Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Select Comfort charged with monopolizing adjustable firmness bedding market, (Mar 31, 2016)

By Linda O’Brien, J.D., LL.M.

Leading bedding manufacturer Select Comfort has engaged in an anticompetitive scheme to suppress competition in the adjustable firmness bedding market by initiating sham litigation and entering into exclusive supply agreements that has caused consumers to pay higher, supra-competitive prices for adjustable firmness mattresses, according to a complaint filed in the federal district court in Los Angeles (American National Manufacturing Inc. v. Select Comfort Corporation, March 30, 2016).

Select Comfort Corp. manufactures the Sleep Number adjustable firmness beds as well as foundations and bedding accessories. Select Comfort products are sold through 480 company-owned retail stores located across the United States, which are the exclusive distributors of the products.

Dires, LLC sells consumer adjustable firmness beds, under the trade name “Personal Comfort Bed,” exclusively online through its website. American National Manufacturing makes several lines of adjustable firmness air mattress beds, including the air bed sold by Dires.

The complaint states that adjustable firmness mattress air beds are unique products, which consist of air-filled mattresses containing internal air chambers that may be adjusted for firmness. Select Comfort began selling adjustable firmness beds in 1988 and has several trademark registrations for “Sleep Number®,” “Select Comfort®,” and “What’s Your Sleep Number?®” Select Comfort is the largest manufacturer and seller of these beds, accounting for more than 90 percent of the sales in the United States.

Select Comfort, the complaint alleges, has achieved a monopoly in the adjustable-firmness bedding market by implementing an anticompetitive scheme to exclude competitors from this lucrative and growing market. First, Select Comfort has initiated a pattern of abusive and baseless trademark infringement suits that were designed to scare essential suppliers away from doing business with competitors and to financially drain competitors. In November 2012, Select Comfort filed a federal lawsuit against Dires, alleging trademark infringement, dilution, and false advertising. The claims allegedly were baseless and intended to interfere with Dires’ business relationships. The court granted summary judgment in Dires’ favor in January 2016.

Additionally, Select Comfort has initiated bad faith patent infringement suits on the basis of patent, during the examination of which showed material prior art that was withheld from the U.S. Patent Office examiners, the complaint states. In October 2015, Select Comfort instituted proceedings before the International Trade Commission against Dires and American National, based on patent infringement, which is currently pending.

According to the complaint, Select Comfort acquired its largest competitor Comfortaire Corporation in 2013, following the settlement of a trademark suit filed by Select Comfort to strengthen its monopoly and to gain a competitive advantage through the “convergence of intellectual property.” Furthermore, Select Comfort has obtained exclusive supply agreements for an essential component necessary to producing adjustable firmness air beds at an economical price—vulcanized rubber. These agreements have raised the barriers to market entry by depriving competitors of essential materials, the plaintiffs claimed.

As a consequence of the defendant’s conduct, competition in the adjustable firmness bedding market has been suppressed and consumers have paid higher, supra-competitive prices for adjustable firmness mattresses than they would have in a competitive market, the complaint alleges.

The plaintiffs asserts claims for monopolization and attempted monopolization in violation of Sections 1 and 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. 5:16-cv-00582-GHK-JC.

Attorneys: Maxwell M Blecher and Donald R. Pepperman (Blecher Collins & Pepperman, P.C.) for American National Manufacturing Inc. and Dires LLC.

Companies: American National Manufacturing Inc.; Dires LLC; Select Comfort Corporation

News: Antitrust CaliforniaNews