Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Bedding provider allegedly used sham litigation to foreclose competition, (Feb 29, 2016)

By Linda O’Brien, J.D., LL.M.

Leading bedding manufacturer Tempur Sealy has acted to maintain its monopoly power in the consumer bedding market by threatening litigation against a start-up competitor in order to force the competitor to change its popular current marketing campaign and website, according to a complaint filed in the federal district court in Salt Lake City, Utah (WonderGel, LLC v. Tempur Sealy International, Inc., February 26, 2016).

Tempur Sealy International is the world’s largest bedding provider, having net sales in 2015 of $3.151 billion. Temper Sealy sells its products primarily through brick-and-mortar retail stores. WonderGel, LLC , doing business as Purple, is a start-up business that is now entering the consumer mattress market with a new product that it markets to mattress consumers in the United States solely online through its website.

The complaint states that Purple markets its new mattress product as unique in that it is firm enough to provide necessary support but soft enough to reduce pressure in protruding areas, such as hips and shoulders. In a video available on its website entitled “How to Use a Raw Egg to Determine if Your Mattress is Awful-#Purple,” Purple used a Goldilocks character from the Goldilocks and the Three Bears fable to show how a raw egg was crushed when placed under pressure on the cushioning elements of mattresses that were relatively “hard,” “soft,” and “just right,” but not on the cushioning element of Purple’s new mattress.

According to the complaint, the video plays for almost four minutes and shows the outside of a Tempur Sealy mattress for a total of seven seconds in three separate scenes of the video. The Tempur Sealy mattress was used only to represent any of numerous brands and models of mattresses available to consumers by numerous manufacturers. The Tempur Sealy mattress was not predominantly displayed and no observable features of the design of that model of mattress was highlighted or mentioned.

On February 22, 2016, Tempur Sealy notified Purple that it was willfully violating Tempur Sealy’s rights in its trademarks under the Lanham Act with the content in the video. Tempur Sealy also demanded that Purple promptly change its website and video or Tempur Sealy would file suit against Purple, the complaint states.

The complaint also alleges that the video is not capable of deceiving ordinary, reasonable mattress consumers and that Tempur Sealy has not suffered any harm as a result of the video, but instead is subject to losing sales to consumers who want Purple’s unique mattress product. Purple claims that Tempur Sealy’s intent is to harm smaller competitors by knowingly making false claims of Lanham Act violations and to interrupt Purple’s current marketing campaign. Additionally, Tempur Sealy’s threat of litigation is damaging to Purple, since its lenders and investors will increase the cost of capital to Purple in light of the increased risk of threatened litigation made by a multi-billion dollar company.

The plaintiff asserts claims for intentional interference with economic relations, abuse of process, and monopolization in violation of the Section 2 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-00162-BSJ.

Attorneys: Casey K. McGarvey for WonderGel, LLC.

Companies: WonderGel, LLC; Tempur Sealy International, Inc.

News: Antitrust UtahNews