Boies, Schiller & Flexner, on behalf of International Construction Products (ICP), has brought an action for trebled compensatory damages and injunctive relief against three major OEMs. (A feature on ICP’s innovative business model, as discussed by founder and chairman Tim Frank pictured appeared in iVT June 2014).
The main points of the lawsuit include the following:
This case involves the anticompetitive exclusion of ICP, an innovative new entrant into the heavy construction equipment market, by defendants Caterpillar, Komatsu, and Volvo, three major manufacturers of heavy equipment.
The market for the sale of new heavy construction equipment in the USA is protected by high barriers to entry in the form of exclusivity arrangements that the Defendants have with their equipment dealers. Because of these exclusivity arrangements, new entrants have historically been unable to secure enough distribution to compete effectively in the US market.
A new avenue of effective entry into the heavy construction equipment market has emerged with the rise of IronPlanet, an increasingly popular website for the sale of used heavy equipment directly to end users. No other online seller of heavy equipment is remotely as large or significant as IronPlanet. Access to IronPlanet allows sellers of new heavy equipment, like ICP, to bypass the distribution barrier to entry and compete effectively with the Defendants.
ICP’s business model was to sell high-quality, new Chinese heavy construction equipment directly to end users through IronPlanet at prices up to 40% below those of the Defendants for comparable machines. ICP’s entry would have substantially increased competition in the new heavy construction equipment market, to the detriment of the Defendants.
ICP and IronPlanet signed a contract for the sale of ICP’s products through IronPlanet, and ICP actually entered the US market. Defendants conspired to eliminate ICP as an effective competitor in the market for new heavy equipment by collectively threatening to boycott IronPlanet if IronPlanet continued to do business with ICP.
A fourth defendant, Associated Auction Services LLC, d/b/a Cat Auction Services, owned by Caterpillar and its exclusive dealers, then aided the Defendants’ conspiracy by agreeing to merge with IronPlanet, increasing Caterpillar’s control over IronPlanet and removing for the foreseeable future the threat of effective new entry in to the new heavy equipment market.
Consumers will pay higher prices for heavy equipment as a result of the Defendants’ conduct.
On behalf of ICP, BSF seeks monetary damages (compensatory and punitive) and injunctive relief to unwind the acquisition of IronPlanet and eliminate the Defendants’ exclusivity arrangements with their dealers.