Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Doorskins manufacturer allegedly used monopoly power to force out competitor, (Jun 30, 2016)

By Linda O’Brien, J.D., LL.M.

Finished door and doorskins manufacturer Jeld-Wen, Inc. has used its monopoly power in the interior doorskin component market to lessen competition, including by refusing to supply finished door manufacturer Steves and Sons with an essential component for its business except on anticompetitive terms and conditions, according to a complaint filed in the federal district court in Richmond, Virginia (Steves and Sons, Inc. v. Jeld-Wen, Inc., June 29, 2016).

Steves and Sons is a family-owned business that manufactures and sells high-quality finished doors to American consumers. Since 1950, Steves has made doors using a key component known as a molded doorskin. Molded doorskins are a facing molded from synthetic materials that may be glued over a wooden frame to make a hollow or solid door that is less costly than a solid wood door.

Jeld-Wen, Inc. manufactures and sells interior molded doorskins as well as finished doors in competition with Steves.

The complaint states that, prior to 2012, there were three manufacturers of doorskins in the United States—Jeld-Wen, Masonite, and Craftmaster. Beginning in 2011, Steves, which previously purchased doorskins from all three manufacturers, began negotiating with the three companies to secure a long-term supply agreement. Steves ultimately selected Jeld-Wen and the parties executed a supply agreement in May 2012. The agreement provided for an initial term and included an "evergreen" clause that automatically extended the term for several years unless terminated in writing by either party.

In June 2012, Jeld-Wen announced it would acquire Craftmaster through a merger of the two companies and the merger closed in October 2012. After the merger, Masonite began to withdraw from the doorskins market and publicly announced that it would no longer supply doorskins to third parties in June 2014, the complaint alleges.

Steves asserts that Jeld-Wen was aware that Steves no longer had another source for doorskins and began efforts to coerce Steves to amend the supply agreement. Since the merger with Craftmaster and exit of Masonite from the market, Jeld-Wen has: (1) sought to raise prices higher than those established in the supply agreement; (2) reduced the quality of building materials used to make doorskins; (3) refused to issue refunds for defective products; (4) refused to sell Steves a popular style of doorskin; and (5) notified Steves of its intention to terminate the supply agreement in December 2019—which is 21 months earlier than allowed in the supply agreement.

According to the complaint, the quality defects, increased prices, and lack of supply have adversely affected Steves’ manufacturing process and sales of its doors. Steves has searched for an alternate source of doorskins but has been unable to identify any global supplier that can sufficiently meet its needs. Moreover, foreign interior molded door manufacturers have significantly higher delivery costs compared to U.S. producers.

Steves and Sons assert claims for breach of contract, breach of warranty, specific performance, trespass to chattels, and monopolization in violation of Section 7 of the Clayton Act. The action seeks declaratory and injunctive relief, damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:16-cv-00545-REP.

Attorneys: Lewis F. Powell III, John S. Martin, John E. Beerbower, and Alexandra L. Klein (Hunton & Williams LLP) for Steves and Sons, Inc.

Companies: Steves and Sons, Inc.; Jeld-Wen, Inc.

News: Antitrust VirginiaNews