LAS VEGAS (CN) - A trade group created "sham" regulations to squeeze out a competitor in the nation's steel framing products industry, the company claims in a federal antitrust RICO complaint.
ClarkWestern Building Systems dba ClarkDietrich sued Allsteel & Gypsum Products, Consolidated Fabricators Corp., Craco Manufacturing, Custom Stud, Design Shapes in Steel, Frametek Steel, and United Metal Products, on Wednesday in Federal Court.
ClarkDietrich claims in the lawsuit that its advanced manufacturing processes gave it a competitive edge, which other companies conspired to eliminate by implementing bogus product certification standards designed to exclude ClarkDietrich's products. ClarkDietrich is a joint company formed by ClarkWestern Building Systems and Dietrich Industries, which the lawsuit describes as "two long-time participants in the steel framing products industry."
ClarkDietrich claims the defendants are members of the Steel Stud Manufacturers Association (SSMA), a national trade group that controls 85 percent of the U.S. nonstructural steel framing products industry. ClarkDietrich also belongs to the SSMA. The SSMA itself is not a party to the lawsuit.
ClarkDietrich claims the trade association enacted bogus regulations specifically designed to deny it the competitive advantage it had gained through investment in new technologies, to eliminate ClarkDietrich as a competitor in the multi-billion dollar industry.
"Defendants and their co-conspirators developed and imposed upon all SSMA members a building code compliance certification requirement that included sham standards that no building code required," the lawsuit states. "They included those sham standards because they discriminated against the manufacturing process used by ClarkDietrich and ensured that its products would not be certified by the only relevant trade association as building code-compliant. They knew this would harm, and hopefully eliminate, ClarkDietrich as a competitor. The sham standards were intended to neutralize ClarkDietrich's cost advantage over defendants arising from unique circumstances and its willingness to invest in innovative manufacturing processes.
"Defendants and their co-conspirators promoted the sham code compliance certification program and their respective products as being so certified, and their conduct had the intended effect. They caused purchasers of nonstructural steel framing products to believe falsely that ClarkDietrich products were not building code compliant, causing ClarkDietrich to lose market share. Defendants' conspiracy and boycott of ClarkDietrich has allowed defendants to maintain artificially high prices, injuring not only ClarkDietrich but consumers and competition in the nonstructural steel frame products market throughout the country."
ClarkDietrich seeks disgorgement of unjust profits and damages for restraint of trade in violation of the Sherman Act, RICO violations, intentional interference with prospective economic advantage, unjust enrichment and common law civil conspiracy.
"The ability of private standard-setting organizations to stifle competition and exclude rivals with cost or other advantages is well-recognized," the complaint states.
Citing Areeda & Hovenkamp's "Antitrust Law," the complaint states: "'[J]oint standard setting can facilitate collusion or impede progressiveness by excluding from the market firms who threaten their rivals with lower prices, higher quality, or other innovations that consumers would prefer if given the opportunity.'
"'[T]he association setting the standards typically although not invariably represents all or most providers within a given market; as a result, such organizations often have significant market power, at least as measured by the power to exclude others from the market.'
"The antitrust laws are appropriately used to address situations 'where [private] rule making is used to facilitate collusion or exclusion of rivals whose competitiveness or innovation threatens the relevant decision makers.'" (Brackets in complaint.)
ClarkDietrich's lead counsel is Pat Lundvall with McDonald, Carano & Wilson, of Las Vegas.