Savant announced last week that they were filing a suit against prominent control system manufacturer Crestron. They are asserting that Crestron has a monoploly on the home automation market, and has been engaging in anti-competitive behavior to preclude Savant from the home controls market.
Many dismissed the suit as a pre-CEDIA publicity stunt, but do Savant’s claims actually have any merit?
At first glance, I myself wasn’t sure. Obviously the prominence of AMX in the market could be seen as the first proof that Crestron is not a monopoly.
The Sherman Act, which Savant lays claim that Crestron is violating, has specific language stating that a monopoly is not illegal if a company’s growth or development is a “consequence of a superior product, business acumen, or historic accident.” Based on the intricacies of HDMI and HDCP, of switch flexibility and bandwidth, and DSP audio breakouts, Crestron’s DM product line could arguably be defined as a “superior product” in this space. And the question of business acumen aside, their prominence over AMX could still be seen as the result of a “historic accident”, (Panja anyone?)
Newer competitors like Control4 and Savant have not had the same luxury of time Crestron has had to develop a dealer base, and therefore sales at that level.
Does all this equal a “Get Out of Jail Free” card for Crestron? (The first of a few Monopoloy jokes) Crestron “homers” would say this is enough, but based on Savant’s accusation of “anti-competitive behavior”, there is a little more to consider.
As a Crestron dealer myself, and dealings with certain Crestron sales representatives, I can say that Crestron has certainly taken jabs at their competition. From their internal labeling of Crestron Prodigy as Control5 (aimed at Control4 obviously), to their Crestron/Savant comparison sheets, to their comments about On Screen Displays (“You have to turn on your TV to turn on your TV”). I’ve even heard statements aimed at competitors like “It’s easy for us to make our systems dumber, it’s hard for them to catch up with 20 years of engineering.”
So, is this alone anti-competitive behavior? Not really. There is nothing illegal about saying you are better than your competition, or about taking shots at them. At best it can be argued to be tacky.
Crestron does a great job of indoctrinating their reps in a way reminiscent of the Marine Corps. (The few, the proud, the Crestron?) They truly believe they are invincible, and their hubris may have led to a fatal error. . . the alleged threatening of dealers selling alternate products and offering additional discounts to preclude that competition from jobs.
It appears to the casual observer that Crestron did actually cross the line in this way. Some Crestron dealers claim they have been told that they cannot “also sell Savant products”, that since Prodigy is in the same price range they cannot sell Control4, and that they can’t even sell competitive switching platforms like PureLink, as they now have DM switchers. Others claim their Crestron dealerships have been threatened to be removed if they do any of the above. There have also been tales and inferences of additional discounting of products to keep the competition out of homes where Crestron has traditionally been the only choice.
It seems that Savant’s suit, if not settled, would at least result in a “Quick Look” under the Sherman Act.
Quick-look: A “quick look” analysis under the rule of reason may be used when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets,” yet the violation is also not one considered illegal per se. Taking a “quick look,” economic harm is presumed from the questionable nature of the conduct, and the burden is shifted to the defendant to prove harmlessness or justification. The quick-look became a popular way of disposing of cases where the conduct was in a grey area between illegality “per se” and demonstrable harmfulness under the “rule of reason”. (Thanks Wikipedia!)
Coming back to the question of business acumen, I argue Crestron may have shown little of it here. It would have been very easy for them to avoid all controversey by creating a quota system for their existing dealers. Dealers who sold other products would inevitably not hit their Crestron quotas, go into review at Crestron, and then could be discontinued as dealers if Crestron saw fit. This would have made dealers have to choose a horse to ride, and most would choose go home with who brought them to the party. Alternately, it seems they may have thrown a jealous fit with certain dealers, getting upset when their date checked out a competitors “Community Chest” (did it again), and ultimately drove them away into the arms of another.
Monetary damages may be hard for Savant to prove or quantify, but a Cease and Desist on Crestron’s alleged marketing practices is an acute possibility in my humble opinion. “Do not pass go, do not collect $200” (couldn’t resist one more, sorry)