A Georgia tire dealer is suing Cheng Shin Rubber USA Inc. for alleged price discrimination, breach of contract and fraud.
Cheng Shin does business in North America through its Maxxis International unit in Suwanne, Ga.
Joey Roland, owner of Jasper-based Discount Tire and Parts Inc., claims that Cheng Shin promised him that his dealership would become the sole distributor of Maxxis tires in northern Georgia. But then the tire maker signed a contract awarding exclusive distribution rights in that area to Doraville, Ga.-based Tri-State Tire Co.
Mr. Roland also alleges Cheng Shin violated the Clayton Antitrust Act-which is known as the Robinson-Patman Act-by discounting prices to Tri-State Tire and other large distributors without offering the same price breaks to Discount Tire.
The dealer's lawsuit was filed Jan. 29 in the Superior Court of Fulton County, Ga. Cheng Shin declined to comment on the allegations, saying it does not comment on pending litigation, according to attorney Allen Groves of Atlanta-based Seyfarth and Shaw.
The lawsuit states that on Feb. 6, 2001, two Cheng Shin sales agents, Brad Williams and Greg Rauth, visited Discount Tire's office and solicited the dealership to become a distributor of Maxxis tires. Relying on promises made by Cheng Shin that Discount Tire would receive exclusive territorial rights to all Georgia counties north of Pickens County, Mr. Roland said he went ahead and purchased a container load of Maxxis tires, then hired a salesman and purchased office equipment to begin a wholesale operation.
His dealership, consisting of one location in Jasper, was involved only in the retail and commercial tire business at the time.
Mr. Roland said Cheng Shin told him that a container of tires would take 65 days to arrive from China. In the meantime, the tire company would draw up a written contract and protect Discount Tire's distribution area, Mr. Roland claimed. At the end of the year, Cheng Shin would evaluate how many tires Discount Tire sold and establish a quota.
But Cheng Shin allegedly had signed a contract that gave exclusive distributorship of the area promised to Discount Tire over to Tri-State, according to the lawsuit, although the company continued to assure Mr. Roland through October that Discount Tire would get that same territory. Mr. Roland claimed he learned of this agreement when a customer said Tri-State was the only legal entity that could sell him Maxxis tires.
The suit further alleges that when Mr. Roland learned of this agreement, he confronted Mr. Rauth, who supposedly advised him ``that no company in Georgia had a written contract'' and that Cheng Shin was preparing the written contract that would solidify the two companies' oral agreement. As a result, Discount Tire relied upon these alleged misrepresentations and purchased additional quantities of Maxxis tires.
Discount Tire finally was informed by Cheng Shin that the dealership would receive exclusive rights only to Pickens County. However, Mr. Roland told Tire Business that Cheng Shin then raised prices on his tires by 5 percent because he ``was in the way'' of Cheng Shin's agreement with Tri-State and other distributors.
The lawsuit also contends that Cheng Shin discounted prices to Tri-State and other large distributors, intending ``to injure'' Discount Tire and lessen competition.
Mr. Roland said he believes price discrepancies are rampant throughout the tire industry, but he feels he needs to stand up for his business and other dealers facing pricing pressure.
``I'm not just doing this for me,'' he said. ``It's something that needs to be done for the tire industry, so that (small dealers) can make a profit on tires.''
He noted that he sold the first container of Maxxis tires successfully and ordered two more in November. Discount Tire also is now wholesaling Aurora tires made by Hankook Tire America Corp.
The dealership is seeking $5 million in punitive damages, actual damages to be decided by the court and attorney's fees.
Mr. Roland founded his company in 1983 at the age of 18. It employs 11 and posted $1.4 million in sales in 2001. Of that total, $200,000 came from the company's wholesale operation.