Do Not Pass Go: Why The USGBC Is Probably Not An Illegal Monopoly

NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

As almost anyone in the green community knows, last week LEED Critic Henry Gifford sued the USGBC for, essentially, a few different flavors of fraud.  Mr. 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.  In that post, I provided a 30-second manager version of Advanced Civil Procedure.  Today, it is Anti-Trust 101.

 The causes of action Mr. Gifford brought against the USGBC are the following:

  1. Monopolization through Fraud--Sherman Anti-Trust Act 15 USC Sec. 2
  2. Unfair Competition--Lanham Act 15 U.S.C. Sec. 1125(a)(1)(B)
  3. Deceptive Trade Practices--New York General Business Law Sec. 349 (a) and (h)
  4. False Advertising--New York State General Business Law Sec. 350-a(1) and Sec. 350-a(3)
  5. Wire Fraud--RICO--18 USC Sec. 1962(C)
  6. 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, BREEM, 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, than 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, than 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, Mr. Gifford must prove specific intent to acquire or maintain the monopoly position.  Mr. 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, Mr. 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, Mr. 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, Mr. Gifford's Anti-Trust Claim should go directly to jail--what a court may actually do is another matter entirely.

NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

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Comments (6) Read through and enter the discussion with the form at the end
Doug Reiser - October 18, 2010 11:10 AM

Great discussion on defining the LEED marketplace. Its a tough question, but if they consider green building evaluation the market, then you also have to consider ASHRAE Std. 189 and the ICC's IGCC as opponents. The code producers and the certification bodies should compete in the same market since their products do essentially the same thing.

It will be interesting to see how narrow of a market they define. Great topic for discussion, Shari.

Sheena Sharp - October 20, 2010 4:14 PM

I was with you until you said that LEED AP is a competitor for professional certification to those that regulate architects and engineers, which are professions with exclusive areas of practice, irrespective of LEED ap status. Perhaps if into another context: does LEED AP certification allow others to compete in the area of environmental law with your call to the bar ?

LEED AP has the status of an optional skill, and indeed should only be considered as an equivalent to say, passiv house training.

What you end up showing is that the meaning of the certification IS confusing to some.

Furthermore, LEED uses ANSI/ASHRAE/IESNA Standard 90.1-2007 as a benchmark, so they do not "compete" in any meaningful way. One is law relating to public health safety and policy, the other (LEED) is aspirational.

and I am a LEED supporter!

greenmaven - October 21, 2010 11:20 AM

, I disagree with your conclusion that LEED should be included in the marketplace of other building codes and standards. Many people miss the significance of the term "standard" or conflate it with any old checklist. A "standard" has been developed under the auspices of an accredited standards developer (eg ISO, ANSI) pursuant to a process that is supposed to ensure broad participation and avoid market/price collusion. LEED is not a "standard" developed under such a process. [However, the USGBC has become an accredited standards developer and is making great strides to developing future products under such auspices.] All that said, a "standard" competes in a different marketplace because, among other things, there are copyright and other legal implications that define the rights of a standard owner in the market. Thanks for sharing your thoughts on this fascinating case!!

Daniela - October 25, 2010 11:46 AM

It will be interesting to see how this plays out. I think an architect who really knows how to do green building should be able to do it with our without LEED.

Does the fact that LEED is starting to appear in governmental policies have any bearing on this? Regardless of whether intentions are predatory or not, it seems that having LEED requirements showing up in municipal legal frameworks is stepping into the monopoly territory.

JAMES CARLINI - November 9, 2010 9:04 AM

As a person who developed the concept of "Measuring a Building's IQ" back in 1985 and actually used a test to compare commercial buildings and their inteligent amenities in a major metropolitan area, I think if you are going to hype LEED certification, you should make sure it delivers what you say it does.

It will be interesting to see how this lawsuit plays out because there is a question as to whether or not adding LEEDS into a building gives the owner some better performance.

Also, certain things are glossed over like what is the payback on the extra money spent for certain systems? If you are recommending a sophisticated dimming system for lights and saying it will help save money and the environment, how long is the payback period? On certain systems, the payback is 25-40 years and I can tell you from practical experience, no building owner is going to spend that to get some LEED certification.

Jeff Cordeau - February 17, 2011 1:30 PM

I am not an energy engineer, so I do not have any credentials, but I am a building/operations manager that is looking to verify that we are environmentally responsible actors. Where can I go to verify this in a way that is recognizable to the public. The way I see it is I have 2 options: LEEDs or Green Globes.

They both market themselves in the same manner, that(paraphrasing) they provide a process to verify your building meets certain criteria to be considered a "Green Building". So, I am suggesting that the market is building owners that want the status that they are environmentally responsible actors, as many people in our area are doing this for this reason.

I can tell you that we already meet the criteria for LEEDs certification because of our efficient management of our building and other factors. Why would we spend so much money of certifying our building if already know that we are responsible? My answer is to that we want everyone else to know, because others are doing it. Please give me another reason why LEEDs is worth so much money?

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