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Inside Axon’s spaceship-themed Seattle office. (GeekWire Photo)

Editor’s note: Story updated with FTC comment at 3 p.m. PT

Axon is taking on the U.S. Federal Trade Commission, alleging in a new lawsuit the regulator is operating an unconstitutional acquisition review process.

The FTC has been investigating Axon’s 2018 acquisition of rival body camera maker Vievu for possible anti-competitive concerns. The FTC in late December gave an “unprecedented ultimatum” requiring Axon to divest the Vievu assets and also hand over its own intellectual property as part of a “blank check” to build up a “clone” competitor armed with Axon’s technology, according to the suit.

“The FTC is seeking to deprive Axon of its intellectual property without Due Process, an unprecedented ultimatum that sends a chilling message to the nation’s technology-based industries,” according to the lawsuit.

If Axon didn’t comply with the so-called “blank check” order, the company said it would “face an unconstitutional proceeding in which the FTC serves the simultaneous roles of prosecutor, judge and jury.” Axon is suing because it wants to move the dispute into a more public forum.

“No one should ever face the prospect of a government that can demand to seize your most precious assets without the ability to defend yourself in a fair and impartial court of law,” Axon CEO Rick Smith said in a statement. “If the FTC believes it has a strong case against us, it should prove it in federal court before a neutral judge. Our action today seeks to ensure that will happen.”

The FTC declined to comment. Update: The FTC issued a press release later on Friday, outlining its administrative complaint against Axon. An administrative trial is scheduled to begin on May 19.

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

In a press release about the lawsuit, filed in U.S. District Court in Arizona, Axon called Vievu “a failing company, with a mountain of debt and only 3 days of cash.” Axon said it acquired Vievu for “$7 million in cash and stock plus up to $6 million in potential earn-outs along with a holster supply agreement.”

Vievu originally launched in Seattle and was acquired by Safariland in 2015. Former Axon employee and Seattle Police Department veteran Steve Ward founded Vievu in 2007 and was later sued by Axon over trade secrets.

In the lawsuit against the FTC, Axon said it bought the company primarily to take over a multi-year deal with the New York Police Department that Vievu could not fulfill.

The acquisition, Axon argues, has not hurt competition in the body camera and law enforcement technology markets. Axon says 10 competitors have won deals from at least 55 different agencies since the Vievu acquisition.

Axon is headquartered in Scottsdale, Ariz., but it has a big office in Seattle that it expanded by another 12,000 square feet two years ago. In the lawsuit, Axon said it has spent more than $200 million over the last 10 years developing its technology.

Axon v. FTC by Nat Levy on Scribd

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