Antitrust Law Daily Market for electronic keypad locks deemed too narrow
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Thursday, August 3, 2017

Market for electronic keypad locks deemed too narrow

By Jeffrey May, J.D.

Antitrust claims against a designer/manufacturer of high-performance electronic locks and locker security solutions were dismissed for failure to allege a plausible product market limited to electronic keypad locks (EKLs). EKLs, commonly found on lockers in fitness center locker rooms, enable temporary use of lockers. Users lock the lockers by selecting and entering a code on a keypad. A complaining rival failed to justify a distinct EKL submarket, separate from a market that included electronic non-keypad lock products, for purposes of its claims that the defendant engaged in monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, exclusive dealing in violation of Section 3 of the Clayton Act, and a combination to monopolize under the California Cartwright Act (Ojmar U.S., LLC v. Security People, Inc., August 2, 2017, Gilliam, H.).

Defining the relevant product market was "indispensable" to both the federal and state antitrust claims, the federal district court in Oakland explained. The antitrust claims were dismissed with leave to amend, since it was possible that the flaws in the operative complaint could be cured by the allegation of other facts.

The plaintiff's statements in support of the EKL market were conclusory, in the court’s view. The plaintiff did not support its assertion that there was not reasonable interchangeability between EKLs and electronic non-keypad lock products. EKLs were sold to original equipment manufacturers (OEMs) and other dealers or distributors, and sometimes directly to end users, such as fitness clubs, universities, and businesses with locker rooms. The plaintiff could not argue that OEMs were unique vendors for EKLs since OEMs apparently purchased and promoted mechanical locks. In addition, the plaintiff did not articulate how fitness clubs, universities, and businesses with locker rooms were distinct customers of EKL products. Further, while EKLs enabled users to use lockers temporarily, the plaintiff did not state facts plausibly showing that this characteristic was peculiar to EKLs.

Even if the plaintiff had plausibly alleged a relevant product market, the Clayton and Cartwright Act claims still failed because it had not sufficiently pled the portion of the product market foreclosed by the challenged exclusivity contracts and failed to plead an antitrust injury.

The case is No. 16-cv-04948-HSG.

Attorneys: Daniel Chilton Callaway (Farella Braun + Martel LLP) and Douglas Arthur Donnell (Mika Meyers PLC) for Ojmar US, LLC. Forrest Arthur Hainline (Goodwin Procter LLP) for Security People, Inc. d/b/a Digilock.

Companies: Ojmar US, LLC; Security People, Inc.

MainStory: TopStory Antitrust CaliforniaNews

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