ZL v. Gartner

December 8, 2009

On December 4, 2009, ZL Technologies filed an amended complaint against Gartner, Inc. in the United States District Court for the Northern District of California. The Court granted ZL the opportunity to clarify and augment its earlier allegations of defamation and trade libel.


In the first round of ZL’s legal dispute with Gartner, Gartner argued to the Court that its rankings and other statements in the proprietary “Magic Quadrant Reports” are merely opinions that are not based upon fact, and that they are understood as such by the readers of those reports. However, Gartner’s past statements in marketing materials, white papers, blogs and even the Magic Quadrant Reports themselves, assert that their research and analysts’ opinions are based on a body of facts compiled through what is asserted to be a rigorous process.


The amended complaint clarifies ZL’s contentions about the inaccuracy of Gartner’s reports, the inherent conflict of interest arising out of Gartner’s voluminous business with the vendors it reviews, and its subsequent bias towards large and established vendors. The amended complaint also adds new detail about Gartner’s repeated claims that its research is based on objective fact—a position exactly opposite to the stance forwarded by Gartner in court.


While this case is focused on ZL’s dispute with Gartner over the erroneous statements in Gartner’s publications, the issues here also implicate Gartner’s larger business model. Gartner plainly admits that it attempts to leverage value from its largest clients, many of whom are also vendors covered in the company’s research. ZL’s legal filings describe how that business model causes Gartner to favor those large companies instead of identifying the best technologies, thus misleading not just the vendors who are inaccurately reviewed by Gartner, but the consumers who base their IT purchasing decisions on Gartner’s biased research.


ZL is seeking injunctive relief as well as compensatory and punitive damages from Gartner.


The amended complaint can be found here.


 

We’d love to hear from you if you are, anonymously or otherwise:

  1. an IT buyer who believes he was misled by any MQ report to make a poor buying decision
  2. an IT vendor who feels wronged by Gartner
  3. an industry analyst with an insider’s view / experience on this issue


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October 19, 2009

ZL Technologies, a San Jose-based IT company specializing in cutting-edge enterprise software solutions for e-mail and file archiving, is challenging Gartner Group and the legitimacy of Gartner’s “Magic Quadrant.” In a complaint filed on May 29, 2009, ZL claims that Gartner’s use of their proprietary “Magic Quadrant” is misleading and favors large vendors with large sales and marketing budgets over smaller innovators such as ZL that have developed higher performing products. The complaint alleges: defamation; trade libel; false advertising; unfair competition; and negligent interference with prospective economic advantage.


This Friday, Oct. 23, there will be a hearing on Gartner’s motion to dismiss ZL’s complaint on First Amendment grounds. Though Gartner claims that its research is “objective, defensible and credible,” its court filings say that its research reports are “pure opinion,” i.e., opinions not based on fact.  ZL believes this is clearly misleading to enterprises which expect better from Gartner than merely opinions-not-based-on-fact to resolve serious IT problems.


The lawsuit and related court documents may be viewed at: ZL v. Gartner Court Documents | ZL Technologies


Regardless of how the court may decide the First Amendment arguments, ZL hopes to achieve the following through legal, political and other means:
- Fair Disclosure on Conflicts of Interest – Gartner generates its revenues from payments made by the same vendors whose products it evaluates. Similar to the new rules now being imposed on financial ratings agencies on Wall Street, Gartner should be required to disclose the revenues received from the vendors it ranks.
- Fair Disclosure on Evaluation Scores – The tech industry would benefit if Gartner were required to disclose more data in its evaluation process and disclose component scores so vendors know exactly where they are lacking and by how much and take corrective action. Currently, there is zero disclosure, which can lead to arbitrary placement, with no recourse and no basis for appeal. 
- Better Oversight – Gartner currently has an employee act as ombudsman to handle disagreements. The conflict of interest is self-evident in the way ZL’s concerns were summarily dismissed with little supporting evidence. There is a crying need to establish an impartial ombudsman similar to those found in public media, in order to ensure purchasers that they are receiving impartial analysis.


ZL believes that Gartner’s immense heft and power in the marketplace necessitate careful checks and balances against abuse of power. ZL believes that if IT innovation is to remain a driver for the U.S. economy, there must be assurances that ratings agencies such as Gartner do not subvert the competitive forces which drive innovation.


The time to act is now. Ratings agencies have impact. If left unchecked, the consequences can be dire, as we recently witnessed with poorly rated financial instruments wreaking havoc on our financial institutions. The SEC has seen fit to impose new rules on the ratings agencies involved. Surely it is time for similar rules to ensure that Gartner’s overwhelming power in the enterprise does not result in restricting competition, choking U.S. innovation and saddling enterprises with inferior products.



Sincerely,


Kon Leong
President & CEO
ZL Technologies, Inc.
2000 Concourse Drive
San Jose, CA 95131
408-240-8989 tel
408-240-8990 fax
www.zlti.com
kon@zlti.com


Press Coverage

  1. Gartner Magic Quadrant for Sale? No, but access is.
  2. Gartner in the dock over Magic Quadrant
  3. Gartner Magic Quadrant Lawsuit: Sour grapes or real gripes?
  4. Legal Dispute sheds light on how Gartner's "Magic Quadrant" is made up
  5. ZL Technologies Sues Gartner over Archiving Magic Quadrant
  6. Can you trust Gartner's "Magic Quadrant" or other analysts reports?
  7. Gartner Paid by Both Sides of the Street
  8. Gartner and the Magic Quadrant: Send in the lawyers
  9. Rating Redux, A matter of Opinion?
  10. "Objective" Think Tank Analysis or, Who is the Seller and Who is the Buyer?
  11. Gartner’s Magic Hydrant