Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Honeywell charged with inducing discriminatory prices for fire and security products, (Nov 10, 2014)

By Linda O’Brien, J.D., LL.M.

Global technology company Honeywell, through its subsidiary, used its market power to enter into exclusive pricing arrangements with vendors and manufacturers of electronic fire and security products in order to obtain lower pricing and better promotions, in breach of a settlement agreement with independent distributor, AlarMax, and in violation of the Robinson-Patman Act, according to a complaint filed in the federal district court in Pittsburgh (AlarMax Distributors, Inc. v. Honeywell International, Inc., November 6, 2014).

AlarMax has been a wholesale distributor of electronic fire and security products for residential and commercial use, including fire alarms, burglar alarms, close circuit television (CCTV), access control, and intercoms and structured cabling, since 1990. ADI Global Distribution, a subsidiary of Honeywell, is also in the business of distributing electronic fire and security products and directly competes with AlarMax to sell its products to the same resellers and end users.

The complaint states that, in 2004, AlarMax gathered evidence that Honeywell intended to eliminate AlarMax’s access to Honeywell electronic fire and security products as well as access to such products by non-Honeywell vendors. Honeywell also allegedly intended to cause those non-Honeywell vendors and manufacturers to sell to AlarMax only at discriminatorily unfavorable prices and terms. Prior to AlarMax filing suit, the company and Honeywell executed a settlement agreement and a supply agreement. The agreements pertained to Honeywell’s obligation to supply AlarMax with electronic fire products that Honeywell manufactures and sells through distribution and its obligation not to use its market power to obtain exclusive lower pricing and better promotions from third party vendors or manufacturers of electronic fire and security products.

In April 2014, in connection with an unrelated suit between AlarMax and a third party manufacturer of low voltage power supplies, AlarMax obtained a statement from a Honeywell executive in which indicated that Honeywell was receiving lower prices from vendors that was extended to AlarMax and did not want AlarMax to know that information. The executive’s affidavit was an admission that Honeywell was breaching the settlement and supply agreements, the complaint charged.

According to the complaint, Honey is inducing non-Honeywell vendors to enter into exclusive pricing arrangements and accepting pricing that is lower than those vendors extend to AlarMax. Additionally, AlarMax is at a disadvantage in its final purchase price of electronic fire products since the vendors provide lower prices and rebates to Honeywell for its products that are not extended to AlarMax. Honeywell’s ability to offer packages of its products priced below the combined individual prices that AlarMax pays is a violation of the settlement agreement.

Through its exclusive pricing agreements, Honeywell received the lowest prices from vendors and the vendors were prohibited from offering the same low prices to AlarMax. Although AlarMax has requested the same promotions and pricing from vendors that Honeywell received, the vendors have repeated responded that they are not permitted under their agreements with Honeywell from doing so. Because Honeywell has for many years obtained exclusive promotions and pricing more favorable than AlarMax received from numerous vendors who have signed vendor agreements with Honeywell, AlarMax has suffered damage, the complaint alleged.

The plaintiff asserts claims for breach of contract, inducement of discriminatory prices, and violations of the Robinson-Patman Act. The action seeks compensatory and treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:14-cv-01527-MPK.

Attorneys: Gretchen L. Jankowski, Wendelynne J. Newton, and Christopher A. Amar (Buchanan Ingersoll & Rooney PC) for Alarmax Distributors, Inc.

Companies: AlarMax Distributors, Inc.; Honeywell International, Inc.

News: Antitrust PennsylvaniaNews