GREENVILLE, S.C.—Michelin North America Inc. and its Michelin Retread Technologies Inc. unit have answered a Bandag Inc. lawsuit with guns blazing. Both companies filed a counter suit on Nov. 17 in response to litigation filed by Bandag on Sept. 19 in the U.S. District Court for Southern Iowa, Davenport Division.
In its suit, Bandag alleged Michelin tried to "injure and cripple" Bandag, usurp its dealer network and "eliminate Bandag as a competitor." But Michelin has rejected that claim, calling Bandag a "monopolist" that "has illegally maintained its market dominance for over 20 years."
Michelin maintained in its counter suit that 50 to 60 percent of all commercial truck tire retreaders are Bandag franchisees locked into "long-term, exclusionary franchise agreements," while Michelin has less than 10 percent of the country's commercial retreaders under franchise agreements.
The Greenville, S.C.-based tire maker also accused Bandag of violating the federal Sherman, Clayton and Lanham Acts and said it seeks unspecified damages "to recover for Bandag's violations of the federal antitrust and unfair competition laws."
Specifically, Michelin charged that Bandag:
Used restrictive long-term franchise agreements that prohibited franchisees from using retread processes other than Bandag's;
Purchased commercial truck tire dealerships to prevent them from switching to Michelin's retread system;
Offered financial incentives to discourage dealerships from converting to the Michelin Retread Technologies Inc. (MRTI) system;
Violated a federal court injunction ordering Bandag not to illegally restrict competition from other mold-cure retreading systems;
Threatened and commenced legal action against truck tire dealers who desired to or actually left the Bandag system; and
Made false and/or misleading statements about Michelin's products, processes and commitment to retreading.
Michelin's countersuit claims that prior to 1998, Bandag's franchise agreement prohibited retreaders from manufacturing or selling another company's pre-cure products but allowed franchisees to make or sell mold-cure retread products.
After certain dealers became interested in Michelin's Custom-Mold system, Michelin charged, Bandag expanded "the scope of the exclusivity provision to bar its franchises from using mold cure technology"—specifically, Michelin's.
Michelin also condemned Ban-dag's "all or nothing" provision prohibiting a franchisee from offering any other retread system at any of a dealership's multiple locations. Franchisees must either maintain the Bandag system at all sites, Michelin said, or it can't be offered at any location. That creates a "whipsaw effect" that ties a dealer to Bandag by signing specific locations to a five-year franchise term with different starting dates for each site, the suit alleged.
Because of the "all or nothing" clause, the practical effect of this policy, Michelin said, precludes a franchisee from switching to another retread system or selling other retread tires without violating Bandag's agreement.
Michelin also charged the Muscatine, Iowa-based retreading equipment supplier with violating an injunction issued in 1979 by the U.S. District Court for the District of Maryland. Michelin said the "best efforts" clause of Bandag's agreement—which prohibits a franchisee from promoting another retread system—was struck down by the court in a lawsuit filed by AMF Inc.
Bandag is allegedly in violation of this injunction, Michelin said, because it continues to prohibit its franchisees from promoting and offering other retreading systems.
Michelin's suit alleges that when five commercial truck tire dealerships—Universal Tire Inc., Southern Tire Mart Inc., J.W. Brewer Tire Co., Joe Esco Tire Inc. and Sound Tire Inc.—considered selecting Michelin's retreading system, Bandag bought the dealerships and converted them to company stores.
"Commercial truck tire retreaders have been denied freedom of choice," Michelin said. "Trucking fleets have been denied the benefits of competition.|.|.|including the benefits of retread tire innovations."
Michelin asked the court to immediately dismiss most of Bandag's claims in its original lawsuit and has denied the remaining claims.
A spokesman for Bandag told Tire Business the company's policy is not to comment on issues in litigation.