Bona Law Files Antitrust and Lanham Act Lawsuit Against Johns Manville for its Monopolization and Disparagement in the Calsil Insulation Market
April 24, 2020
On March 22, 2019, Bona Law (with Klenda Gessler & Blue LLC) filed a federal antitrust lawsuit in the District of Colorado against Johns Manville Corporate and a subsidiary on behalf of its client, Thermal Pipe Shields.
The complaint alleges that Johns Manville (a Berkshire Hathaway company) violated the antitrust laws through monopolization and tying, the Lanham Act through false advertising, and state laws through trade disparagement and tortious interference.
Update: After another round of briefing and a newly amended complaint, the Court largely denied Johns Manville's motion to dismiss the antitrust and Lanham Act claims, allowing the case to proceed to discovery.
According to the complaint, until Thermal Pipe Shields’ recent entry into the market, Johns Manville was the only supplier of calsil insulation, which is used for piping, tanks, and other industrial applications involving equipment that operates at temperatures up to 1200 degrees Fahrenheit. Calsil is a separate product market with no close substitutes and is the industry standard for certain functions. The customers are a hand-full of distributors that resell calsil—along with many other products—to end-users.
Thermal Pipe alleges that Johns Manville deliberately, systematically, and illegally attempted to maintain its 98% monopoly in the calsil market “by attempting to destroy competition in that market by exclusionary tactics; by threatening to refuse to sell to any company that buys competing products from Thermal Pipe Shields; by tying sales of insulation products to other Johns Manville industry-standard products that distributors need; and by falsely disparaging the quality of Thermal Pipe products (even though they come from the identical factory that Johns Manville had once used).”
According to the lawsuit, Johns Manville has held a tight grip on the calsil market since plant closures left it with the only two U.S. calsil production facilities. The only other calsil factory that can supply the U.S. market is in Shanghai, and from 2004 it was operated by a Manville JV known as “IIG Shanghai” until 2014 when the plant’s ownership changed. The factory is now owned by BEC Industrial (Shanghai) Co., Ltd.
In 2017, Thermal Pipe Shields decided to enter the calsil market after it was approached by the Shanghai factory’s new owner with an offer of an exclusive U.S.-import deal. Shortly thereafter, the complaint alleges, Manville itself tried to convince Thermal Pipe Shields to buy its calsil from Manville instead. To that end, Manville requested the opportunity to test the Shanghai calsil in the hope the tests would show its U.S.-based product was superior. The tests did not ultimately show that, the complaint alleges, and in fact the Shanghai calsil surpassed all industry requirements.
Thermal Pipe Shields began marketing and selling the Shanghai calsil as TPSX-12 in Spring 2018. Around the same time, a senior manager from Johns Manville, David Shong, moved to Thermal Pipe Shields as a vice president in charge of industrial business development and technical services.
According to the complaint, “John Manville immediately tried to disrupt and destroy Thermal Pipe Shields’ potential entry and its attempt to break the Johns Manville monopoly.” First, Manville threatened Shong and Thermal Pipe Shields, falsely accusing Shong of stealing “confidential customer lists” and demanding that they not solicit any Manville customers. Thermal Pipe Shields rejected the demand as an invitation not to compete among horizontal competitors, a per se illegal antitrust violation—and besides, all of the customers Thermal Pipe Shields was soliciting are in published industry directories. Next, Johns Manville claimed Shong improperly disclosed “confidential and proprietary material” to Thermal Pipe Shields—but the materials he allegedly disclosed were the test results of the Shanghai calsil that Thermal Pipe Shields had allowed Manville to test (and on the condition that it receive those results).
With its threats rebuffed, the complaint alleges that Johns Manville engaged in both exclusionary and disparaging conduct to protect its monopoly position in calsil.
For example, the complaint alleges that Johns Manville leveraged its dominance in other product markets in threatening to cut off customers considering purchasing TPSX-12. Johns Manville also dominates the U.S. market for two other products, Micro-Lok fiberglass pipe insulation and Sproule WR-1200 expanded perlite insulation. Johns Manville has a 90% market share for Micro-Lok in major U.S. markets and Sproule WR-1200 is a major insulation staple for industrial sites across the Gulf Coast. Thermal Pipe Shields alleges that Johns Manville executives told its customers that if they purchased TPSX-12, Manville would cut them off from Micro-Lok and Sproule WR-1200 as well. In one instance, the executives told a customer that “We know you have been buying from Thermal Pipe Shields because we track their import records” before threatening to cut it off from other Manville products. In another, the Johns Manville agent told the customer that Johns Manville’s legal department had authorized tying purchases of the other essential Johns Manville products to purchases of calsil, and that Johns Manville would refuse to sell that customer the other products if it bought its calsil from Thermal Pipe Shields.
According to Bona Law attorney, Jarod Bona, “Thermal Pipe Shields wants to compete on the merits in the market for calsil. They had no choice but to bring this lawsuit.”
Indeed, the complaint explains that Thermal Pipe’s calsil is a superior product offered at a significant cost-savings compared to Johns Manville’s calsil, seriously threatening Johns Manville’s market position. More specifically, independent tests showed that the Shanghai calsil outperformed Johns Manville’s own calsil. Those tests revealed that the Shanghai calsil provides higher compressive strength to resist crushing than Johns Manville’s calsil and delivers much higher flexural strength to prevent breakage in transit and handling on the job site than Johns Manville’s calsil.
Thermal Pipe seeks damages of at least $20 million, those damages trebled, an injunction barring Johns Manville from continuing its anticompetitive and defamatory conduct, and Thermal Pipe’s attorneys’ fees and costs.