Honeywell International has filed an antitrust suit in an effort to stop a merger of two of its competitors in the smart home technology business.
Honeywell seeks to stop the $140 million acquisition of two divisions of Icontrol Networks by Alarm.com, claiming the combined entity would have 70 percent share of the market for software allowing remote operation by smartphone or computer of a home security system or other connected devices such as lights and thermostats. Courts have held that a 65 percent market share is sufficient to establish a prima facie case of market power, according to the suit, filed Wednesday in federal court in Newark.
At issue is control of the market for software platforms that are used with alarm systems purchased through dealers such as ADT. Honeywell asserts the deal would permit Alarm.com to insist that third-party manufacturers of security hardware and smart home devices use its platform exclusively.
The proposed linkup would violate §7 of the Clayton Act and §1 of the Sherman Act, according to the suit, which seeks a judgment that the deal violates antitrust laws and an injunction barring the planned acquisition or any other transaction that would combine portions of the two companies providing remote services for security systems.
Honeywell, which has a 12 percent share of the market for remote services, said the deal between its rivals would hamper its ability to connect its software platform to other manufacturers’ smart home devices. The deal would also allow Alarm.com to undermine Honeywell’s relationship with ADT, an important customer that is the largest independent security system dealer, the suit asserts. ADT has announced that, if the deal goes through, it will switch from Honeywell to Alarm.com remote services software, according to the complaint.
Both Icontrol and Alarm.com use open architecture, which allows its software to be used with sensors and control panels made by other companies, while Honeywell uses closed architecture, which means a customer can use its software only with a Honeywell alarm system. However, Honeywell made its software compatible with ADT’s hardware after considerable time and expense. The merger would cause Honeywell to lose sales just as it will be forced to make additional investment in its platform, according to the suit.
Honeywell would suffer injury if the merger went forward, and because its injury would flow from the reduction in competition caused by the merger, as well as anti-competitive acts made possible by the deal, the injury to Honeywell would constitute antitrust injury, the company said.
Private actions to enforce antitrust law are specifically authorized by §16 of the Clayton Act and encouraged by Congress and the Supreme Court, according to Honeywell.
Guy Amoresano and John Haggerty of Gibbons in Newark and Richard Parker of O’Melveny & Myers in Washington, D.C., representing Honeywell, did not respond to calls about the suit. Alarm.com and Icontrol also did not return calls.
