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Tiny Town of Emo, Ontario, Canada Fighting Back Against Wal-Mart

Wal-Mart is such a dominating force that when it enters a market, few rivals are left unscathed. But in the tiny town of Emo, Ont. - population, 1,186 - grocers Dan and Mark Loney found a formula for their store to take on the discount titan.

And they're doing it with Wal-Mart's own products.

A few years ago, Wal-Mart Canada Corp. set up shop in nearby Fort Frances, Ont., forcing the brothers to come up with a new game plan. Emo sits on the U.S. border, so they began crossing regularly to pick up bargain-priced merchandise to stock in their store. They do most of their U.S. bulk buying at Sam's Club, the warehouse chain owned by Wal-Mart Stores Inc.

They don't stop at that. They post signs on the shelves of their Cloverleaf Grocery touting their prices as lower than Wal-Mart's.

But the Loneys' aggressive resourcefulness has hit a nerve. On Monday, they received a letter from a lawyer for Wal-Mart, telling them to stop using Wal-Mart's trademarks in their advertising. Otherwise they risked a legal spat.

"Wal-Mart has enough time to spend on us?" Dan Loney asked rhetorically in a telephone interview this week from his store, which generates about $6.5-million in annual sales. "It blows your mind away."

Bentonville, Ark.-based Wal-Mart, the biggest retailer in the world with sales of $312.4-billion (U.S.) last year, has a lot on its plate these days.

The company's growth has been sluggish and its stock price is well below its 2004 high.

It's the target of an array of employee lawsuits over alleged poor pay and work conditions, including a class action alleging sex discrimination. Organized labour is constantly on the case of the anti-union employer. And it has been accused of spying on its critics and even on its own board members.

Kevin Groh, a spokesman for Wal-Mart Canada, said in an interview that it takes its business in the Fort Frances market as seriously as any other. He said the Loneys' customers are being misled by what are sometimes unfair price comparisons. The products being compared are not always being sold in the same time frame, market or package size.

He acknowledged that Sam's Club was built to serve small businesses such as the Loneys'. But Wal-Mart believes its name is being misrepresented in the Loneys' advertising.

In a four-page letter to the Loneys, dated April 23, lawyer John Macera of Macera & Jarzyna LLP in Ottawa, claimed Cloverleaf is violating trademark, advertising, packaging, labelling and other laws and regulations.

"Moreover, because of the very extensive use and advertising of Wal-Mart's trademarks, Wal-Mart has a very strong cause of action against you for unfair competition and passing off," the letter says. "There is no doubt that Wal-Mart can obtain court relief by way of injunction, damages, an accounting of your profits, punitive damages and payment of its legal fees."

Dan Loney said he feels that Wal-Mart is just trying to scare a small-town grocer. "The stuff that we bring back from the States, we make sure we can make money on it and sell it for less than the Wal-Mart," he said. "It's pretty embarrassing, I guess, for them."

As a franchisee, his store receives most of its supplies from Westfair, a division of Loblaw Cos. Ltd. and one of Wal-Mart's Canadian competitors. But recently, the Westfair shipments have been unreliable because of big distribution snags at Loblaw, he said.

He has no plans to stop supplementing his inventory with Sam's Club products. He said he complies with Canadian laws by sticking bilingual labels on the goods. In Emo Cloverleaf enjoys something of a monopoly, having bought out the only other grocer in town. "It's been good business," he said. "Our sales are way up since Wal-Mart came."