Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Window spacer manufacturer allegedly acquired competitors to foreclose competition, (Mar 20, 2015)

By Linda O’Brien, J.D., LL.M.

Quanex, a manufacturer of flexible window spacers, has engaged in anticompetitive conduct by acquiring the only other two manufacturers of flexible window spacers in the United States and, after obtaining a monopoly, substantially increasing prices of flexible window spacers sold to window manufacturers, according to a complaint filed in the federal district court in Riverside, California (ATN Holding, Inc. v. Quanex Building Products Corporation, March 17, 2015).

ATN is engaged in the business of manufacturing residential windows. Quanex Building Products manufactures flexible window spacers that are used in the assembly of residential windows. Flexible window spacers are installed between two planes of glass to provide insulation and to hold the planes together. Currently, Quanex is the only manufacturer of flexible window spacers in the United States.

The complaint states that, prior to 2003, there were two other manufacturers of flexible window spacers in addition to Quanex—Truseal Technologies and Edgetech I.G. In 2003, Quanex acquired Truseal Technologies and obtained any and all patent rights to Truseal’s flexible window spacers. In 2011, Quanex attained 100 percent of the market by acquiring Edgetech I.G.

According to the complaint, Quanex has substantially increased the effective price of flexible window spacers by more than 20 percent after acquiring 100 percent of the market. Quanex has maintained its monopoly power by refusing to sell its flexible window spacers to any residential window manufacturer that also uses non-Quanex window spacers. ATN was a regular purchaser of Quanex flexible window spacers until Quanex refused to deal with ATN due to its use of non-Quanex window spacers in the production of insulated residential windows.

There are significant barriers to entry into the relevant market, ATN claimed. First, Quanex obtained Truseal’s patent rights in the acquisition and vigorously enforces those rights through legal actions. Second, the cost of buying machinery and equipment to produce flexible window spacers is significant. Third, the cost for window manufacturers to switch from one window spacer to another is high and most manufacturers will not expend the time, effort, and money to switch products, the complaint also states.

Quanex’s alleged willful acquisition and maintenance of its monopoly power has harmed competition. Quanex has increased prices, set up barriers for a competitor to enter the market, and refused to deal with window manufacturers that use non-Quanex window spacers. The anticompetitive conduct has resulted in price increases above a reasonably competitive level and stifles innovation and diversity in the relevant market, the complaint charges.

The plaintiff asserts claims for monopolization, attempted monopolization, unlawful acquisition, and unfair competition in violation of Section 2 of the Sherman Act, Clayton Act, and California’s Unfair Competition Law. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 5:15-cv-00516.

Attorneys: William L. Buss and Eric M. Schiffer (Schiffer & Buus APC) for ATN Holding, Inc.

Companies: ATN Holding, Inc.; Quanex Building Products Corporation

News: Antitrust CaliforniaNews