Savant Lays out Claims Against Crestron in Court Documents

Savant filed a lawsuit against Crestron this week in the U.S. District Court for the District of Massachusetts.

The filing, downloaded from Pacer.com, is excerpted below.

In essence, Savant accuses Crestron of violating the Sherman act and other laws concerning anticompetitive practices. Allegedly, Crestron explicitly and implicitly keeps its dealers from carrying the competitive Savant lines, and also makes false claims about Savant, its personnel and its products.

Savant is seeking a jury trial and unspecified damages.

Among Savant's claims and assumptions:

• Savant estimates that U.S. revenues for automation systems that control high-end A/V, lighting, climate control, communications and security systems exceed $700 million, of which about two-thirds is from the residential sector.
• Savant believes Crestron sells about $400 million per year, of which about half is for residential applications.
• Savant notes that its Mac OS-based architecture allows the company to provide these types of solutions "at a price significantly less than heretofore obtainable."
• Savant estimates that there are about 3,000 higher-end integrators in the U.S., of which 2,500 do business with Crestron."By virtue of its dominant size, Crestron has substantial control over dealers ...."
• Crestron has engaged in "anticompetitive, unfair and deceptive practices designed to thwart competition from Savant on the merits ...."
• Crestron routinely insists that its dealers refrain from carrying Savant products. From a Crestron selling sheet: "Remember, you can't be a Crestron dealer and also sell Savant products!"
• Crestron discounts products to some dealers as an incentive to not carry Savant.
• " ... [N]umerous dealers have in fact refused to handle Savant's products for fear of termination by Crestron."
• Crestron makes false and misleading statements both orally and in sales and marketing materials, disparaging Savant personnel and its products. Among the false assertions is that "only Crestron has an exclusive relationship with Apple, Inc., when in fact Savant is an authorized reseller of Apple products."
• "Crestron has acted with a specific intent to monopolize, and to destroy effective competition ...."
• Because of Crestron's false and misleading statements, "Savant has suffered and continues to suffer actual damages, including lost prospective and actual business, lost profits, loss of goodwill and damage to its reputation and the reputation of its products ...."

Exhibit

Savant points to this product comparison sheet allegedly distributed by Crestron.

Savant v. Crestron

Case N. Case 1:10-cv-11622-EFH

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
__________________________________________

SAVANT SYSTEMS, LLC
Plaintiff

v.

CRESTRON ELECTRONICS, INC.
Defendant

Civil Action No.
Sherman Act and Clayton Act
Antitrust, Lanham Act
Unfair Competition,
M.G.L.A. c. 93 and c. 93A,
Common Law Unfair Competition

COMPLAINT AND DEMAND
FOR JURY TRIAL

------------------------------------------------

I. NATURE OF THIS ACTION

1. This is an action by plaintiff Savant Systems, LLC ("Savant"), a new entrant into the manufacture and sale of programmable controller systems for residential and commercial automation for controlling high-end audio-visual, lighting, climate control, communication and security systems, against defendant Crestron Electronics, Inc. ("Crestron"), the world's largest supplier of competitive systems in that market. This action seeks, based on Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§1, 2, Section 3 of the Clayton Act, 15 U.S.C. §14, Section 43(a) of the Lanham Act, 15 U.S.C. §1125(a), as well as state and common law, to restrain certain anticompetitive, unfair and deceptive conduct by Crestron calculated to preclude or delay Savant's entry into the market, and to remedy the damaging effects of Crestron’s past unlawful conduct.

II. PARTIES

2. Savant is a limited liability company organized and existing under the laws of the Commonwealth of Massachusetts with its principal place of business located at 770 Main Street, Osterville, Massachusetts 02655.

3. Savant was founded in 2005 on Cape Cod, Massachusetts by a core group of technology pioneers and business executives for the purpose of developing programmable controllers for home automation, particularly for controlling high-end home audio-visual, lighting, climate control, communication, and security systems. The group brings together literally hundreds of years of combined real-world success in varied technology fields such as programmable systems, digital signal processing, video processing, telephony switching systems and home electronics integration. Prior to founding Savant, core members of the group (operating
as Excel Corporation, also of Cape Cod) had designed and developed a successful series of programmable telecommunication switches; the business was subsequently acquired in its entirety by Lucent Technologies, Inc.

4. Crestron is a corporation organized and existing under the laws of the State of New Jersey, with its principal place of business located at 15 Volvo Drive, Rockleigh, New Jersey 07647.

5. By Crestron's own admission: "With over 40 years in business and 57 offices worldwide, Crestron Electronics is the leading provider of control and automation systems for homes, offices, schools, hospitals, hotels and more." "Crestron Company Overview" at http://www.crestron.com. (Exhibit A hereto).

III. THE PRODUCTS AT ISSSUE

6. Savant's programmable controllers are designed to run on the Mac OS® platform of Apple, Inc. This unique design approach has allowed Savant to develop user-friendly and reliable control and automation components which are easily integrated into total control and automation systems for residential and commercial environments, and to provide such systems at a price significantly less than heretofore obtainable. Using Savant-originated application programs available for purchase from Apple, Inc., Savant's controllers can be complemented by the world's most popular phone and portable media devices, including Apple's i-Pod, i-Phone and i-Pad devices. Savant's controllers are programmable by the local installers of the systems to be controlled, and thus can be customized and particularized to the individual installation.

IV. JURISDICTION AND VENUE

7. Jurisdiction over Savant's claims under the Sherman Act, Clayton Act and Lanham Act is proper under 28 U.S.C. §1331 and 1337(a), as well as under 15 U.S.C. §15 with respect to the Sherman and Clayton Acts. Jurisdiction over Savant's state and common law claims is proper under 28 U.S.C. §1367(a) and the principle of supplemental jurisdiction.

8. This Court also has jurisdiction pursuant to 28 U.S.C. §1332 in that this action is between citizens of different states and the amount in controversy exceeds $75,000 exclusive of interest and costs

9. Venue is proper in this District pursuant to any one or more of 28 U.S.C. §1391, 15 U.S.C. §15 and 15 U.S.C. §22, because Crestron transacts business and is found within this District and a substantial part of the events giving rise to the claims herein were intended to cause effects in this District.

V. THE RELEVANT MARKETS

10. The relevant product market ("The Market") for purposes of this action is the distribution and sale of programmable controllers for residential and commercial automation, particularly for controlling high-end audio-visual, lighting, climate control, communication and security systems ("The Products"). (A "high-end" system typically costs the end-user in excess of twenty-five thousand dollar for purchase and installation, and may well extend into in excess of one-hundred thousand dollars). The relevant submarket ("The Submarket") comprises the distribution and sale of The Products for residential automation for controlling high-end home audio-visual, lighting, climate control, communication and security systems ("The Residential Products"). The market for The Products is substantial. On information and belief, it accounts for in excess of seven hundred million dollars of business in the United States each year, of which it is estimated that on the order of two-thirds are of The Residential Products.

11. The geographic market is both local and nationwide. High-end residential systems tend to be purchased locally; they are typically sold and serviced by dealers in communities having a population in excess of one hundred thousand inhabitants. Commercial systems are purchased both locally and nationally.

12. Crestron is the largest supplier of The Products in the United States. On information and belief, its sales of The Products are on the order of four hundred million dollars annually, of which it is estimated that approximately 50% are residential sales. Through its size and its long-standing dealings in the market, Crestron presently dominates The Market and The Submarket for the sale of The Products throughout the United States.

13. On information and belief, there are on the order of three thousand independent dealers (i.e., not affiliated with a manufacturer of The Products) throughout the United States who are engaged in the sale of The Products to end-users and their subsequent installation in the enduser's homes and commercial facilities. On information and belief, on the order of twenty-five hundred of these deal in Crestron products.

14. Access to these dealers by those, such as Savant, who wish to compete with Crestron, is essential. The dealers not only provide information and demonstrations to customers wishing to automate their home or office, and thereby play a significant role in the sales effort, but also provide, or arrange for, skilled technicians to install The Products in the customer's premises. Additionally, the dealers train the customers in the use of the equipment, and provide maintenance and repair services for the customers. Without fair access to the dealers, Savant is significantly impeded in its access to the market, particularly to The Submarket.

15. Access to the dealers is especially critical in connection with The Submarket, where the cost of maintaining a staff of technicians for installation and maintenance of The Products throughout the United States would be economically unfeasible because of the typically smaller size of residential sales.

16. By virtue of its dominant size, Crestron has substantial control over dealers in The Products. Withdrawal from the dealers of access to Creston products, and of parts and components for them, would cause a significant economic loss to dealers, and the threat of such withdrawal provides Crestron with power to significantly control their actions.

17. Through the acts discussed more fully below, Crestron has established, and is improperly attempting to maintain, monopoly power in The Market and the Submarket.

VI. CRESTRON'S UNLAWFUL CONDUCT
A. Crestron's Exclusionary Practices

18. Crestron has not been willing simply to compete with Savant on the relative merits of its and Crestron's competitive products. Instead, shortly after Savant entered the market, Crestron began, and continues today, a pattern of anticompetitive, unfair and deceptive practices designed to thwart competition from Savant on the merits, to prevent and/or disincentivize dealers from carrying Savant products, to deprive end user customers of a choice between Savant and Crestron products, and to exclude Savant from the market.

19. Crestron's conduct with respect to dealers is a prominent and immediate example of the pattern of anticompetitive, unfair and deceptive practices undertaken by Crestron with the purpose and effect of acquiring, maintaining and/or expanding its monopoly in The Market and The Submarket.

20. More specifically, Crestron has unlawfully required dealers, as a condition of maintaining their relationship with Crestron and their access to Crestron's products for resale, to agree not to offer, resell, install or distribute Savant products. In a series of "Comparison Guides" recently published to dealers and others by Crestron, purporting to compare Crestron's products to Savant's product for competitive selling purposes, Crestron boldly proclaims: "Remember, you can't be a Crestron dealer and also sell Savant products!"See Exhibits B-E hereto.

21. Crestron has also misused, and continues to misuse, its monopoly position in The Market and The Submarket by offering dealers who express an interest in carrying Savant products substantial discounts on the pricing of Crestron's products provided that the dealers agree not to resell or offer, and in fact refrain from reselling or offering, Savant's competing products.

22. Crestron has also misused and continues to misuse, its monopoly position in The Market and The Submarket by penalizing dealers that offer Savant products for resale, by voiding warranties on Crestron products also offered by such dealers and/or by voiding cash back offers made by Crestron with regard to the resale of Crestron products.

23. Dealers have accepted Crestron's demands and restrictions, and agreed to refrain from offering Savant's products in exchange for the right to continue to offer Crestron's products, to receive pricing discounts on Crestron products and/or to avoid being penalized by Crestron by voiding of warranties and cash back offers on Crestron products.

24. Through such exclusionary agreements, and other anticompetitive policies and practices with dealers, Crestron has sought to deprive dealers of the freedom to make competitive choices about which products should be offered to their end user customers, the ability to determine for themselves the design and configuration of the systems they sell, and the ability to diversify their products to best serve end user consumers' needs.

25. On information and belief, Crestron has entered, or attempted to enter, into such exclusionary agreements with virtually all of the dealers who carry and have carried Crestron's products. These agreements have effectively foreclosed Savant's competing products from this major channel of distribution, severely impairing Savant’s good faith attempts to enter the market.

26. Collectively, Crestron's anticompetitive practices have unreasonably restrained, and, unless enjoined by this Court, will continue to unreasonably restrain, competition in The Market and The Submarket. There are no business justifications for Crestron's practices. Crestron’s acts threaten to artificially increase its share of these markets and "tip" them permanently to Crestron because of its illegal exercise of monopoly power.

27. Neither the antitrust laws nor this action seeks to inhibit Crestron from competing on the merits with Savant by innovation or otherwise. Rather, this Complaint challenges only Crestron's concerted attempts to acquire, maintain and/or expand its monopoly through exclusionary agreements with dealers, and other anticompetitive conduct, that deter innovation, exclude competition, and rob end user customers of their right to choose among competing alternatives.

28. Crestron's conduct adversely affects innovation by, among other things,
a. impairing the incentive of Savant and likely other competitors and potential competitors to undertake research and development on new products, because they know that Crestron will be able to limit the rewards to them from any resulting innovation;
b. inhibiting Savant and other competitors that nevertheless succeed in developing promising innovations from effectively marketing their innovative products to dealers and ultimately to end user customers;
c. reducing the incentive and ability of dealers to diversify the products they offer in ways that would appeal to end user customers; and
d. reducing competition and the spur to innovation by Crestron that only competition can provide.

29. The purpose and effect of Crestron's conduct with respect to The Market and The Submarket have been and, if not restrained by this Court, will be:
a. to preclude or lessen competition on the merits between the products of Crestron and Savant;
b. to preclude or lessen potential competition with Crestron products from new products to be developed by Savant in the future; and
c. to enable Crestron to acquire, maintain and/or expand its market share and monopoly power in The Market and the Submarket; and
d. to preclude or delay Savant's successful entry into The Market and the Submarket.
As a result of these practices, numerous dealers have in fact refused to handle Savant's products for fear of termination by Crestron.