Antitrust Law Daily Wrap Up, ANTITRUST—S.D. N.Y.: Building management systems products reseller fails to state plausible antitrust claims against competitor, (Apr 7, 2014)

By Linda O’Brien, J.D., LL.M.

A reseller of building management systems products failed to sufficiently plead federal and state antitrust claims against a competing reseller and manufacturer of building control system enhancements for allegedly engaging in a conspiracy to restrain trade and monopolize the relevant market, the federal district court in New York City has ruled (TechReserves Inc. v. Delta Controls Inc., March 31, 2014, Daniels, G.).

TechReserves operates as a value-added reseller (VAR) of building management systems (BMS) products, which are hardware and software enhancements to building control systems. BMS products are used in commercial and other buildings to regulate climate, lighting, and access points, as well as monitor system performance. Delta Controls, a manufacturer of BMS products, employs a building automation and control software (BACnet protocol) that is an alternative to proprietary software manufactured by other BMS vendors. Integrated Building Controls (IBC) operates as a VAR of BMS products, including those manufactured by Delta. BMS manufacturers sell their products to building owners through authorized VARs, which distribute the BMS product and provide installation and support services to purchasers.

TechReserves filed suit against IBC, a competing VAR, alleging that the company conspired to use Delta’s market power to restrain competition in the BACnet product market and entered into illegal tying arrangements in violation of Sections 1 and 2 of the Sherman Act and the New York Donnelly Act. Specifically, IBC and Delta were charged with excluding other VARs from selling, installing, and servicing Delta BACnet BMS products and force BMS purchasers to use IBC’s services if they want to buy Delta products. The defendants moved to dismiss.

The court found that the plaintiff failed to adequately plead a plausible relevant market. To state a claim under the Sherman Act, a plaintiff must allege that the defendants entered into a conspiracy that unreasonably restrained competition or trade in the relevant market and caused the plaintiff to suffer an antitrust injury. According to the court, TechReserves described the relevant product is varying, inconsistent, and imprecise terms. Moreover, Delta’s distribution of its non-unique, single brand product did not constitute a legally cognizable market. In rejecting TechReserves’ argument that it sustained an antitrust injury due to its inability to sell Delta products, the court noted that TechReserves’ preference to sell the best product on the market did not support an antitrust claim.

Additionally, the plaintiff failed to adequately plead Delta’s alleged market power or a cognizable antitrust injury. TechReserves did not present evidence of either Delta’s or IBC’s market share to determine whether the defendants possessed or exercised market power in the relevant market. Aside from sweeping and unsubstantiated allegations of harm to competition in the market, TechReserves also failed to allege any facts showing actual harm to competition in the relevant market as a whole. There was no evidence to support a claim that any VAR beside TechReserves was harmed by the alleged conspiracy.

The court also determined that the plaintiff failed to adequately plead the existence of any agreement between Delta and IBC to restrain trade by tying the sale of Delta BACnet BMS products to an installation and service contract with IBC. TechReserves failed to plead facts to show that Delta was capable of coercing purchasers to accept tied IBC services with Delta BACnet products.

Finally, the plaintiff’s monopolization, attempted monopolization, and antitrust claims under the Donnelly Act were also dismissed. Other than mere conclusory statements, the plaintiff pleaded no facts to support an allegation of an intent to monopolize. Since the plaintiff’s failed to allege facts to support its Sherman Act claims, its state law claims based on the same conduct failed as well, the court concluded.

The case is No. 1:13-cv-00752-GBD.

Attorneys: Andrew Paul Cooper (Davidoff Hutcher & Citron LLP) for TechReserves Inc. Michael A. Lindsay (Dorsey & Whitney, LLP) for Delta Controls Inc. Donald E. Watnick (Law Offices of Donald Watnick) for Integrated Building Controls, Inc.

Companies: TechReserves Inc.; Delta Controls Inc.; Integrated Building Controls, Inc.

Cases: Antitrust NewYorkNews