Schwab Accuses Rival of False Ads

Discount brokerage pioneer Charles Schwab Corp. sued the TD Waterhouse Group Inc. on Monday, alleging that its rival’s advertisements falsely labeled Schwab as a high-priced firm with inferior service.

The trade libel complaint filed in state court underscores Schwab’s determination to reclaim its reputation as a bargain brokerage.

After being undercut by smaller rivals for years, San Francisco-based Schwab has lowered its trading commissions twice in the last nine months and waived some of the account fees that it rolled out in recent years to offset a deep financial slump.

With the changes, some of New York-based Waterhouse’s prices are now higher than Schwab’s. For instance, a Schwab customer with $55,000 in his accounts would pay $12.95 for an online trade compared with $17.95 for a Waterhouse customer with the same amount of money.

Waterhouse’s aggressive ads, which first appeared in late 2003, rankled Schwab’s founder and chief executive even before the company’s recent price cuts.

“I have been working darn hard for more than 30 years to build our reputation, so I am not going to stand by and let them run ads that are patently false,” Charles Schwab said in an interview Monday.

TD Waterhouse said it stood by its ads.

“We’re surprised that Schwab would use litigation in an attempt to silence the competition,” spokesman Kevin Dinino said.

Charles Schwab said he tried to persuade Ed Clark, CEO of TD Bank Financial Group, which oversees TD Waterhouse, to abandon the ads before he filed the lawsuit. Schwab wants a court order to ban the ads, in addition to unspecified damages.

Schwab’s shares fell 6 cents Monday to $10.84 on the New York Stock Exchange, while shares of Toronto-Dominion Bank, TD Waterhouse’s parent company, slipped 3 cents to $41.53.