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Ask HN: Our competitor scams their clients - what should we do?

by vgurgov on 9/13/11, 4:59 AM with 7 comments

Ok, here is the story. We are young company in online ads space making less that 100k sales/month.

We just found that one of our competitors are clearly scaming their clients. They are company with 30M+ funding, famous investors, few products etc.

They are charging their clients (big brands) x2-3 more for more expensive things while in practice delivering cheap thing. We collected all the evidence, screenshots etc.

We are in relatively small niche market, where all players are well known and so they are effectively stealing our clients/money.

What should we do?

1) Bring the evidence to press(techcrunch etc) and try to start another scamville? If so, should we do this anonymously or ask to name ourself? Would it harm our reputation as we are their competitors?

2) Prepare report and send it to their clients?

3) Contact them or their investors

4) Start doing the same thing :) This is not really an option since method is quite obvious and it will be uncovered sooner or later by someone.

5) Something else?

Thanks in advance!

  • by CantDecide on 9/13/11, 5:23 AM

    Apple can charge a premium for their equipment because they are known as a premium brand. Even if they could make their products for 1/3 the cost, they would still charge the same price because they need to be seen as premium products, and because they can.

    If you are sure you're competitor is over charging, maybe it is for the same reason. As dandandan said, maybe you are pricing your product too low.

    Going after them publicly, accusing them of scamming or unethical behavior will only backfire. Either your company will be branded crackpots and unreliable, or you will actually get negative press.

    The best you can do is in your marketing and sales pitches, say "our prices aren't as inflated as our competition but our product is better than theirs." Then prove it with examples of product quality. Your customers will do their own pricing research.

  • by dandandan on 9/13/11, 5:17 AM

    Overcharging customers who are willing to pay that rate isn't "scamming" them per se. It could be considered unethical though and will probably come back to bite them even without going to the media about it. Are you sure your rates for whatever you provide aren't too low?

  • by jnorthrop on 9/13/11, 7:18 PM

    If you have evidence of fraud contact the FTC or the FBI. If they aren't committing a crime then let it go. You will not win any favors by bashing your competition.

  • by ig1 on 9/13/11, 11:41 AM

    How do you know who they're selling the premium product to ?

    You need to be careful that you're not misunderstanding the situation, because if you go public and find out you're mistaken they could sue you out of existence for libel.

    What you could do is present the data (say in the form of an industry analysis comparing the industry players) including case studies showing what their client are receiving and publish it.

    You could then send it around to their clients (X is what you're receiving from Y, you could be receiving Z from us). And let the client make the deduction that they're being scammed and not getting what they paid for.

  • by vgurgov on 9/13/11, 5:20 PM

    Thanks for all the feedback. I guess i posted op in a hurry and my points were not clear. 1) Know for sure that they are misleading their clients. We know how this industry works very well and we collected all evidence. 2) Scam is like this. They are saying to clients that they will get bananas and charge charge them for bananas. Market price for bananas in this industry is 20-30 cents. In fact they are shipping them peanuts with price of 7 cents at most. In fact they are selling them very bad peanuts that cost even less and noone really wants them.

  • by MattBearman on 9/13/11, 9:53 AM

    I think people maybe misunderstanding the original post (either that or I am).

    My understanding is that their competitor offers 2 products, a basic and a premium (this is an example, I've no idea how many products their competitor offers).

    The scam is that the people paying for the premium service are only getting basic. Ie, they would get exactly the same service if they were paying for the basic.