Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Honeywell seeks to dismiss alarm distributor’s price discrimination suit as lacking specifics, (Jan 9, 2015)

By Linda O’Brien, J.D., LL.M.

A complaint by wholesale alarm distributor AlarMax failed to plead the material elements of a price discrimination claim under the Robinson-Patman Act and should be dismissed, according to a motion filed by global technology company Honeywell in the federal district court in Pittsburgh (AlarMax Distributors, Inc. v. Honeywell International, Inc., January 7, 2015).

AlarMax is an independent wholesale distributor of electronic fire and security products for residential and commercial use. ADI Global Distribution, a subsidiary of Honeywell, is also in the business of distributing electronic fire and security products and directly competes with AlarMax. In 2004, Honeywell and AlarMax entered into a settlement and supply agreement to resolve a threatened suit by AlarMax for alleged price discrimination.

After obtaining a statement submitted by Honeywell regarding the confidentiality of its costs in an unrelated suit between AlarMax and third-party vendor, Alarmax filed suit against Honeywell, alleging claims for price discrimination under the Robinson-Patman Act and breach of contract. AlarMax asserted that 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 the settlement and supply agreement.

In a memorandum in support of its motion to dismiss, Honeywell argues that Section 2(f) of the Robinson-Patman Act requires the plaintiff to allege (1) a difference in price; (2) in contemporaneous sales to two buyers purchasing from a single seller; (3) in interstate commerce; (4) involving commodities of like grade and quality; (5) that may injure competition. AlarMax’s complaint fails to identify two comemporaneous sales by any vendor – one sale to Honeywell and the other sale to AlarMax – at different price levels.

The alleged unsigned vendor agreement that AlarMax offers as evidence of discriminatory pricing is not evidence of an actual sale and is unspecific as to products, pricing, commencement, termination, or any other material term of a transaction, according to Honeywell.

Moreover, the complaint gives no notice of any products allegedly sold at discriminatory prices and fails to allege any actual price differential, the memorandum argued. Apart from vague and conclusory allegations of higher prices, the complaint does not identify a single product that was actually sold by a single vendor at a certain point in time at different prices to both AlarMax and Honeywell, the defendant contended.

According to the motion, to establish a claim under Section 2(f), the plaintiff must ultimately show that the buyer not only received the benefit of price discrimination in the form of lower prices but also that the defendant knew or should have known that it was the beneficiary of unlawful price discrimination. AlarMax’s claim fails because the complaint does not allege any facts demonstrating a plausible inference that Honeywell knowingly induced or received unlawful pricing from vendors, Honeywell claimed.

Honeywell’s statement in the unrelated suit between AlarMax and third-party vendor was submitted to protect the confidentiality of Honeywell’s own pricing and cost information from competitors, such as AlarMax, the memorandum said. The statement says nothing about Honeywell’s knowledge of any prices AlarMax was receiving from other vendors and the only plausible inference that can be drawn from the statement is that Honeywell considers its cost information to be proprietary and confidential to the respective vendor.

Honeywell views AlarMax’s complaint as an effort to suppress Honeywell’s efforts to obtain lower costs from vendors and to offer lower prices to its customers. The most plausible inference to draw from AlarMax’s objections to Honeywell’s alleged low costs and low prices is an aversion to competition and not a violation of antitrust laws, the motion states.

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. William Pietragallo, II (Pietragallo Gordon Alfano Bosick & Raspanti, LLP), William C. McLeod, Alison L. MacGrefor, and Sung W. Kim (Kelley Drye & Warren LLP)for Honeywell International Inc.

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

News: Antitrust PennsylvaniaNews