The lawn care business isn't all fresh grass and pretty flowers.TerraCycle, a small, New Jersey-based company, discovered that in March when they were sued by the industry giant, Scotts Miracle-Gro.
Scotts is taking legal action because, it alleges, TerraCycle has copied the packaging of the Scotts Miracle-Gro product, a trademark infringement, and the company is making false claims about how good their product is compared to the competition.
TerraCycle sells worm poop, which is used as fertilizer. If you think there couldn't possibly be a lot of money in worm poop, you might be right. TerraCycle is a six-year-old company that hasn't yet turned a profit, earning $1.5 million in annual sales in 2006. On the other hand, Scotts earned nearly $2.7 billion in annual sales last year.
Of course, TerraCycle denies the allegations against them. However, the crux of their response has relied on new media-style PR.
"We're a young and hip company," says Albe Zakes, director of PR for TerraCycle. "We thought we were overmatched by Scotts. We looked around and thought, ‘What do we have that they don't?'"
They turned being an underdog into an asset. TerraCycle has framed this situation as a David vs. Goliath battle, starting a blog SuedByScotts.com that shows a side-by-side comparison of the two companies CEOs, intended to illustrate how itty-bitty they are compared to the behemoth that is Scotts. Photos show TerraCycle's chief executive, Tom Szaky, a 25-year-old with spiky hair who started an environmentally friendly company while a Princeton student, next to the old-school Scotts CEO, a distinguished older man, Jim Hagedorn, whose father founded Miracle-Gro in 1951. He has corporate jets; Szaky has the aforementioned poop.
The blog has been effective, garnering media hits in such outlets as The Wall Street Journal and BusinessWeek, and links with over 100 other blogs. TerraCycle also says its sales have risen (122% the week after an AP article was published) and they've gotten five offers for free legal services. Still, with legal costs estimated to reach between $250,000 and $1 million, the company faces the very real threat of being shut down by the lawsuit.
"The naïve, original hope was that if we got enough public opinion around this case, Scotts would say, ‘Let's call off the dogs,'" says Zakes. "If anything, I think we've further angered the big giant."
Speaking with Su Lok, PR manager at Scotts, it would seem that "anger" is the wrong word.
"We started off as a small start-up," says Lok. "We applaud and welcome competition, but one of the reasons why we've been in the business so long is speaking truthfully about our products and protecting our brands. It really is about the merits of the case."
According to Chris Gidez, SVP of corporate communications at Hill & Knowlton, that's an appropriate counter-strategy.
"Generally, large companies [are] trying to protect a copyright, intellectual property, or their position," he says. "I don't see evidence that the larger company is punished reputationally. No one faults a company for standing up for what they think is right; it's about how they go about doing it."
In fact, a large company that doesn't take legal action, even against the smallest of companies, may risk losing legal protection in the future. Gidez's advice is for companies in this type of situation is to stick to the facts or risk damage to their reputation.
"The merits are one thing. The conduct is another," he says.
In the meantime, TerraCycle is taking the case as it comes. The only direct contact they've had with Scotts was through a "threatening" letter from the company and a request for documents, sales agreements, and contracts.
"Personally, I look forward to a Federal Court ruling upholding the accuracy of TerraCycle's statement that its all-purpose plant food ‘equals or exceeds a leading synthetic fertilizer in most aspects of plant growth'," says Rick Ober, TerraCycle's VP of legal. "That will make great marketing copy."
CEO Tom Szaky is even more optimistic.
"From a non-legal perspective, we could win by having this lawsuit generate strong brand recognition via the PR that the lawsuit brings," he says. "Ideally, we could generate so much attention and have that translate into sales. [T]he additional income will help fund the legal costs of the lawsuit."