Judge: Chicago can allegedly choose to pay more for 'worse' lighting products without breaking antitrust laws

By Jonathan Bilyk | Apr 16, 2018

A Chicago federal judge has pulled the plug, for now, on an antitrust action accusing the city of Chicago, the city’s municipal financing group and a contractor in charge of a huge city public lighting project of jumping the bidding process to  ensure General Electric would come out on top.

On April 16, U.S. District Judge Amy J. St. Eve dismissed without prejudice a lawsuit filed by Lake Forest-based efficient lighting manufacturer Neptun Lighting, which had alleged the city’s decision to bypass Neptun for a lighting contract worth “millions” of dollars in favor of GE violated federal antitrust laws.

In her opinion, Judge St. Eve said she found the complaint lacking in several key respects, saying Neptun failed to explain how the denial of single contract made the market for city lighting products uncompetitive, and failed to outline how the alleged conspiracy between the city, its contract and G.E. benefited the city or the contractor.

Neptun’s complaint “…provides no reason whatsoever as to why Defendants would conspire to injure themselves. It does not suggest that GE Lighting was somehow involved in the conspiracy, let alone name it as a defendant. Nor does it allege an iota of upside for Defendants in driving business toward a company that would cost them more money while providing a worse product,” Judge St. Eve said.

Jacob Hamann   Eimer Stahl LLP

The complaint landed in federal court in November 2017, when Neptun lighting first filed suit through its attorneys with the New York-based Kundu PLLC and the Douglas Whitney Law Offices, of Chicago. Defendants identified in the suit include the city, Ameresco and the Chicago Infrastructure Trust, a nonprofit group that helps the city furnish “alternative financing and project delivery options for transformative infrastructure projects.”

In its lawsuit, Neptun alleged the city and its co-defendants engaged in an “unlawful and predetermined agreement” to select GE as a supplier of a large portion of a key city lighting upgrade project.

According to the lawsuit and Judge St. Eve’s opinion, Neptun had submitted proposals to the city to grab a share of the city’s $160 million Chicago Smart Lighting Project, which would update the city’s outdoor public lighting, converting from high-pressure sodium lights to LED light fixtures.

In January 2017, the city selected a proposal from Ameresco, an “independent provider of comprehensive energy services” based in Massachusetts, to help oversee the work.

In submitting its bid, Ameresco had indicated its preference to work with a different lighting manufacturer, but also said “it could work with another ‘major manufacturer’ already ‘aligned with another contractor’ should (the city) ‘have an interest in utilizing their products’ – a not-so-subtle hint that Ameresco could secure GE Lighting’s” products, Judge St. Eve said.

Neptun had initially submitted its proposals in connection with a different contractor, identified in the court documents as Itron Inc., which had competed with Ameresco for the bid.

After Ameresco won the bid, it put out a call for additional lighting “sub-bids based on revised specifications,” which were revised “to account for GE Lighting’s shortcomings,” Judge St. Eve noted.

In its complaint, Neptun provided detailed information explaining how its lights outperformed their competing counterparts made by GE, as demonstrated by independent testing – testing the court documents indicate GE never provided.

Further, Neptun said it also makes its lighting products in Chicago’s suburbs, apparently meeting another of the city’s stated desires to ensure the project benefited local businesses as much as possible.

Neptun noted it has demonstrated the manufacturing capacity to meet the city’s lighting needs.

And Neptun said it could provide the lighting products at a lower cost than GE.

Nonetheless, Ameresco and the city of Chicago ultimately opted to steer the deal to GE, cutting the cord on Neptun’s bid, costing the company “millions” and taxpayers millions more, Neptun alleged.

In its lawsuit, Neptun alleged this violated federal antitrust law by “’relaxing’ the specification requirements and then holding a ‘purportedly open and free competition to select luminaire manufacturers as a pretext in order to include GE Lighting as a luminaire manufacturer – notwithstanding the inferiority of GE Lighting’s luminaires.”

Judge St. Eve, however, said the complaint never quite plugs into a legal rationale to justify allowing it to continue.

“… What the complaint plainly takes issue with is not a lack of competition in a market, but a lack of competition with respect to one customer and one contract,” which the U.S. Seventh Circuit Court of Appeals has declared is not an antitrust concern, St. Eve wrote.

“… Although the ‘manipulation’ of a ‘bidding process’ by a purchaser may give rise to ‘a claim grounded in tort or contract,’ ‘the absence of any allegation of an anticompetitive effect prevents these claims from coming within the purview of the antitrust laws,’” St. Eve wrote, citing the 1984 Seventh Circuit decision in Car Carriers v Ford Motor Company.

“Neptun’s theory of harm runs headlong into that law,” St. Eve wrote. “Neptun’s clearest articulation of the alleged harm is that ‘desiring and selecting a more expensive and poorly-performing product in advance of any bidding, and irrespective of the performance . . . is anticompetitive.’

“That theory has no recognition in the law (as evidenced by Neptun’s lack of caselaw support), and for good reason; otherwise, purchasers who make decisions that are anything from uninformed to thriftless would be subject to antitrust lawsuits and treble damages,” the judge wrote.

In dismissing the case, St. Eve gave Neptun until May 7 to amend their complaint to address what she said were its shortcomings.

The city is represented in the action by attorneys with its Department of Law. Chicago Infrastructure Trust is defended by attorneys Daniel E. Laytin and Casey James McGushin, of the firm of Kirkland & Ellis LLP, of Chicago.

Ameresco is represented by attorneys Jacob M. Hamann and Nathan P. Eimer, of the firm of Eimer Stahl LLP, of Chicago.

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Organizations in this Story

Ameresco, Inc. City of Chicago Eimer Stahl Kirkland & Ellis LLP Neptun Light Inc U.S. District Court for the Northern District of Illinois

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