The United States power protection industry is progressing through a state of commoditization, resulting in margin compression for new equipment sales. In response, some uninterruptible power supply (UPS) equipment manufacturers are installing “padlock software” on their systems to guarantee revenue from post-warranty service. The software, coupled with the manufacturer’s failure to inform customers of it before the sale, effectively creates a lock-in for preventative and remedial post-warranty service, allowing the manufacturer to charge inflated prices for its services.
JT Packard is currently engaged in Federal litigation with two UPS manufacturers, MGE and Eaton/Powerware, to end these practices. The basic tenant of the company’s legal argument is that these business practices violate the Sherman Antitrust Act. The cases are currently progressing through discovery, with anticipated court trials by year-end 2006. The outcome of the litigation will have far-reaching implications for many industries.