Most of the time you start your day by grabbing a cup of coffee then sit down and catch up on the latest news, today for a change a cup of coffee was the latest news. The Oliver Law Group P.C. has filed a class action lawsuit against Keurig Green Mountain, Inc. The suit claims that Keurig Green Mountain, makers of the K-cup single-serving coffee brewing machines, violated the Sherman Antitrust Act by designing their new machines to not let their competitors enter the market, even though their exclusive patent had expired.
Keurig is about to introduce its new 2.0 version brewing machines which are designed to only allow the manufacturers own product to be used in them. Apparently there are a lot of people that are tired of paying the higher cost of Kuerig’s prepackaged coffee servings because there have been a total of 14 lawsuits already filed against them across the country. Complaints have also been written in several product review forums across the country; one person went so far as to claim it was like buying a toaster and only being able to put the manufacturers bread in it.
Of the 14 lawsuits that have been filed, 12 are class action based and originated in the states of New York, Maryland , Massachusetts, California, Florida, New Jersey and of all things an insurance company filed in Maryland. The two remaining lawsuits were filed by Keurig’s competitors who make their own portion cups for Keurig’s brew machines, TreeHouse Foods, based in Oakbrook, Ill and Rogers Family Co., based in Lincoln, Calif. Keurig Inc. sued both of these two competitors when they first introduced their own portion cups for the Keurig machine and lost.
Both competitors go on to claim that their lawsuits are not about the new brewing machine. They say it is about that Keurig’s monopoly stifles consumer choice. It is interesting that in both companies’ lawsuits they made a point to single out that Keurig Inc. has exhibited a long list of actions over the years which violate state and federal antitrust and anti-competition laws. They go on to point out that the consumer is going to be the biggest loser here.
Why would Keurig want to risk losing these antitrust lawsuits by introducing the redesigned machines that effectively lock out the competition? The answer is simple. According to Keurig Inc. investor information, Keurig controls around 85% of the market for machines that have products that are competitive with the K-cup refills. That percentage translates into over 3 billion dollars in sales to the company. The company’s total sales revenue for 2013 was 4.3 billion dollars. So the K-cup refill packs make up the majority of Keurig’s sales and profit.
In a strange but true omission, Keurig Inc. itself admitted that the lock out technology it put in its new machines has no bearing whatsoever on the operational part of the brewer. The company went on to claim that it is not the lockout technology that makes its new Keurig 2.0 brewer exclusive, but its ability to work with the Keurig designed refill packs to make the perfect cup of coffee. They claim that allowing the competitors refill packs to work in their machines would not translate to them being able to replicate Keurig’s version of the perfect’ cup of coffee; this in turn would not only hurt the machines reputation, but sales would suffer as a result also. Keurig’s representatives went on to state that they had offered their competitors access to the technology, for a fee of course.
It will be interesting to see how this all shakes out in court or if it will even get that far. Keurig has all but admitted that they designed there new coffee brewer to stifle the competition, but they quickly dismissed that as only being a part of keeping up the company’s reputation for quality and the increased sales that go along with that. The competitor’s suits seem to attack Keurig’s antitrust and anti-competitive history more than they attack the new machines technology. The class action lawyers will most likely go after anything that will make them victorious for their clients. The results from the first trial to take place may be a good indicator of how the others will go. We will just have to wait and see what happens.