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From Antitrust Law Daily, December 5, 2017

Motorola has monopoly over land mobile radio communication market, competitor alleges

By Stephanie K. Mann, J.D.

A competitor in the land mobile radio (LMR) communication systems has filed a complaint in the U.S. District Court of New Jersey against Motorola Solutions, Inc., alleging that Motorola is engaging in anticompetitive practices that are unlawful under the Sherman and Clayton Acts, along with the unfair competition and intentional interference laws of California, New Jersey, and Florida, by deliberately and actively foreclosing competition in order make billions of dollars in profits through inflated prices to U.S. customers. The plaintiff is seeking damages and injunctive relief (Hytera Communications Corporation, LTD. v. Motorola Solutions Inc., Dec. 4, 2017).

Access to dealers. The plaintiff has alleged that Motorola prevents it from competing in the U.S. marketplace by blocking access to the dealers responsible for making sales to end-users by threatening dealers who want to carry and offer an alternative product line for their customers. According to the complaint, this exclusive relationship exists in the following ways:

  1. Motorola uses a point system to induce exclusivity: a dealer that exclusively sells Motorola’s product is one-quarter of the way toward achieving "platinum" status, qualifying the dealer for important benefits that tether the dealer to Motorola.
  2. Motorola takes away, or threatens to take away from dealers Motorola’s highly lucrative service business from dealers that begin to actively represent competing LMR providers.
  3. At a March 2017 industry conference, Motorola gathered in one room all the critical dealers in the industry and threatened the dealers to not carry competing products
  4. Motorola has since issued a memorandum specifically directing dealers that if they sell the plaintiff’s products, they will be canceled as Motorola dealers.

The core purchasers of LMR products are public safety organizations and municipal governments, which often require a "lucrative series" of maintenance and service contracts. These contracts are largely performed by Motorola dealers and ensure profitability for the dealers. Dealers cannot take on competing products for fear of losing these servicing contracts.

Sham litigation. The complaint also alleges that Motorola has brought about a series of "sham" litigation and Federal Communications Commission complaints with the intent to harass its competitors and putting fear, uncertainty, and doubt in the minds of potential buyers of competitor products. In addition, Motorola has falsely claimed that the plaintiff is infringing on two of its patents, despite having previously agreeing to license this information. This has resulted in the plaintiff having to raise their costs and delay sales in order to defend these unsupported accusations.

Alternative technology. Finally, Motorola has made continuous efforts to prevent alternative technology standards from being adopted, said the complaint. The digital mobile radio (DMR) and terrestrial trunked radio (TETRA) are used as an alternative LMR standard for public safety customers located outside of the United States. Despite actively selling DMR and TETRA systems outside of the U.S., Motorola has fought the adoption of these standards within the U.S. in order to preserve its lucrative sales contracts, alleged the plaintiff.

The plaintiff alleges that by foreclosing competition from DMR and TETRA solutions, Motorola is able to maintain inflated pricing. The complaint specifically points to the City of Chandler, Arizona. After applying discounts to its list price, Motorola charged the city $5,290 for its LMR radio. This, said the complaint, is nearly five times what a customer in the U.K. could pay at retail for a comparable TETRA product.

According to the plaintiff, this conduct can only lead to one conclusion: that Motorola has maintained an unlawful monopoly of the U.S. market for the sales of digital two-way radio systems to public safety and government customers, and then leveraged this dominance into control of the market for business and industry sales.

The case is No. 2:17-cv-12445-ES-JAD.

Attorneys: Katelyn O'Reilly (Walsh Pizzi O'Reilly Falanga LLP) for Hytera Communications Corp. Ltd.

Companies: Hytera Communications Corp. Ltd.; Motorola Solutions Inc.

MainStory: TopStory Antitrust StateUnfairTradePractices NewJerseyNews

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