In response to a lawsuit filed last week by Honeywell seeking to block its acquisition of Icontrol Networks’ Connect and Piper business units, Alarm.com CEO Stephen Trundle fired back in a court filing this week arguing that competition in the market will actually increase as a result of the deal rather than decrease as Honeywell contends. In the heavily redacted filing, Trundle says that Comcast, which agreed to purchase Icontrol’s “Converge” software platform in separate deal, stands poised to become a more “formidable competitor” in the space.
In its complaint filed last week in U.S. District Court, Honeywell asserts that the combination of Alarm.com and Icontrol is a “classic violation of antitrust law” as it would result in Alarm.com having a 70 percent share of the market for the provision of remote services for dealer installed security systems.
“We believe the completion of Alarm.com’s acquisition of certain Icontrol businesses would limit competition, drive up prices for dealers and consumers, and harm a fair and competitive marketplace,” Honeywell spokesman Trent J. Perrotto wrote in a statement to SecurityInfoWatch.com explaining why they filed the lawsuit.
However, following an eight-month review by the Federal Trade Commission, Trundle says the agency concluded that the transaction posed no harm to either consumers or competitors. Honeywell filed the lawsuit following the expiration of the HSR Act waiting period for the deal, which ended on Feb. 22, according to a recent 8-K filing with the U.S. Securities and Exchange Commission by Alarm.com
“No anti-competitive harm will result from the proposed transaction: neither competition nor innovation in the home security market will be harmed,” Trundle’s filing reads.
Additionally, Trundle says that if the temporary restraining order sought by Honeywell to block the completion of its deal with Icontrol is issued that Alarm.com “will suffer great harm.”
“Until the deal closes, Alarm.com is unable to share with Icontrol employees what their future will be in the combined company,” Trundle says in the filing. “Honeywell also likely understands this dynamic and is seeking to further damage Alarm.com by delaying the closing as long as possible… We have continuously had to tell prospective employees, ‘we’re sorry how long this is taking but please just wait a little bit longer.’ Relative to Honeywell, we are a small company with a modest executive team. Honeywell likely knows they can distract us further with these activities and in so doing, harm the existing Alarm.com business and employees.
Honeywell says in its complaint that if Alarm.com is allowed to enjoy this dominant market position that it could demand third-party security hardware and smart home device manufacturers interoperate exclusively with the Alarm.com platform and thus diminish the ability of Honeywell and others in the market to compete.
Honeywell also argues that the merger would enable Alarm.com to hinder its ability to establish or maintain interoperability with third-party hardware and device manufacturers. Currently, Honeywell leverages a closed architecture software system – a consumer can only use Honeywell Remote Services if they also use one of the company’s alarm systems – whereas Alarm.com and Icontrol use an open architecture that allows any manufacturer to integrate with their platform. The one exception to this, according to the complaint, is ADT. Honeywell says it “invested significant resources” into making the hardware systems it sells to ADT compatible with Icontrol Remote Services platform.
Trundle argues that if Honeywell is harmed, it won’t be the result of this transaction but rather the result of regular competition. “I do not believe that the proposed transaction will harm Honeywell; but if Honeywell is harmed, it will be the result of vigorous, ordinary-course competition, not a violation of the antitrust laws,” Trundle says in the filing.
Although it has explored the possibility of switching to an open architecture and even has plans to do so, Honeywell says the merger would put this in jeopardy. “As a result of the merger, these third parties will be able to reach a significant share of the Remote Services customers by interconnecting with the one dominant firm. Incentive to invest in interoperability with multiple players will greatly diminish,” the complaint reads. “Firms that do not currently interoperate with Honeywell will have little reason to invest in creating interoperability; and device manufacturers that currently interoperate with Honeywell will have less reason to invest resources into maintaining interoperability.”
For his part, Trundle says he was “unaware of Honeywell ever showing signs that it is actively attempting to ‘open’ its remoted services software platform” to other third-party panel manufacturers.
Speaking of ADT, Honeywell also claims a merger would undermine their relationship with the residential security behemoth, which they say would “cripple” the company as a remote services competitor. Because ADT plans to transition from Icontrol to Alarm.com following the merger, Honeywell says it would have to undertake another lengthy and costly project to make its hardware interoperable with Alarm.com’s platform, but the company says that process could be made all the more challenging if Alarm.com doesn’t want to play ball.
“The merged company would have the ability to thwart the effort to establish interoperability,” the complaint says. “Alarm.com can refuse to cooperate outright. It can also sabotage the project in myriad ways that are subtler and more difficult to detect: by committing fewer resources than necessary, by withholding critical information from Honeywell, by making design decisions that hamper interoperability with Honeywell hardware, and more.”
Trundle says the idea that Honeywell could be excluded from a relationship with ADT as a result of the merger is simply not true. “Honeywell is a giant in the marketplace, and will have no difficulty surviving after the proposed transaction closes,” Trundle says in the court documents.
Additionally, Honeywell claims that because Alarm.com has a financial interest in alarm panel maker Qolsys, the merged company would have an incentive to divert sales away from Honeywell and toward Qolsys. Honeywell also points out that the merged company would have an incentive to work with hardware manufacturers that don’t have a remote services offering.
Finally, Honeywell says it believes if the merger is allowed to go through that Alarm.com could leverage its market position to harm the company’s relationship with other security dealers by potentially pulling its offerings or withdrawing support from dealer programs that offer both Honeywell and Alarm.com remote services, as well as by pressuring those who run dealer programs to steer dealers toward marketing Alarm.com products over Honeywell.
“The result of such conduct will be Honeywell losing market share to Alarm.com, and the merged firm extending its dominance,” the complaint says.
