Editor´s note: The following article has been updated to include developments since the Feb. 12, 2000 issue of Tire Business went to press.
GREENVILLE, S.C. (Feb. 9, 2001) — In yet another twist to the battle for retreading dominance in the U.S., Michelin North America Inc. is suing Bridgestone/Firestone Inc. for allegedly conspiring with Bandag Inc. to prevent retreaders from adopting Michelin´s retreading system.
The latest complaint—an amendment to a pending 1999 antitrust lawsuit Michelin filed against Bandag—claims Bridgestone/Firestone and Bandag formed an unlawful agreement "to ensure that Michelin does not become a significant competitor in retread tire systems and the fleet market."
Michelin and its subsidiary, Michelin Retread Technologies Inc. (MRTI), added BFS to their Bandag suit Jan. 23 in U.S. District Court for the Southern District of Iowa, Davenport Division.
"Because of Bridgestone/Firestone and Bandag´s action, commercial truck tire retreaders continue to be denied freedom of choice in selecting retreading systems and the benefits of competition," said John Rice, chief operating officer for Michelin Americas Truck Tires, in a prepared statement.
Greenville-based Michelin claims Bandag and BFS conspired to deny MRTI access to key truck tire dealers by inducing those dealers to reject the MRTI system. The lawsuit states that the results of this "conspiracy" include:
* Raising Michelin´s and other competitors´ costs of market entry;
* Erecting artificial barriers to affect Michelin´s entry;
* Reducing Michelin´s output in relevant markets;
* Keeping Michelin´s products and services out of those markets;
* Preventing, delaying and denying Michelin´s access to nationwide distribution channels and/or key commercial tire dealers; and
* Preventing or delaying Michelin´s growth opportunities and ability to achieve minimum thresholds of productivity and sales.
Furthermore, Michelin charges that because the companies´ actions are not subject to any formal business agreement or joint venture, BFS and Bandag have violated the federal Sherman Act.
On Feb. 2, Michelin filed a 70-page brief requesting a preliminary injunction against Bridgestone/Firestone and Bandag that would block the two firms from continuing their "conspiracy" until the case goes to trial, said Michael Fanning, Michelin vice president of public relations and government affairs.
The brief—currently under seal—"lays out in detail all the evidence that supports our allegations that BFS and Bandag are conspiring to delay our progress in the market," Mr. Fanning said.
When asked how BFS and Bandag have stunted Michelin´s growth in the retread market, Mr. Fanning replied that "they offered dealers illegal incentives to retain the Bandag system, and.... We can´t discuss the specifics."
However, in Michelin´s expedited hearing request—a portion of the brief not under seal—the tire maker asks the court to enjoin BFS and Bandag "Taking any further action by agreement, concerted action, coordination, joint undertaking or mutual understanding that precludes competitor (Michelin/MRTI) access to retread dealers and retread customers" including the following alleged activities:
*Conditioning...any grant, availability of funds, franchise rights or anything else of value to any tire dealer based upon that dealer´s agreement not to deal with, license or become a franchisee of Michelin´s retread system;
*Enforcing any exclusivity provision or clause in any contract between Bandag and any dealer or between Bridgestone and any dealer that would forbid or discourage a dealer from adopting, licensing or becoming a franchisee of Michelin´s system. Specifically, this refers to enforcing any radius of miles or geographic territories in which a dealer may not deal with, adopt, license or become a franchisee of a competing precure or mold-cure system;
*Communicating with each other about trucking fleets, retread system competitors, tire dealers, retread prices, retread products, research and development, retread tire manufacturing processes and retread tire distribution;
*Selling, assigning, leasing or otherwise transferring any assets to each other, including intellectual property, know-how, fixed asset, contract, trademark, and/or wholly owned tire dealership or other distribution asset;
*Forming any joint venture, alliance, merger, joint undertaking, joint marketing or joint distribution agreement or any combination of the assets, stocks, business interests or pursuits of or between Bandag and BFS that relate to retreading; and
*Coordinating the investment of resources into distribution channels, including but not limited to truck tire dealer facilities, equipment for manufacturing, marketing or distributing retread tires, marketing and advertising, and financial assistance to dealers.
The hearing notice also asks the court to force BFS and Bandag to separately identify every tire dealer to whom alleged inducements were offered, or to whom threats of franchise termination were made in return for that dealer´s agreement not to deal with competitors´ retread systems. In that same paragraph, White Tire Distributors Inc., Bob Sumerel Tire Co. and Valley Tire Co. Inc. are listed as some dealerships whose franchise agreements with Bandag are a "direct result of the anticompetitive and concerted action between Bridgestone and Bandag."
A hearing has been set for April 16 to rule on the injunction.
BFS said it saw "no basis whatsoever" for Michelin´s claims.
"Our marketing activities and relationships with dealers have been appropriate and lawful," the company responded in a prepared statement. "Michelin, Bandag and Bridgestone/Firestone all compete in the highly competitive retread market, and that is the appropriate forum for this dispute—the marketplace, not the courts."
A Bandag spokesman said the company does not comment on pending litigation.
In September 1999, Bandag filed a lawsuit against Michelin and MRTI in the Davenport federal court alleging that Michelin tried to eliminate Bandag as a competitor and usurp Bandag´s dealer network.
Two months later, Michelin and MRTI filed a countersuit, charging Bandag with locking 50 to 60 percent of all commercial dealers into long-term, exclusionary franchise agreements which maintain Bandag´s monopoly on the retread industry.
The case has been in discovery since then. Michelin´s attorneys uncovered evidence of a secret partnership between Bandag and BFS which they found in the companies´ documents and from depositions of both Michelin and Bandag retreaders, according to a Michelin attorney who asked not to be named.
Prior to the recent filing that added BFS as a defendant, the case was scheduled for trial in January 2002, the Michelin attorney said.
Michelin entered the retread market in 1997 and sought franchisees who would offer its MRTI system to national, regional and local fleets. The technology offers dealers both precure and mold-cure processes.
MRTI has 40 North American retreaders under its banner. Bandag reported 429 retread franchisees and company-owned plants at year-end 2000—down from 549 it reported in 1997—according to Tire Business´ market data.
Bridgestone/Firestone operates a company-owned retreading facility called the Oncor Tread Renewal System in Hazelwood, Mo., and 11 company-owned GCR Truck Tire Centers that use the Bandag process—four in the U.S. and seven in Canada.
Fourteen GCR centers use the retreading process developed by Oliver Rubber Co., now a unit of Cooper Tire & Rubber Co.
A BFS spokeswoman said the company has a "handful of standard franchise agreements with Bandag" covering its four U.S. Bandag plants.
"It´s certainly nothing that could be seen as affecting a competitor´s rights," she said.