Court Orders Jeld-Wen to Divest Towanda Over Issues of AntitrustOctober 10th, 2018 by Drew Vass
A court ruling brought a more than year-long legal battle between door manufacturers Jeld-Wen and Steves and Sons Inc. (Steves) to a close October 5, following a trial-by-jury process finding that Jeld-Wen’s acquisition of Craftmaster International (CMI) violated antitrust provisions. A three-day evidentiary hearing followed and, according to a court-published document, the motion by Steves ordering Jeld-Wen to divest its Towanda, Pa.-based manufacturing plant was upheld. Jeld-Wen acquired the facility via its purchase of CMI in 2012. Court rulings opine that returning the Towanda-based operation to an independent status as a stand-alone provider is expected to restore appropriate levels of competition to the domestic door skins (doorskins) market. Other remedies requested by the plaintiff were rejected, after being deemed unnecessary to the overall process, while a Special Master (judge-appointed subordinate official) will ensure the remedy’s success.
The trial followed an action filed June 29, 2016, by Steves, alleging damages on six counts, including violations of numerous sections of the Clayton Antitrust Act, an amendment that focuses on such acts as price discrimination, price fixing and unfair business practices. The company also alleged breaches of contract, which were upheld, while counts pertaining to breach of warranty, specific performance, and trespass to chatels were voluntarily dropped by Steves.
According to official court documents, while there were three manufacturers between the years of 2001 and 2012 of doorskins for interior molded doors, selling those products to independent manufacturers (like Steves and Sons), all three were vertically integrated providers (also manufacturers of doors). In May 2012, Steves reached a seven-year, automatically-renewing supply agreement with Jeld-Wen, shortly after which Jeld-Wen announced an intent to acquire fellow doorskin provider CMI, which it did in October 2012, leaving but two doorskin suppliers in the U.S.: Jeld-Wen and Masonite. As a result of that merger, and Jeld-Wen’s conduct, a jury found that competition was substantially lessened going forward, causing Steves sustained injuries—specifically of the type that court documents suggest antitrust laws were established to prevent. Further, the court found that following the acquisition of CMI, Jeld-Wen violated conditions of the supply agreement established between the two companies, by continuing to increase prices despite declining input costs, while also hampering its commitments to reimburse the full cost of doors in the event of defective skins. Meanwhile, records show that Steves was unable to adequately fulfill its needs for doorskins via foreign suppliers.
Ultimately, the court found that if the two companies could not reconcile their relationship, Steves would be driven out of business after 2021, following the expiration of a supply agreement. And in 2015, court documents suggest, it “became obvious that negotiations with Jeld-Wen would not work,” leading to dispute resolution efforts, followed by mediation and ultimately a legal suit.
The jury awarded Steves $58,632,454 in antitrust damages, which, when trebled (tripled, as required by statute) total approximately $176 M. Further damages were assessed at just over $12 M, pertaining to the breached long-term supply agreement, but will be reduced to approximately $2 M.
In support of its decision for divestiture, the court points to the success of the Towanda-based facility prior to its acquisition. And while no formidable buyers have surfaced for the facility to date, the court concludes that buyers can be expected once legal battles have ended.
In a public statement, officials for Jeld-Wen say the company plans to appeal.
“Jeld-Wen firmly maintains that it has not violated any antitrust laws,” says Gary S. Michel, president and chief executive officer. “We will use all of our available resources to continue to challenge the erroneous antitrust verdict.”
In the meantime, Michel says Jeld-Wen will, “continue to support the growth and development of [its] dedicated employees at the Towanda facility.”
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