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Ecos Electronics Corp. v. Underwriters Laboratories Inc.

decided: August 29, 1984.


Appeal from U.S. District Court, Northern District of Illinois, Eastern Division.

Pell and Eschbach, Circuit Judges, and Jameson, Senior District Judge.*fn*

Author: Pell

PELL, Cir. J.:

Plaintiff ECOS Electronics Corporation (ECOS) filed an antitrust suit against Underwriters Laboratories (UL) and a number of other defendants. The district court granted summary judgment in favor of UL and found no just reason to delay entry of judgment for UL pursuant to rule 54(b) of the Federal Rules of Civil Procedure. While the case proceeds in the district court against the remaining defendants, ECOS appeals the district court's grant of summary judgment to UL.

I Facts

ECOS manufactures a device known as an outlet circuit tester, which in essence serves to test the condition of an electrical outlet. A similar device is manufactured by Daniel Woodhead Company (Woodhead), which is a defendant in plaintiff's suit but not involved in this appeal. ECOS claims that its tester is technologically superior to the Woodhead tester. Unfortunately for ECOS, the superior technology carries with it a high price tag. As a consequence consumers will only purchase an ECOS tester if it appears that the advanced technology is necessary. Consumers, apparently, have not found the high price of an ECOS tester justified by its superior performance and have instead purchased the inferior, albeit cheaper, Woodhead tester. ECOS blamed its failure to capture the market for testers on UL, among others, and brought suit alleging an unreasonable restraint of trade and monopolization. To understand ECOS's claim, which appears unique in the annals of antitrust litigation, it is first necessary to examine the functioning of UL and its effect on the circuit tester market.

UL is an independent, not-for-profit corporation. UL investigates devices such as circuit testers with respect to hazards affecting life and property. UL is managed by 18 trustees elected from its membership, none of whom may be associated with a manufacturer or vendor of products investigated by UL. The purpose of UL's investigation of a product is only to determine whether the product meets the minimum safety level specified by UL's standards. UL does not assess the relative quality of products, nor does it compare the features found on competing products.

UL establishes standards for the various products it tests. When a manufacturer submits a product that is not covered by an existing standard, UL engineers develop a new standard. The standard will be revised as additional products are submitted. After review and comment by interested persons, UL publishes the standard in a document available to the public. UL also submits standards to the American National Standards Institute (ANSI), which acts as a clearinghouse for organizations developing standards. Products that meet UL's standard are listed by UL and may carry a UL designation on them.

ECOS claims that its inability to compete successfully in the circuit tester market stems from UL's development of a standard approving Woodhead testers and other inexpensive testers. In 1964 Woodhead submitted a circuit tester to UL's Chicago office. The Woodhead tester was a simple device that could be plugged directly into an electrical outlet. UL refused to list the Woodhead tester because it gave incorrect indications of the conditions in a circuit. In 1972 Woodhead submitted a modified version of its circuit tester, which UL approved although UL engineers were aware that the tester could not detect all wiring conditions. After consultation between UL's Chicago, Illinois and Melville, New York offices, UL decided to list Woodhead-type testers provided that the manufacturers disclosed the limited ability of the tester. Woodhead and Harvey Hubbell, Inc., which manufactured a Woodhead-type tester, agreed to provide disclosures with their testers.

ECOS complained to UL about the standard set for testers, UL Standard 1436, and claimed that Woodhead-type testers did not work and should not be listed. UL considered ECOS's comments, but declined to change the standard as UL felt that Woodhead-type testers were useful despite their limitations. UL expressed a willingness to investigate ECOS testers, but ECOS declined to submit any for investigation. ECOS claimed in its complaint that Standard 1436 by its terms precluded listing an ECOS tester as it drew more current than allowed by the standard. Documents submitted by UL in support of its motion for summary judgment demonstrated that UL informed ECOS that UL was willing to consider listing an ECOS tester despite the variation from the standard. UL explained that a complex tester, such as ECOS claimed to manufacture, would be considered outside the scope of the standard and hence not bound by the standard's limits. UL also explained that the standard would not be applied if the product met the goal of the standard, although not meeting all of the requirements of the standard. The district court found that UL established ECOS's failure to submit its tester. While ECOS claims that the court erred in this finding, a claim that is without merit, it also claims that its failure to submit a tester is irrelevant as it claim rests on UL's listing of Woodhead testers, not on refusal to list ECOS testers.

II The Lawsuit

ECOS filed suit seeking damages and injunctive relief under the Clayton Act, 15 U.S.C. §§ 15, 26, claiming that UL and the other defendants were guilty of conspiring to restrain competition in violation of the Sherman Act, 15 U.S.C. § 1. ECOS also alleged that Woodhead was guilty of monopolization in violation of 15 U.S.C. § 2. ECOS' claim against UL can be summarized as follows: By listing Woodhead testers UL convinced consumers that these testers were adequate for testing circuits and that the sophisticated technology employed by ECOS was superfluous. Consumers buy the cheapest UL approved tester, so by listing Woodhead testers UL and Woodhead conspired "to imbed into the outlet circuit tester market technically inferior outlet circuit testers." According to ECOS, the UL listing allows Woodhead testers to gain a competitive advantage over more sophisticated equipment and deprives manufacturers of sophisticated testers "of an unfettered opportunity to offer their product in the market and to obtain the benefit of lower costs resulting from economies of scale." ECOS explicitly claims that obtaining a UL listing for its testers would not solve the problem as consumers will still purchase the cheaper Woodhead tester.

The district court granted summary judgment*fn1 for UL, holding in a one-paragraph opinion that: "The crux of plaintiff's argument is that it produced a superior product and that only its product should qualify for UL listing. Plaintiff's alleged injury results from the claim that it was forced to compete with inferior ...

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