Bandag Inc. and Michelin Retread Technologies Inc., as part of the recent settlement of their unfair trade practices lawsuits, have agreed to drop non-compete obligations for their franchisees and to allow franchisees more flexibility in handling the competitors' retread products during normal fleet service procedures.
Bandag and Michelin are sending identically worded letters to all affected parties, according to a copy of the letter posted by Bandag on the U.S. Securities and Exchange Commission Web site.
The provisions outlined in the letter are valid until May 21, 2014, and apply to U.S. franchises. A key provision of the agreement allows either company's franchisees more flexibility in determining their franchise expiration dates.
The letter states franchisees with multiple locations will be able to unify the expiration dates of their various franchise agreements to the date any of the agreements are set to expire. In cases where expiration dates are more than three years hence, the agreement allows franchisees to exercise an option to terminate their agreement(s) on or about May 21, 2005.
Additionally, in future cases where a retreader chooses to switch suppliers, the franchiser (Bandag or Michelin) will allow the franchisee ``a reasonable transition period of not less than 90 days and not more than 180 days'' to switch a location from one system to another.
Regarding handling each others' products, the letter spells out that services covered include:
* Mounting and dismounting products;
* Removal/installation of tire wheel assemblies;
* Balancing, air pressure maintenance, rotation, fleet inspections;
* Repairs that do not require the tire to go through the retread process;
* Emergency road service;
* Wheel refurbishing/inspection; and
* Vehicle alignment.
Bandag and Michelin agreed to settle their suits and countersuits May 21 after three years of legal wrangling and nearly seven days of trial in U.S. District Court in Des Moines, Iowa. The parties agreed to dismiss all financial claims against each other.
Through the first quarter of this year, Bandag had spent more than $22 million on dealing with the suits and had estimated prior to the trial starting that it would spend $7 million to $9 million more this year. Bandag had sought to recover $8.75 million plus punitive damages, while Michelin sought damages of $146.2 million from Bandag and Bridgestone/Firestone, which was a co-defendant in the lawsuit.