha Stewart

A judge prohibits some planned Penney and Martha Stewart merchandise deals through fall.

Lead Photo

Macy’s won a temporary injunction barring Penney from rolling out the Martha Stewart store within a store.

Macy’s Inc. has won a temporary victory in its fight against Martha Stewart Living Omnimedia Inc. and J.C. Penney Co. Inc. over exclusive rights to certain merchandising categories.

Macy’s has spent several months pursuing litigation in the New York State Supreme Court, including asking a judge to declare null and void a new exclusive e-commerce and merchandising contact Martha Stewart has in place with J.C. Penney Co. Inc., which is No. 20 in the Internet Retailer Top 500 Guide. Macy’s is No. 14.

Penney and Martha Stewart last December announced a 10-year, approximately $300 million deal to develop a joint e-commerce and store-based arrangement whereby Martha Stewart would develop a “store within a store” concept featuring exclusive Martha Stewart merchandise in select J.C. Penney locations. Martha Stewart and Penney also would jointly develop an e-commerce site slated to be launched sometime in 2013. “The site will offer Martha Stewart expertise and enable consumers to purchase a wide range of home and lifestyle products, including those sold in the Martha Stewart stores inside Penney and other merchandise designed or selected by Martha Stewart,” Penney CEO Ron Johnson said in December. “We intend for Martha Stewart stores to be a key centerpiece of our new strategy to transform J.C. Penney.”

Macy’s in February filed suit against Martha Stewart Living in New York, saying the deal with J.C. Penney violated an exclusive merchandising arrangement Macy’s signed with Martha Stewart in 2006. That agreement enabled Macy’s to sell Martha Stewart’s line of home goods, including bed and bath textiles, housewares, casual dinnerware, flatware and glassware, cookware, holiday decorating and trim-a-tree items, and other Martha Stewart private label products such as home furnishings, holiday celebration concepts, bridal registry items and a full assortment of "how-to" books and cookbooks as part of a joint merchandising program. The lines of merchandise have been sold on Macys.com and in Macy’s stores since 2007.

On Friday in a new filing with the U.S. Securities and Exchange Commission, Martha Stewart Living said it was adding certain unspecified product categories to its deal with J.C. Penney and that Penney would pay Martha Stewart Living at least $282.9 million over the course of their contract. But, also on Friday, Macy’s won a temporary injunction from Justice Jeffrey Oing that, at least for now, bars Penney from rolling out its Martha Stewart store within a store concept. "We expect to continue to exclusively sell Martha Stewart-branded merchandise in categories such as cookware, kitchen utensils, bed and bath for the term of our contract," says a Macy’s spokesman.

In its latest annual report filed with the SEC in March, Macy’s says it has renewal rights to certain Martha Stewart products through 2027. In the injunction Penney is prohibited from opening its store within a store until a possible trial in November. It’s unclear if the injunction also prohibits the launch of the e-commerce site.

Penney and Martha Stewart have agreed to abide by the injunction but to otherwise go ahead with their plans for the 2013 joint venture.

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