Body camera company sues FTC

Scottsdale-based Axon says feds tried to ‘strong-arm’ it

Axon Enterprise Inc., the Scottsdale-based company that is the nation’s largest provider of on-body cameras for police departments, is suing the Federal Trade Commission, claiming its acquisition review process is unconstitutional.

The lawsuit, which was filed in U.S. District Court in Phoenix on Friday, claims the FTC attempted to “strongarm” Axon into settling after the regulatory agency reviewed the company’s acquisition of another on-body camera provider.

The lawsuit also claims the FTC tried to force Axon to give up its intellectual property.

“We don’t think that’s legally justified,” Rick Smith, the CEO of Axon, told The Arizona Republic in a phone interview.

In a news release from the FTC, the regulatory agency said Axon’s acquisition of Seattle-based VieVu reduced competition “in an already concentrated market.”

The release issued Friday said the commission would continue with plans to take Axon to an administra

tive court to challenge the merger.

“Competition not only keeps prices down, but it drives innovation that makes products better,” said Ian Conner, the director of the FTC’s Bureau of Competition.

“Here, the stakes could not be higher. The Commission is taking action to ensure that police officers have access to the cutting-edge products they need to do their job, and police departments benefit from the lower prices and innovative products that competition had provided before the acquisition.”

Axon, formerly known as Taser International, was founded in Scottsdale in 1991. The company recently sold the Phoenix Police Department, one of the largest municipal police forces in the country, more than 2,000 on-body cameras for its officers.

Smith said the lawsuit would not affect the current contract it has with Phoenix.

Lawsuit: FTC threatened to sue Axon

In May 2018, Axon purchased VieVu, a smaller company that was “failing” but had a multiyear contract with the New York Police Department, according to the lawsuit.

Axon bought VieVu for $7 million with a combination of cash and stock because it wanted the NYPD contract, the lawsuit states. But a month later, the FTC sent Axon a letter saying it was investigating the acquisition.

After an 18-month investigation, the FTC told Axon that it must divest all assets the Scottsdale company acquired when it bought VieVu, the lawsuit states.

If Axon didn’t rid itself of VieVu’s assets, the regulatory agency would sue Axon and take the company through an internal administrative hearing “where the outcome is all but guaranteed” in favor of the FTC, according to Axon’s lawsuit.

The FTC believes the merger of Axon and VieVu would drive up prices for police departments across the country for the technologies officers now depend on, the commission’s news release said.

“If the FTC believes it has a strong case against us, it should prove it in federal court before a neutral judge,” Smith said.

Sue before getting sued

Instead, Axon offered to settle the case by selling off VieVu assets, stripping any improvements Axon did on VieVu products and putting $5 million in capital to VieVu for whoever bought it, the lawsuit claims.

“But the FTC insisted on more: Axon must not only divest all acquired assets plus improvements, but also agree to grant whomever buys those assets a license to all of Axon’s (body-worn cameras) and (digital evidence management systems) intellectual property and technology.”

Smith said he believes FTC’s demands “crossed a moral and ethical line.”

“That’s when our advisers said, ‘This is crazy. We’ve never heard anything like this,’” Smith said.

The company instead sued in federal court rather than be sued in an administrative court, Smith said.

If Axon had sold off VieVu as part of the company’s original proposed settlement, the NYPD could decide if it wanted to continue services with Axon or a new company, Smith said.

He added that Axon had proposed the settlement to avoid the stress of a lawsuit. Smith also said his company is suing the FTC because they believe a judge would be an impartial decider.

If the FTC takes Axon through the administrative process, the Scottsdale company could appeal a decision in federal court. However, no new evidence is allowed in federal court, which makes it hard for a judge to overturn a negative ruling, the lawsuit argues.

Axon: ‘Make the bullet obsolete’

Axon and VieVu have clashed in the past.

In 2017, the companies had a legal battle over the contract with Phoenix. VieVu claimed in court documents that Axon had interfered in VieVu’s bidding, while Axon claimed in a separate lawsuit that VieVu falsely advertised its cameras’ functions.

Axon eventually won that fight. The company, which originally found success in making and selling Taser devices, has shaped police work and how police departments collect and store video evidence.

Taser devices, which deliver an electric shock, have received criticism for causing the deaths of people police come in contact with. Axon still has a stronghold on that market.

As the largest body camera provider in the country, Axon’s technology has also captured some of the most high-profile police shootings nationwide.

According to an August 2018 article in the New Yorker, Smith said that his mission is “to make the bullet obsolete.” Specifically, by providing officers tools such as a Taser device, that could serve as a less-lethal alternative to firearms.

“Today, would you keep a sword by your bed?” the article quotes Smith as saying. “No! It’s ridiculous. But firing hot projectiles of lead shrapnel at people — we want to make that a ridiculous concept, because it’s a brutal, outdated, terrible thing to do.”