No Antitrust Violations|in Honeywell Practices

SAN FRANCISCO (CN) — Honeywell International, one of the world's largest manufacturers of auxiliary power units for aircraft, did not stifle competition in the unit-repair market, the Ninth Circuit ruled Friday.

U.S. Circuit Judge M. Margaret McKeown outlined the underlying dispute in her 32-page opinion.

Honeywell is one of two major manufacturers of units that provide aircraft with electric power. Aerotec International, which is not affiliated with Honeywell, is a repair company that works on Honeywell's units. In 2006, Aerotec began a major push to increase its less-than-one percent market share, winning contracts from companies like Saudi Arabian Airlines and Air India.

Honeywell offers repair services for its units as well and enjoys a significant leg up on the competition because it builds its own replacement parts. Aerotec, as an independent company, purchases replacement parts from Honeywell but pays more for them than do the airlines and (usually) Honeywell affiliates.

In 2007, a parts shortage for the Honeywell Model 331-500 unit put Aerotec at a further competitive disadvantage because independent repair service companies are at the bottom of Honeywell's priority shipping list. This left Aerotec unable to obtain repair parts quickly enough. When Saudi Arabian Airlines paid its bills late, Aerotec opened lines of credit with Honeywell, which bumped it even further down the priority list.

Aerotec lost Air India's business to Honeywell and Saudi Arabian Airlines to a Honeywell affiliate. It then lost a 2009 bid for Air China to Honeywell. It filed an antitrust suit against Honeywell in 2010, claiming that elements like shipping delays, stringent payment terms and offers of heavily discounted parts and services were all intended to smother independent companies.

Judge McKeown, delivering the three-judge panel's unanimous decision, wrote that, in spite of its hardships, Aerotec offered little evidence for its claims.

It failed to demonstrate that Honeywell monopolized the market because Aerotec had access to substitute repair parts and parts from other vendors, the panel found, and it did not offer any evidence that Honeywell tied together services or products.

Aerotec argued that Honeywell's practices, such as not fulfilling independent companies' parts orders quickly, created an implied tie.

"We readily acknowledge that tying conditions need not be spelled out in express contractual terms to fall within the Sherman Act's prohibitions," McKeown wrote. "The problem with Aerotec's claim is that there is no tie, i.e., no evidence that Honeywell explicitly or implicitly ties or conditions the sale of APU [auxillary power unit] parts to APU owners on a requirement that the owners 'buy and repair Honeywell' and/or forego services from independent service providers." (Emphasis in original.)

Aerotec also claims that Honeywell committed an antitrust violation through exclusive dealing, but offers no specific evidence to support the claim.

"Aerotec cannot sustain its burden by offering broad allegations and complaints that are unhinged from any specific agreement," McKeown wrote. "At this stage of the litigation, after extensive discovery, Aerotec needed to do something more than offer conclusory statements and stitch together disparate facts about the market for repairs; it needed concrete documentation that Honeywell's agreements prevented customers from giving their repair business to other [maintenance, repair and overhaul] servicers."

"This case serves as a reminder that anecdotal speculation and supposition are not a substitute for evidence, and that evidence decoupled from harm to competition—the bellwether of antitrust—is insufficient to defeat summary judgment," McKeown added.

Michael Blair from Baird, Williams & Greer in Phoenix represented Aerotec. William Maledon from Osborn Maledon in Phoenix represented Honeywell.

"Honeywell always maintained that none of its business dealings with Aerotec were anti-competitive, and we are pleased that the Ninth Circuit has agreed with us," Maledon said in an email.

"Aligning with Honeywell's core values and its commitment to all customers, we will continue to vigorously defend ourselves from lawsuits that challenge our legal and transparent business practices," Honeywell spokesperson Steven Brecken added.

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