Force Partners, LLC v. KSA Lighting & Controls, Inc.
| Decision Date | 25 February 2022 |
| Docket Number | 19-cv-07776 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | FORCE PARTNERS, LLC, Plaintiff, v. KSA LIGHTING & CONTROLS, INC.; ACUITY BRANDS, INC.; JIM WILLIAMS; and ASHLEY WILLIAMS, Defendants. |
Plaintiff Force Partners, LLC (Force Partners), a sales agent in the lighting and controls business, filed this antitrust lawsuit[1] against four defendants: Force Partners' competitor, KSA Lighting & Controls, Inc. (KSA); KSA's President, Jim Williams (Jim); KSA's then-Vice President of Distributor Solutions, Ashley Williams (Ashley) (together with KSA and Jim, the KSA Defendants); and Acuity Brands, Inc. (Acuity) (collectively, with the KSA Defendants, Defendants), a lighting manufacturer, asserting violations of Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, the Illinois Antitrust Act (740 ILCS 10/1), the Illinois Uniform Deceptive Trade Practices Act (815 ILCS 510/2) (the IUDTPA), and tortious interference with prospective business relations. R. 41, FAC.[2] Before the Court are Defendants' motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 45, Acuity Mot. Dismiss; R 47, KSA Mot. Dismiss.[3] For the reasons discussed below, the Court grants in part and denies in part Defendants' motions to dismiss.
Force Partners and KSA are sales representatives who compete in the lighting and control business. FAC ¶¶ 26-27.[4] Force Partners and KSA each act as the exclusive sales representative for particular lighting and controls manufacturers in the greater Chicagoland area. Id. ¶ 26. KSA is an exclusive sales representative for Acuity, the largest manufacturer of lighting products in North America. Id. ¶ 32. Force Partners' and KSA's customers are distributors who purchase lighting and control products for both commercial and industrial projects and for their own shelves to sell to end users. Id. ¶ 2. In order to best meet the needs of customers, lighting product distributors carry the products of a variety of manufacturers in their inventory and also source products on a custom basis for “spec” commercial and industrial projects. Id. ¶ 9. While the distributors directly purchase the lighting products and controls from the manufacturers and the manufacturers' exclusive sales representative, contractors and end-users are the indirect purchasers of the products. Id. ¶ 49.
The lighting and controls sold by “full line” sales representatives like Force Partners and KSA include, among other products, exit and emergency lights and signs, sports lighting, and wired and wireless controls. FAC ¶ 28. Force Partners alleges that the relevant product market in this case is lighting and controls for buildings and private roadways. Id.
Lighting and controls manufacturers, like Acuity, contract with exclusive sales representatives, like Force Partners and KSA, to cover a defined geographic territory. FAC ¶ 29. A manufacturer's designated sales representative is the only authorized marketer of the designated brands in the specified area to downstream channels. Id. Sales representative agencies have agreements that define their territories. Id. ¶ 30. The relevant geographic market in this case is comprised of sixteen Illinois counties in Northern Illinois and surrounding Chicago, including three counties in Northwest Indiana (the Market). Id. ¶ 30. Sales representatives may represent more than one manufacturer's products in the same geographic territory. Id. ¶ 31. However, manufacturers assign exclusive territories to just one sales representative. Id. ¶ 34.
Assigning exclusive territories to sales representatives enables manufacturers to build and maintain brand sales through relationships with local distributors, contractors, builders, and designers in the territory. FAC ¶ 34. These exclusive contracts mean it is not easy to obtain a manufacturer's products other than through its exclusive sales representative. Id. In the relevant Market, over 75% of the trade is handled by approximately 23 distributors, which in turn comprise approximately 90% of Force Partners and KSA's customers. Id. ¶ 37.
For example, architects, lighting designers, and engineers develop specifications for construction projects, and interact with sales representatives who want their products specified for an upcoming project installation. FAC ¶ 47. Architects and lighting designers usually list up to three acceptable alternative manufacturers for each fixture type. Id. Sometimes these specifications list only one manufacturer's name, which indicates a “hard spec” with no substitution; other specifications list as many as three manufacturers' names, which means any one of them is pre-approved and acceptable and invites competition to supply the specified products. Id. Finally, some specifications reference a single manufacturer but state “or equal, ” meaning another manufacturer can be asked to compete and provide a quote so long is it meets the technical requirements of the design. Id.
Sales representatives sell downstream through a few primary channels; namely, stock and flow distributors and project/specification distributors. FAC ¶ 35. Stock and flow distributors carry and sell inventory of a variety of brands in a physical showroom, counter area, or warehouse that serves the “on-demand” needs of small to mid-sized electrical contractors and a limited number of retail customers and homeowners. Id. Project/specification distributors supply larger building projects and provide materials management services to coordinate or direct goods to local staging areas at the time that builders/contractors need the supplies. Id. Some distributors deal in both stock and flow and project/specification work. Id.
Once distributors receive specifications for projects, they are expected to seek bids from approved manufacturers' representatives. FAC ¶ 49. Once the bids are presented, the distributor is expected to submit the most complete package at the best price that can be delivered in a timely manner. Id. Sales representatives can provide budget quotes directly to contractors, but these quotes will include extra margin for the distributor. Id. ¶ 36. Such quotes do not and cannot cut distributors out of the sale because the distributors offer a consolidation point along with financing, with terms that go back to the contractors. Id.
Force Partners alleges that distributors in the lighting market and their end users benefit in numerous ways from competition among sales representatives like Force Partners and KSA. FAC ¶ 50. These include the ability to identify the best price and service options for their clients among available manufacturers, who expect distributors to offer complete solutions for their lighting and control needs. Id.
Between 2017 and August 2019, KSA and Force Partners were the top two largest sales representatives supplying lighting and control products in the Market, representing approximately 59.5% and 23%, respectively, of specified and approved products in the project/specification market. FAC ¶ 43. The other two sales representatives in the Market, PG enlighten and CLW, represented approximately 10% and 7.5% of product. Id.
In August 2019, Jim and his wife, Ashley, gave a PowerPoint presentation (the Presentation) to all or most of the 23 most important lighting distributors in the Market. FAC ¶ 73. Force Partners alleges that the goal of the Presentation was to stop the distributors from doing business with Force Partners through a combination of monetary inducements and threats to withhold critical products and services. Id. The Presentation explicitly named Force Partners as a sales representative that the distributors should boycott. Id. ¶ 77. Force Partners alleges that Defendants falsely accused Force Partners of bypassing distributors to make sales directly to end-users and contractors, thereby denying sales and profits to distributors. Id.
KSA subsequently rolled out a program by which, if a distributor wanted to continue to receive KSA's “best prices” and “services, ” it would have to agree to be a “Partner” of KSA (the Proposal). FAC ¶ 82. Stock and flow distributors were told that they could not carry any of Force Partners' brands on their shelves. Id. ¶ 83. The biggest effect of such an agreement would be to take Eaton's Cooper Lighting products, an Acuity competitor, off these distributors' shelves and significantly reduce access to the Chicago market. Id. Project/specification distributors were told that they had to rig bids to ensure that KSA won any multiple-name specification bids that also included Force Partner. Id. ¶ 84. Where KSA brands and Force Partners brands were specified for bidding on a project, the distributors were given the choice of: (a) not quoting Force Partners brands at all, or (b) providing Force Partners' confidential pricing information to KSA so it could “match” the price. Id. Force Partners claims that the goal of the Proposal's terms was to take away business away from Force Partners and drive it out of business. Id.
If the distributors did not agree to the Proposal, they would be deemed “Associates” and would not be able to get KSA's brands “best prices” or attendant services. FAC ¶ 90. This would effectively bar the distributors' ability to competitively quote KSA brands and they would lose business to those distributors who were willing to go along with the scheme. Id. Distributors informed Force Partners that they were intimidated by KSA's demands. Id. ¶ 94.
KSA left no copies of the Presentation with the distributors and did not...
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