Why the USGBC Probably Isn't an Illegal Monopoly
Why the USGBC Probably Isn't an Illegal Monopoly
As almost anyone in the green community knows, last week LEED critic Henry Gifford sued the U.S. Green Building Council for, essentially, a few different flavors of fraud.
Gifford sued the USGBC as an alleged representative of a class of people who had been duped by the USGBC.
I posted last week that I did not think that the class action would survive class certification. [Editor's Note: Disclosure -- The recently filed lawsuit names Rob Watson, who chaired the LEED steering committee for its first 12 years and is now executive editor of GreenerBuildings.com, among the defendants.] In that post, I provided a 30-second manager version of Advanced Civil Procedure. Today, it is Anti-Trust 101.
The causes of action Gifford brought against the USGBC are the following:
- Monopolization through Fraud -- Sherman Anti-Trust Act 15 USC Sec. 2
- Unfair Competition -- Lanham Act 15 U.S.C. Sec. 1125(a)(1)(B)
- Deceptive Trade Practices -- New York General Business Law Sec. 349 (a) and (h)
- False Advertising -- New York State General Business Law Sec. 350-a(1) and Sec. 350-a(3)
- Wire Fraud -- RICO--18 USC Sec. 1962(C)
- Unjust Enrichment
To avoid confusion, I will note here that the complaint has two Fourth Causes Of Action. I will address the various causes of action in different posts this week, starting with monopolization.
The Sherman Act is intended to prevent the combination of entities that could potentially harm competition, such as monopolies or cartels.
Section 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. § 2, makes it an offense for any person to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States . . . .”
To prove monoplization, the plaintiff must show “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).
First, it is not entirely clear what market the plaintiffs are alleging USGBC has a monopoly.
A monopoly is a form of market structure where only one or very few companies dominate the total sales of a particular product or service. Monopoly power is defined as the ability to control price or to exclude competitors from the marketplace. The courts look to several criteria in determining market power but primarily focus on market share (the company's fractional share of the total relevant product and geographic market). A market share greater than 75 percent indicates monopoly power, a share less than 50 percent does not, and shares between 50 and 75 percent are inconclusive in and of themselves. In focusing on market shares, courts will include not only products that are exactly the same but also those that may be substituted for the company's product based on price, quality, and adaptability for other purposes. For example, an oat-based, round-shaped breakfast cereal may be considered a substitutable product for a rice-based, square-shaped breakfast cereal, or possibly even a granola breakfast bar.
Green Globes, Energy Star, Passive Haus, BREEAM and others exist in the realm of green building evaluation, but LEED certainly has the dominant market share. But is this really the market?
If building evaluation in general is the market, then surely the International Construction Code, which is the model code for most states and municipalities, has a broader market share and usage than LEED. If energy performance is the market, then the ASHRAE codes which provide standards for energy performance and are used almost universally have a far more dominant market share.
If professional certification of builders and design professionals is the market, then certifying to become a registered architect or a professional engineer must also compete with becoming a LEED accredited professional.
Second, even assuming that LEED has a "monopoly" on some undefined market, Gifford must prove specific intent to acquire or maintain the monopoly position. Gifford alleges a significant number of bad acts on the part of the USGBC, mostly centering around the USGBC's alleged misrepresentation of the energy performance of LEED buildings. In the recitation of the claim, Gifford states that misrepresentation of energy performance of LEED buildings "is false and intended to mislead the consumer and monopolize the market for energy-efficient building design."
The problem is, Gifford does not demonstrate how this false representation is conspiratorial or predatory. The USGBC's actions, even if fraudulent, are not intentionally prohibiting other rating systems from coming into existence or preventing other systems from proving they result in more energy efficient buildings.
So, Gifford's anti-trust claim should not pass go, but should go directly to "jail" -- what a court may actually do is another matter entirely.
The author notes that the opinions expressed in this post are entirely her own, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.
Shari Shapiro, J.D., LEED AP, is an associate with Obermayer Rebmann Maxwell & Hippel LLP in Philadelphia. Shari heads the company's green building initiative. She also writes about green building and the law on her blog a www.greenbuildinglawblog.com, where this post originally appeared.
Image by sxc user jsnflo.