Honeywell Sues Alarm.com For Violating Anti-Trust Laws (Settled)

By: John Honovich, Published on Feb 24, 2017

Is Alarm.com about to dominate the smart home software market?

That is what Honeywell alleges in its new lawsuit, first reported by CEPro.

Honeywell's complaint declares:

As a result of the proposed acquisition, Alarm.com would have approximately a 70% share in the market for the provision of Remote Services for dealer installed security systems. The creation of such concentration, which would injure competition, stifle innovation, and result in higher prices to consumers, is presumptively illegal. [emphasis added]

Inside this post, we share Honeywell's full complaint / filing, analyzing its claims (including Honeywell going open, their fears about being 'crippled', the critical role of ADT and Qolsys, the 'vicious cycle' they face) and its potential impact in the fast growing and critical smart home segment of the alarm / RMR business.

[Update: The lawsuit is settled. Analysis Inside.]

** *****.*** ***** ** dominate *** ***** **** ******** market?

**** ** **** ********* alleges ** *** *** lawsuit, ***** ******** ** *****.

*********'* ********* ********:

** * ****** ** the ******** ***********, *****.*** would **** ************* * 70% ***** ** *** market *** *** ********* of ****** ******** *** dealer ********* ******** *******. The ******** ** **** concentration, ***** ***** ****** competition, ****** **********, *** result ** ****** ****** to *********, **presumptively *******. [emphasis added]

****** **** ****, ** share *********'* **** ********* / ******, ********* *** claims (********* ********* ***** open, ***** ***** ***** being '********', *** ******** role ** *** *** Qolsys, *** '******* *****' they ****) *** *** potential ****** ** *** fast ******* *** ******** smart **** ******* ** the ***** / *** business.

[******: *** ******* ** settled. ******** ******.]

[***************]

Filings ******

**** ** **** **** ** *** full ********* ********* ******* Alarm.com/ ********, ***** ** Feb **, ****.

Key ***********

********* *********.***'* $*** ******* *********** ** key ******** ********** **** ** ********:

*****.***’* ******** ******** ** Icontrol ***** **** *****.*** the ******** ****** ******** platform

*** ******, ******* *********, would ** ******* ****** more ** *****.*** ******* its *********:

*** ******** *** *********** effect ***** ** ****** prices *** ****** ******** to ******** *******

*********** ** *****.*** ***** be ****, ******* *********:

*****.*** ***** ** **** to ****** **** ***** party ************* ** ******** hardware *** *****-**** ******* interoperate *********** **** *****.***.

*******, ****** / ** barriers ***** ** * problem, **** *********:

*****.*** *** ******** *** their ************ ******** ************ to ****** ********* ***********.

Smart **** / ****** ********

** ******* ** ***** have ************** ********* *******, of ***** ~* ******* use ***** **** / remote ******** ********* **** Honeywell, *****.*** ** ********, according ** *********. *.* million ** ***** * million ***** ***** *** purchased ******* * ******** dealer, **** *********.

****** ***** *** ***** home / ****** ******* software ** ********* ** Honeywell **:

*****.*** **% / *.** million (**** *****.*** ******** 2.6 ******* ** *** end ** ****, ****** their ****** ** ******* higher ***)
******** **% / *.** million (******** **** *****.*** this ******* *** **% 'dominant' ********)
********* **% / *.** million (*.*.,***** *******)
****** **% / *.** million

Open ***** *** *********

** *** *********, ********* admits they *** * ****** offering:

*********, ********* **** ****** architecture. ************, * ******** can **** *** ********* Remote ******** ******** ** he **** **** * Honeywell ***** ******.

*******, ********* **** ** has ***** ** **** up:

********* *** ******** *** possibility ** ****** ** an **** ********* *** developed ******** ***** ** do **... ** *** made ***** ** **** its ****** ** ***** party ******** ******** ************* as **** ** ** to **** ********* *** option ** *** ********* security ******** **** ***** party ****** ******** *** vice *****.

**** ********* **** ******* being ****** *****, **** will ** ******* *******:

*** ****** ***** ***** Alarm.com/Icontrol ** ****** *********’* ability ** ********* ** maintain **************** **** ***** party ******** *** ****** manufacturers. **** **** **** stymie *********’* ******* ** open *** ******** ** third ***** ******** ******** and ********* **** *********’* ability ** ******* *** platform ** ***** *************’ smart-home *******.

'Crippled' ********* **** ***

********* ***** ***** ********, specifically **** ***:

*** ****** ***** ***** Alarm.com/Icontrol ** ****** ********* by *********** *********’* ********** relationship **** * **** important ********, ***, *** largest *********** ******** ****** dealer *** **** ** important ******** ** ******** system ********. **** ***** cripple ********* ** * Remote ******** **********.

************, ********* ***** **** hardware ***** ** ***:

*** ********* ****** ******** from ******** *** ******** (alarm *******) **** ******** sources ********* *********.

** ********* ******** **** Alarm.com **** ***** ********* hardware *** **** *** moves ** *****.***'* ********. In **********, *** ******* beneficiary ********:

*****.*** *** * ********* interest ** ***** ****** manufacturer ******. *** ****** company **** **** ** incentive ** ****** *** hardware ***** **** **** Honeywell *** ****** ******.

*** ******* ***** ** drasticly ******** ** *********, says *********:

*** ******** *** * significant ******* ** *********’* hardware *****. *********** ** diminution ** *** ********** relationship ***** ****** ** drastic ********* ** *********’* installed **** *** ******* stream.

******* *****

********* ********* **** ****:

** ********* ***** ******* and ***** ******, ** will ** ****** ** retrench ********** ** *** platform. * ******* ***** unfolds: *** **** ***** Honeywell *****, *** **** attractive *** ******* *******, causing ** **** *** additional *****.

Litigation ** *********

***** **** ** *********'* feel **** ********* *** come **** ******* **** Honeywell's ************ ****. ** course, ** ***** ** anti-trust *********, *** ************ need ** ** ** bleak ** ******** ** show *** ****. ** is *** ***** ** Honeywell ***** ******** *** future ** ******** **** dire ** **** ** it ** ****** *** case for *** *********.

Vote / ****

Lawsuit *******

*** ******* *** ******* in ***** ****. ***** details **** *** *********, we ****** **** *****.*** provided **** *********** / agreement ** **** ** the ******** *********** ****** Honeywell ******** ** (*.*., blocking **** ***, ***.). Alarm.com ********** ***** **** logistically (******** *** ***** on ** ******* ****) and ********** (*** ******** millions ******** ******* * much ****** ******* ******* they **** '*****' ** 'wrong') **** ******** *** suit.

Comments (19)

Undisclosed #1

02/24/17 02:27pm

A small part of Honeywell's panic could be attributed to the fact that they have pushed out all of the former Ademco regime that would have been in tune much earlier on with this threat. This same Honeywell also allowed future founders of 2GIG to develop their technology while on Honeywell's employment dime and did nothing to thwart them when they left and took that playbook to compete against Honeywell...

Mark Jones

02/24/17 02:30pm

Interesting read, thank you. I might make note that Honeywell has had a very similar relationship with ADT for years and years and years, and while integrators complained, no one ever filed a suit over it that I know of. The public was largely blind to the Honeywell/ADT arrangement. Anti-trust exist to promote fair competition for the protection of the consumer, not a particular manufacturer. As I read their complaint, I would agree with their assessment on the impact of their business. I just don't see how it harms the consumer. I voted no by the way.

Jeremy Ellis

02/24/17 03:22pm

Honeywell was going to open up their platform?!? What a fucking lie/joke. Maybe if you fixed your software so end users could maybe...I don't know...see and control both partitions remotely? Or maybe it was the fact that if you buy a system from separate dealers, there is no hope of a single login to get to ALL your systems remotely? A great case of old vs. new. Hang on to thermostats big H! It's all you have left!

Undisclosed Integrator #2

02/24/17 03:56pm

AFAIK Honeywell has plans for a single piece of software to control things that is slated for FY2018 Q1-2 that's at least on the enterprise side. I heard that the same is occurring lower on the food chain. Seems plausible given the maxpro cloud stuff.

Sean Nelson

Nelly Security | 02/24/17 04:26pm

What a weak crybaby move by Honeywell. Embarrassing actually. They just need to admit that their software pales in comparison to Alarm.Com. Once they admit that, they may be able to fix the problem and actually compete.

Good for Alarm.Com, talk about a company firing on all cylinders!

Undisclosed Integrator #2

02/24/17 04:39pm

I disagree on the crybaby part of things. Alarm.com has had the luxury of coming into the market without having to deal with legacy systems and legacy communication formats etc. They have really eaten the RMR lunch more so of the smaller/regional traditional alarm companies with a central than honeywell. It's pretty nice to only need to support one product and modern communication paths. Most regional alarm companies with centrals have been in the industry or were formed right after AT&T's anti trust breakup. What we are seeing now is a trend back towards consolidation in the market that is being accelerated by the new entrants. It's really easy to criticize the older companies in this industry as not moving fast enough, but it's not like you can go back to the year 2000 and abandon half your customers because you know that the up and comers are going to be straight cell/ip communicators with an interactive platform. It's really difficult to pivot as fast as people think you should. There's a reason there aren't very many 100 year old companies in any industry.

Hard to fully blame honeywell since they have a legacy of customers they have needed to support versus being able to invest everything in a single product limited market offering. Alarm.com has picked off the new installs and that part of the market and I would assume is going to try to disrupt and move upstream. Problem is that part of the market isn't as fickle and tends to be a lot sticker as a customer base. It's the same problem Hikvision is running into. Let's not forget even in 2013 AOL still made $52mm a month in subscription fees for dial-up.

Sean Nelson

Nelly Security | In reply to Undisclosed Integrator #2 | 02/24/17 05:48pm

"Without having to deal with legacy systems?" You sound as if that were a burden. Honeywell has been an established successful business for quite a long time, they have the money and resources to run an R&D team that focused primarily on cutting edge technology and staying ahead of the game but this is where they failed, they either didnt put enough emphasis on this or simply went the wrong route somewhere and the better technology has won out. This is classic competition and "survice and adapt". Now Honeywell is on their heels and the only thing they know to do is file an anti-trust suit which in my opinion, makes them look very weak and outdated.

John Honovich

IPVM | In reply to Sean Nelson | 02/24/17 06:16pm

Honeywell is on their heels and the only thing they know to do is file an anti-trust suit which in my opinion, makes them look very weak and outdated.

I agree if you read the complaint or our summary, it makes Honeywell look weak / defensive.

However, most people are only going to see the headline - big strong Honeywell sues small Alarm.com. And Honeywell has a market cap ~80x Alarm.com's.

And my suspicion is that Honeywell wants this public. For example, CEPro posted on this the morning after the complaint was filed, meaning someone very close to the suit tipped them off. I don't know who told CEPro but it would make most sense for a Honeywell person to do so. Also, typically the suer, especially a bigger company, benefits from news of a lawsuit since it can create a chilling effect on the smaller company (i.e., "Oh no, Honeywell is going after Alarm.com maybe we should wait to work with them, etc.").

Sean Nelson

Nelly Security | In reply to John Honovich | 02/24/17 06:57pm

I dunno, maybe your right, but I think the complete exact opposite. Im thinking "Oh wow, Honeywell is suing Alarm.com, they must be a really big disruptor to ruffle Honeywells feather, I gotta check them out"

When I think Honeywell, I think of the companies who did so well doing analog CCTV for so many years and was content on doing so and never really progressed and by the time they did start to progress, it was already too late. Perhaps its not this extreme but thats my drift.

Undisclosed #4

In reply to Sean Nelson | 02/24/17 06:48pm

I agree Sean, the problem with your thinking is that you forgot that Honeywell was spending the last 17 years taking profits out of the former Pittway group companies to get their investment back rather than putting any innovation back in...that is why they bought them ...you're just not being practical! :)

John Williams

In reply to Undisclosed Integrator #2 | 03/15/17 04:38pm

I very much appreciate your Longview thinking and perspective. I learned a lot from it that I will carry with me.

That's right, there aren't too many 100 year old companies!

Undisclosed #3

02/24/17 06:31pm

When did Honeywell acquire ADI?

Undisclosed #1

In reply to Undisclosed #3 | 02/24/17 06:58pm

2000. As with most big acquisitions, the culture immediately changed. Execs from other divisions came flying in to finish off the management that built Pittway.

Undisclosed #4

In reply to Undisclosed #3 | 02/24/17 06:58pm

The same time they acquired Pittway...2000

Undisclosed Manufacturer #5

02/24/17 11:44pm

If you combined all the methods Honeywell has deployed to win at this game this makes me really laugh.

John Honovich

IPVM | In reply to Undisclosed Manufacturer #5 | 02/25/17 12:50am

If you combined all the methods Honeywell has deployed to win at this game this makes me really laugh.

Is that a pro or anti-Honeywell sentiment?

Undisclosed Manufacturer #5

In reply to John Honovich | 02/25/17 12:57am

Neither Pro or against, just an observation. From the early days of AlarmNet through lending money to convert dealers and owning multiple technologies in the same industry, while owning an alarm company for a brief period.....it's just odd for them to cry foul.

Undisclosed Distributor #6

02/26/17 11:15am

Sounds like Honeywell losing at their own game??

John Honovich

IPVM | 03/14/17 06:53pm

Update: The lawsuit was settled. While details were not disclosed, we assume that Alarm.com provided some concessions / agreement on some of the specific competitive issues Honeywell objected to (e.g., blocking them out, etc.). Alarm.com absolutely gains both logistically (avoiding the delay on an ongoing suit) and monetarily (not spending millions fighting against a much larger company whether they were 'right' or 'wrong') from settling the suit.

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