TORONTO - A lawsuit against Sears Canada Inc. (TSX:SCC) and its U.S. counterpart by its Hometown Store dealers has been granted class action status by an Ontario court.
The lawsuit by more than 250 current and former operators of Sears Hometown Stores allege Sears Canada and Sears Roebuck and Co. made it "virtually impossible" for them to operate their Hometown Stores profitably.
The dealers allege that Sears lowered commissions, reduced advertising for local stores and bypassed the franchises by selling directly to customers who are located within their markets.
They also claim that Sears set their compensation and work conditions, without abiding by labour laws or franchise protection laws.
The allegations have not been proven in court.
Sears Canada said Thursday it has reviewed the claims and believes they are without merit.
The retailer has argued the Hometown Store operators are not franchisees and denied dealer commissions have been reduced.
Sears has also denied that any changes to the dealer compensation structure and advertising subsidies hurt dealers.