Savant alleges that Crestron is the largest supplier of high-end home automation systems – equipment that controls everything from audio/video and lighting systems to climate and security, and costs from $25,000 to $100,000 to install – with a market share of over 80 percent. 

According to Savant, the market is particularly constrained by the fact that automation products are not sold directly to consumers, but through local dealer networks.  The vast majority of these dealers – 80 to 90 percent – are Crestron dealers.  Savant says Crestron offers discounts to dealers who refuse to carry Savant and penalizes those who do.  According to the complaint, Crestron’s misconduct is exemplified by a recent guide telling dealers, “Remember, you can’t be a Crestron dealer and also sell Savant products.” 

Savant has alleged that these and other exclusionary activities are designed to restrain competition by precluding Savant’s access to the dealer network and protect Crestron’s monopoly.  The suit also alleges that Crestron published false information about Savant, such as “asserting that only Crestron has an exclusive relationship with Apple . . . .”  Other allegedly false statements include Crestron’s warning to customers that “when you buy Savant, you buy Savant – a one-room storefront on Cape Cod – not Apple.” 

Judge Harrington of the U.S. District Court for the District of Massachusetts rejected Crestron’s arguments in a two-paragraph order, setting the stage for full-blown discovery and inevitable re-examination at summary judgment.  The market for programmable home (and commercial) automation technology, currently more than $200 million annually, appears to be growing rapidly.

Skyrocketing gas prices may be getting an extra boost from anticompetitive conduct according to some Democratic legislators that are urging the Federal Trade Commission to investigate possible anticompetitive conduct by gasoline refineries.

Last week, Democratic senators, including Senators Claire McCaskill, Charles Schumer, Patty Murray and Senate Majority Leader Harry Reid, asked the FTC to investigate whether gasoline refiners have restrained supply of gasoline in order to increase prices.  In a letter to Jon Leibowitz, the Chairman of the FTC, they questioned whether U.S. inventories may have been kept artificially low in order to maintain high gas prices, citing evidence that “refineries are using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year.” 

D.C. and Maryland attorneys general also recently announced investigations.

D.C.’s Attorney General is investigating Capitol Petroleum Group (“CPG”), D.C.’s largest owner of gas stations, for potential anticompetitive practices.  CPG owns/operates a large number of gasoline stations in D.C.  The investigation will center on whether CPG’s gas station holdings represent an illegal monopoly under D.C.’s antitrust law, and might also look into CPG’s primary owner’s dual role as a gas station owner and gas wholesaler through another company called DAG Petroleum.  Four years ago, the D.C. Council repealed a law prohibiting wholesalers from owning individual service stations based on competition concerns.  It might be revisiting that decision.  CPG’s owner in a statement argued that the gas stations he owns are managed by individual franchisees which independently set the price of gas at the pump.

Maryland’s Attorney General is investigating “sudden and dramatic” increases in gas prices at a number of Maryland stations supplied by Empire Petroleum Holdings.  Empire, a distributor, apparently told its retailers that prices had to be raised about 25 cents a gallon because of the Mississippi River flooding.

Both target companies are contesting allegations of anticompetitive conduct.

Bob Marley may have been the first Reggae superstar and the writer of such hits as I Shot The Sheriff, but he is not a product market, according to a California federal judge.

The U.S. District Court for the Central District of California has dismissed the antitrust claims in Rock River Communications Inc. v. Universal Music Group Inc., rejecting Rock River’s theory that reggae music – and Bob Marley in particular – is a relevant product market that Universal was monopolizing. 

The litigation stems from Rock River’s 2006 release of remixed Bob Marley and the Wailers recordings titled “Roots, Rock, Remixed.”  Universal, which claimed to have the exclusive right to these recordings, sent “cease and desist” letters to several major music distributors, including Apple Inc.’s iTunes, Amazon and Virgin, who promptly pulled the album from their shelves. 

In response, Rock River sued Universal alleging that it violated Sections 2 and 7 of the Sherman Act by (1) attempting to monopolize the reggae genre of sound records in the United States; and (2) restraining trade and threatening to create a monopoly.  Rock River also sued Universal for allegedly interfering with its prospective economic advantage by sending the cease and desist letters.

Despite nearly three years of litigating the case, Rock River offered paltry evidence as to product market definition, market power and barriers to entry.  In particular, Rock River argued that Universal had monopoly power based on the percentage of Bob Marley albums it has sold.  Rock River alleged that Universal “accounted for 81 percent of the reggae sound recordings sold, and Bob Marley recordings accounted for 76 percent of the total reggae recordings sold.”  In formulating these market share numbers, Rock River simply presented a declaration from a lay witness.  Moreover, Rock River essentially agreed with defendants that there were no barriers to entry in the market for reggae music.

Based on Rock River’s failure to show that there were any genuine issues of material fact, the court granted Universal’s motion for summary judgment on the antitrust claims.  The court held that plaintiff”s proposed product market was “too narrow to be relevant for antirust purposes” as it focused on Bob Marley sound recordings, rather than reggae music as a whole.  The court noted, however, that even if the product market were a single genre of music, Rock River failed to offer evidence regarding either price-sensitivity of the market or that other genres of music are not a reasonable substitute for reggae music.

Finally, the court found that Rock River presented “no cognizable evidence” with respect to market share or any evidence showing that there are barriers to entry in the alleged market. 

The court allowed Rock River’s claim for interference with prospective economic advantage to go forward, finding that there is a question of fact regarding whether Universal indeed had the exclusive right to sell the recordings at issue.

Although Microsoft’s epic antitrust battle with the U.S. Department of Justice officially comes to an end tomorrow, with the expiration of the government’s decade-long oversight of the software giant, Microsoft has learned that another antitrust challenge has just received a new lease on life.

The United States Court of Appeals for the Fourth Circuit has revived the antitrust action Novell filed against Microsoft involving Novell’s office software applications WordPerfect and Quattro Pro.  Last year, the U.S. District Court in Maryland dismissed Novell’s antitrust claims.

The Fourth Circuit has now held that Novell is free to pursue an antitrust claim even though Microsoft settled a related suit with another company, Caldera, Inc., for $280 million.  The Fourth Circuit ruled that Novell’s sale in 1996 of its desktop operating system business to Caldera did not prevent it from seeking damages from Microsoft for allegedly using its monopoly power in the operating systems market to squash Novell’s office applications.

In 1996, Novell made a deal assigning certain rights to sue Microsoft to Caldera.  Caldera sued Microsoft over competition in the operating system market, receiving a $280 million settlement four years later, of which Novell received a $35 million share.  Then in 2004, Novell sued Microsoft in its own right, claiming WordPerfect was the victim of unfair competition by Microsoft, and last year Microsoft won summary judgment against Novell in that case on the grounds that Novell’s claims were subject to the 1996 agreement with Caldera.

But whereas the district court held that Novell signed away its software application claims to Caldera along with the operating system claims, the appeals court refused to abandon distinctions between the products harmed by Microsoft’s allegedly anticompetitive practices and will allow Novell to proceed with its one remaining antitrust claim.

Novell, which was purchased by Seattle-based Attachmate, Inc. last month, is seeking several billion dollars in treble damages under the antitrust laws.

Adobe Systems Inc. has been hit with an antitrust class action in federal court by Free FreeHand Corp., a non-profit group, and graphic design professionals and consumer users of FreeHand, the vector-graphic illustration software product acquired by Adobe several years ago.

The complaint in Free FreeHand Corp. et al. v. Adobe Systems Inc., 5:11-cv-02174 (N.D. Cal.), alleges monopolization in violation of the Sherman Act § 2 as well as violations of California’s antitrust statute, the Cartwright Act, and the State’s broad-sweeping Unfair Competition Law.  The complaint also seeks relief under Washington’s antitrust and unfair competition statutes.

The complaint alleges that when Adobe bought Macromedia Inc. in 2005 and acquired the FreeHand software, it did so to monopolize the market for vector-graphic illustration software by eliminating competition for its own software product, Illustrator, the chief competition for FreeHand in the professional graphic software market.

Plaintiffs allege that Adobe has a 100% share of Mac users and an 80% share of Windows users in the relevant market.  The complaint excludes so-called “hobbyist” level vector-graphic illustration software from the alleged market, such as Serif DrawPlus, Xara X, Draw well, Photoline, Inkscape, Lineform, Sketsa SVG editor, Zeusdraw, Easy draw, and Intaglio.  The complaint also excludes computer-aided design programs, bitmap graphic illustration and page layout software from the alleged market.

Adobe likely will challenge the market definition vigorously as that threshold issue could determine whether Adobe is found to have market power. 

Free Freehand alleges that Adobe monopolized the market by acquiring the competing software, then raising the price of Illustrator and at the same time failing to update FreeHand.  It also alleges that Adobe tried to eliminate FreeHand from the market completely by announcing that it would stop developing FreeHand in 2007 and by publishing documents detailing how consumers can migrate from FreeHand to Illustrator.

The complaint, however, may be vulnerable to an argument by Adobe that the claims are barred by the applicable four-year statutes of limitations.  If the complaint survives a motion to dismiss, Adobe is also likely to argue that the plaintiffs’ claims encroach on its product design decisions which were undertaken for legitimate and procompetitive reasons. 

In addition to seeking damages for purported overcharges, the complaint seeks a divestiture of Freehand source code to turn it into an open-source competitor of Illustrator.

Adobe won antitrust clearance from U.S. regulators in 2005 for the acquisition of Macromedia Inc., the developers of FreeHand, which cleared the way for the $3 billion deal.  Approval came after U.S. Justice Department officials issued a second request to take a closer look at the design and vector-graphics illustration products at issue in the complaint.