Business

Legal dogfight! Claws for concern as online pet-foodies ‘kibble’

This legal battle’s bite could be worse than its bark.

One New York direct- seller of dog and cat food and more is suing a rival over a fast-growing piece of the $53 billion pet-supply business.

PetFlow.com — a Big Apple-based site that’s expected to rack up $30 million in sales this year after just two years in business — has been accused of stealing key business secrets from a local pet-food distributor.

New York-based PetNet Direct claims that the Internet-savvy founders of PetFlow systematically milked it for competitive information in 2009, then reneged on their promise of a 10 percent equity stake in the now red-hot PetFlow business.

PetFlow, which recently saw a $7 million round of financing derailed by the lawsuit, filed in Manhattan state court, hasn’t yet responded to the allegations, but a top PetFlow exec claims the suit is nothing more than an attempted shakedown.

The key trade secret in question: an innovative strategy to sell monthly subscriptions for regular pet-food deliveries, similar to the way Netflix sells monthly movie subscriptions.

The stakes are high, as PetFlow’s success with the subscription model has surprised and impressed venture capitalists, many of whom still remember the implosion of Pets.com in the Internet bubble 12 years ago.

In numerous media interviews over the past year, PetFlow co-founders Alex Zhardanovsky and Joseph Speiser have taken credit for the pet-food subscription idea. Unlike many competitors, PetFlow uses free shipping and discounts as incentives to lock customers into long-term subscriptions.

But Marc Kravitz, who founded PetNet in 2005, claims in his lawsuit that Speiser is lying — and that the PetFlow subscription model was originally his idea.

“The auto-ship concept . . . had never been applied to the pet food/supply industry before Kravitz had conceived of doing so,” the PetNet lawsuit alleges.

After meeting with PetFlow executives at a Chinese restaurant in Midtown in October 2009, PetNet signed a nondisclosure agreement with Zhardanovsky and Speiser in order to explore a potential joint venture, according to the suit.

In addition to insight into its subscription delivery model, PetNet claims it gave Zhardanovsky and Speiser access to confidential customer lists, purchasing history, vendor contacts and other competitive information.

“Much of this confidential information . . . could not be acquired through any other source,” the suit claims.

Zhardanovsky pooh-poohs those claims, saying in an interview yesterday that PetNet “is just trying to profit off somebody else’s success” — and that the information PetNet handed over was useless.

“They claim they provided a list of vendors, but when we reached out to vendors it was a complete cold call,” said Zhardanovsky, who sold a lucrative online ad business before founding PetFlow in 2010.

“I sat on Google myself searching ‘dog-food supplier New York,’ ‘dog-food supplier New Jersey,’” Zhardanovsky said.