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From Antitrust Law Daily, July 8, 2016

Fire protection district, alarm service provider unable to avoid conspiracy claims

By Jeffrey May, J.D.

Fire alarm services company Alarm Detection Systems, Inc. (ADS) adequately alleged that the actions of a rival company (Tyco Integrated Security, LLC ) and a municipal fire protection district in Illinois prevented it from competing for customers in the district and a nearby district, the federal district court in Chicago has ruled. Tyco and the Orland Fire Protection District (Orland FPD) failed to convince the court that claims in a second amended complaint arising out of conduct in the Orland FPD market should be dismissed (Alarm Detection Systems, Inc. v. Orland Fire Protection District, July 7, 2016, Durkin, T.).

In September 2015, the court dramatically narrowed the claims that ADS could pursue against Tyco, Orland FPD, and other Illinois fire protection districts and private alarm contractors. ADS filed a second amended complaint, repleading antitrust, constitutional, and state law claims against Orland FPD and Tyco from its prior complaint, and adding claims against fire alarm service provider DuPage Public Safety Communications (Du-Comm).

The court noted that it had previously held that ADS plausibly alleged that the Orland FPD’s authorization of Tyco to sell or lease the transmission equipment that subscribers had to use to connect to Orland FPD’s communications center "effectively preclud[ed]" ADS and other alarm companies from competing for business in Orland. Because neither Tyco nor Orland FPD made any new arguments requiring the court to reconsider its decision, their motion to dismiss claims based upon these agreements were denied. Once again, the court rejected the argument that ADS failed to allege a geographic market. It was noted that the Seventh Circuit had implicitly acknowledged that a fire protection district could at least plausibly meet the definition of a geographic market. With respect to the conspiracy element, the court held that the agreement between Tyco and Orland FPD that would materially decrease the ability of other private fire alarm companies to compete in the Orland territory satisfied that requirement.

Newly added claims against Orland FPD regarding its agreement to provide fire alarm services in nearby Lemont also survived dismissal. ADS alleged that the contract between Orland FPD and Tyco also governed their activities in the Lemont territory. Lemont FPD has already settled the claims against it by ADS.

The court once again dismissed claims that ADS was unable to compete for customers in the Bloomingdale Fire Protection District (Bloomingdale FPD) in Illinois. The claims arose out of a series of agreements among Bloomingdale FPD, Du-Comm, and Tyco. ADS failed to plausibly allege an antitrust injury arising from their actions, in the court’s view.

Bloomingdale FPD required commercial fire alarm service customers to lease it wireless fire alarm transmitters from, and to enter into service contracts with, Bloomingdale FPD. However, it later sold Tyco its fire alarm equipment and the right to fulfill Bloomingdale FPD’s obligations under its customer contracts, with the understanding that the subscribers were free to leave those contracts and enter into contracts with any private alarm company. Meanwhile, Bloomingdale FPD had entered into a contract with Du-Comm to take over the 911 dispatch functions and fire alarm monitoring of commercial accounts, and Du-Comm later entered into an exclusive arrangement with Tyco. ADS contended that these agreements, coupled with the inertia of customers with respect to changing alarm service providers, created "barriers to entry" that "effectively precluded" ADS from competing in the Bloomingdale FPD territory. ADS did not allege, and the contracts between Tyco and Du-Comm, and Du-Comm and Bloomingdale FPD did not show, that customers were required to contract with Tyco to send signals to Du-Comm’s dispatch center, in the court’s view. ADS’s allegation that antitrust injury could be demonstrated by higher prices for customers in the Bloomingdale FPD territory also was deemed insufficiently pleaded.

The case is No. 1:14-cv-00876.

Attorneys: Bruce Lee Goldsmith (Dykema Gossett Rooks Pitts PLLC) for Alarm Detection Systems, Inc. James J. Roche (James J. Roche and Associates) for Orland Fire Protection District. A. Christopher Young (Pepper Hamilton LLP) for Tyco Integrated Security, LLC.

Companies: Alarm Detection Systems, Inc.; Orland Fire Protection District; Tyco Integrated Security, LLC

MainStory: TopStory Antitrust IllinoisNews

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