It was 1990, 10 years after hairstylist Ezzo Ebeido opened his beauty salon, and business was soaring. A garrulous immigrant from Jordan who opened his West End shop with a little more than $80 dollars in his pocket, Ebeido recalls taking in $300,000 in gross sales and services along with $100,000 in take-home pay. Life was goodbut not for long.
For the past decade, Ebeido, 52, has filed a messy array of lawsuits after some of the most popular hair and beauty companies in the industry stopped letting him stock their shampoos, conditioners, and other products. He’s had to lay off all his employees, his business earnings have plummeted, and his attorney’s fees have topped $150,000. And last month, he endured yet another defeat in the 6th U.S. Circuit Court of Appeals. He vows another round of appeals, but the glory days of his business are long gone.
“It’s David vs. Goliath,” Ebeido says. “I’m just a small businessman going up against some of the most powerful companies in the world.”
It all began in March 1990 with what seemed like a friendly letter. The Knoxville-based Royal Beauty Supply, a distributor, informed Ebeido that there was a “small discrepancy” concerning Ebeido’s price structure on Matrix hair products. The hairstylist was discounting Matrix shampoos and conditioners. The distributor later testified in court that as many as 10 local salon operators complained that Ebeido’s low prices were below the manufacturer’s suggested retail price.
“I sliced the heck out of the prices,” Ebeido says. “I was after volume.”
In the letter, the distributor assured Ebeido that the company was not asking him to revamp the way he sold Matrix products, but rather to “rearrange it in a way which satisfies all parties involved.” The clear implication of the letter, of course, was that the hairstylist had to raise his prices. Ebeido, however, wouldn’t budge. Shortly after, Matrix stopped selling him its popular hair products. Three other product lines considered essential for a hair salon to stockBiolage, Vavoom, and Logicsalso pulled their products from his shelves.
At first, Ebeido’s sales actually increased, because he added more product lines to mitigate his loss. But the loss of Matrix was a big blow. After three years of negotiations, Ebeido filed a federal lawsuit against Matrix Essentials and Royal Beauty Supply under the Sherman Antitrust Act. He claimed that the defendants conspired to fix prices in part to appease the other local hair salons that had complained about Ebeido. He asked for punitive damages, compensation from lost sales, and the right to stock Matrix hair products.
In response to Ebeido’s suit, Matrix and Royal claimed that they cut off Ebeido because they only sell their products to professional beauty salons. Ebeido, they contended, was a retailer posing as a hair salon.
In 1995, federal Judge Thomas Wiseman threw out Ebeido’s case citing insufficient evidence. Soon after, two other beauty companies, Aveda and Redken, also severed their ties with the Nashville hairstylist. That meant he then couldn’t stock three of the best-selling hair products in the businessthe rough equivalent of an athletic store not being able to carry Nike, Reebok, and Adidas.
“It was devastating,” Ebeido remembers. “I had to let all the employees go because I could not afford the overhead.”
Equal parts intransigent and idealistic, Ebeido fought on. In 1996, the 6th U.S. Circuit Court of Appeals reversed Wiseman’s decision and remanded the case for trial. “A reasonable juror could find by a preponderance of the evidence that prior to March 26, 1990, Royal and Matrix conspired to fix prices for Matrix products, an agreement which resulted in a request to Mr. Ebeido to sell his Matrix products at suggested retail price,” the ruling noted.
After the Court of Appeals ruling, Redken resumed its relationship with Ebeido. But that was Ebeido’s last triumph. In January 1999, Wiseman again threw out the case, ruling that there was insufficient evidence to conclude that Matrix was conspiring to fix prices. The company, Wiseman said, had a right to market its productsor decline toat any location it desired. Last month, the Court of Appeals affirmed Wiseman’s ruling.
But while the courts have consistently ruled in Matrix’s favor, it’s curious that the company has shunned a salon that wanted to sell its product. John Parker, a Cleveland-based attorney for Matrix, says that the company limits the sale of its products to professional beauty salons and not to Wal-Mart, Kroger, or any other business that specializes in retail. “Matrix was founded by a hairdresser,” Parker says. “He believed a hairdresser was the best person to sell his product.”
Ebeido, however, is a professional hairdresser with about 10 degrees of certification under his belt. In fact, he is an expert in a process called trichoanalysisthe cosmetic equivalent of an MRIin which he analyzes strands of damaged hair under a microscope to help develop a protein-based treatment to restore its vitality. Unlike the average teenage clerk at Walgreen, Ebeido cares about hairway too much it would seem.
“He once refused to sell me a product because it was not appropriate for my hair,” customer Amy Crownover says. “I wanted to purchase it, but he told me it wasn’t right for me and he’d have something better in a few days.”
But while Parker does not discredit Ebeido’s expertise, he says that he derives too much of his profits from retail and not enough from haircutting. Matrix has a “50-percent rule,” which essentially dictates that for a business to qualify as a professional salon, it has to earn at least half of its sales from services. By his own admission, at the time Matrix cut him out of the loop, retail generated nearly 90 percent of Ebeido’s sales, with services accounting for the rest.
Nashville’s somewhat catty local hairstyle community defends Matrix’s 50-percent rule, saying that without it they’d be undercut by giant retailers. Besides, they argue, the rule helps the consumer. “If Ezzo is not using the products enough in his salon, he doesn’t even know what the products are doing for the clients,” says Joanne York, owner of Salon J. “With us, we use the products on the clients and can see what it does for them.”
Ebeido says that both Matrix and Aveda, which he’s also sued, selectively have enforced the 50-percent rule to help force him out of business and appease their client bases of larger salons. He says that the company didn’t ask him to comply with the rule until his competitors complained. In addition, Ebeido, who has become a kind of amateur attorney and sleuth during the course of this battle, has a record of receipts showing Matrix products are being sold at drugstores and supermarketsboth of which don’t qualify as professional salons. The difference between Kroger and Ebeido is that local beauty salons complained about his business, he claims. Parker, the Matrix attorney, says that the company did not sell its line of products to those stores, that an independent distributor probably conducted business with them.
When Ebeido first started his business, he worked as a bouncer and bartender to help keep it afloat. He worked 12-hour days, six days a week, continuing his education in the beauty trade and promoting his salon. He often has talked about how he lived the American dream. But a tough reality has set in.
Barred from selling some of the most popular hair-care lines in the business, Ebeido says his gross sales are down from $350,000 in 1990 to about $120,000 today. His salary has tumbled even more precipitously from $100,000 to $20,000, while his rent skyrocketed from $450 in 1980 to nearly $4,000 today. Graver still, Ebeido roughly estimates that without Matrix and Aveda products, he has lost $1.5 millionnot just from lost sales of those products. Sales from other products he stocks have dropped too, because the customers who buy a range of products now shop elsewhere.
Ebeido says he has the stamina for two more years of legal fighting, but he acknowledges that another defeat probably will mean the end of his business. Optimism hasn’t eluded him entirely, but he’s clearly been beaten up.
“Ezzo is proud to be an American,” customer Betsy Moran says. “He’s happy to be here. But lately he seems so down. He was really enjoying the legal process and the judicial system. He thought he’d get a fair shake.”
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