Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Kodak allegedly attempted to drive competitor out of Versamark ink market through anticompetitive conduct, (Sep 20, 2013)

By Tobias J. Gillett, J.D., LL.M.

A producer of ink for use with Kodak’s Versamark printers has filed a complaint in the federal district court in Cincinnati, alleging that Kodak unlawfully tied the purchase of ink to the purchase of refurbished printheads for the printers and engaged in deceptive trade practices and unfair competition in coercing customers into purchasing Kodak ink and in making false and misleading statements about the producer’s ink (Collins Inkjet Corp. v. Eastman Kodak Co., filed September 19, 2013).

Kodak manufactures Versamark printers that it sells to printing companies. According to the complaint, Kodak is also the only manufacturer of printheads for Versamark printers and the only company that can currently provide refurbished printheads, while Collins Inkjet Corp. and Kodak are the only manufacturers of ink for the printers.

From 1989 until 2001, Collins competed with Kodak in the sale of Versamark ink. In 2001, however, the companies entered into an agreement under which Kodak would be the exclusive reseller of Collins’ Versamark ink. Collins provided both ink branded as “Collins” and ink branded as “Kodak,” while Kodak produced some ink that was also branded as “Kodak.” Customers could order Collins ink through either Collins or Kodak.

In 2011, however, Collins developed concerns about Kodak’s financial stability, and allegedly sought to terminate its agreement with Kodak after being unable to resolve issues concerning Kodak’s outstanding payables due to Collins. Following Kodak’s bankruptcy filing, Collins was able to terminate the agreement.

After the termination, however, Kodak allegedly began engaging in anticompetitive conduct intended to coerce customers into purchasing their ink from Kodak rather than Collins. Kodak allegedly informed customers that it would charge higher prices for refurbished printheads if “non-Kodak” inks were used. Since the cost for a refurbished printhead used with Collins ink would increase 25 percent under this policy, and since customers would generally spend three to four times more annually on refurbished printheads than on ink, the new policy “made it economically infeasible for customers to continue to use Collins ink.”

Although Kodak initially only sporadically enforced its policy, in July 2013 Kodak announced and began enforcing a new policy increasing the price disparity between printheads used with Kodak ink and those used with Collins ink and requiring customers to formally identify the ink used in printheads sent back to Kodak, according to the complaint. Kodak allegedly claimed the policy was justified by damage to printheads caused by third party inks, but the complaint asserts that only Collins produced third party inks for Versamark printers, and that it was unaware of any damage resulting from the use of its inks. Kodak also allegedly threatened customers that their warranties would be voided if they used non-Kodak ink.

According to the complaint, Kodak issued a press release falsely implying that Kodak had revoked its approval of Collins’ ink for quality reasons, and falsely stating that only Kodak could engineer, test, and optimize inks and fluids for Versamark printers prior to order. In a slide presentation to customers, Kodak allegedly made the same misrepresentations, falsely stated that Kodak had met all of its obligations to Collins under the terms of their agreement, and falsely represented that Kodak ink used with Kodak printers provided a lower total cost of print. The presentation also allegedly falsely implied that Collins ink was not free from contaminants, and that the premium customers would pay for Kodak-branded inks was justified based on an assurance of “optimal performance” when Collins’ ink out-performed Kodak’s. Kodak falsely suggested to customers that Collins’ ink could potentially damage printing components, system operation, and color management, it was alleged.

In addition, Kodak allegedly told some customers that attempted to order Collins ink that Collins was no longer in business or simply sent them Kodak ink instead. Kodak has also purportedly released a new software file that prevents Collins’ inks from running on a printer on which the file has been installed, and attempted to force customers into entering exclusive dealing agreements with Kodak for the purchase of ink.

The complaint asserts claims for unlawful tying under Section 1 of the Sherman Act, unfair competition under Section 43(a) of the Lanham Act, deceptive trade practices in violation of Ohio law, defamation, and tortious interference with prospective contractual relations.

The complaint seeks a declaration that Kodak violated the relevant laws; injunctions against Kodak’s tying of its ink to its refurbished printheads, against Kodak’s enforcement of its provisions increasing the cost of refurbished printheads used with Collins’ ink, and against failing to provide printheads to customers using Collins’ ink under the same terms and conditions as it provided printheads to customers using Kodak’s ink; an order requiring Kodak to provide notice to customers of the injunctions and of their right to use ink with refurbished printheads whether or not it was manufactured by Kodak; an injunction requiring Kodak to cease making false or deceptive statements regarding Kodak’s and Collins’ respective ink products and to take corrective action; an injunction against interfering with contractual relations by improperly encouraging customers not to buy Collins’ ink; costs of suit; attorneys’ fees; and any other just and proper relief.

The case is No. 1:13-cv-00664-MRB.

Attorneys W. B. Markovits (Markovits, Stock & DeMarco, LLC) for Collins Inkjet Corp.

Companies: Collins Inkjet Corp.; Eastman Kodak Co.

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