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Bandag Lawsuit Charges Michelin With Illegal Attempts to Destroy Competition

17 September 1999

Bandag Lawsuit Charges Michelin With Illegal Attempts to Destroy Competition

    MUSCATINE, Iowa, Sept. 16 -- Bandag, Incorporated
, filed a lawsuit today against Michelin Retread Technologies,
Inc., and Michelin North America, Inc., subsidiaries of one of the world's
largest tire manufacturers, charging them with trying to destroy Bandag as a
competitive force, in violation of federal law.  According to the suit,
Michelin has attempted to eliminate Bandag as a competitor in the U.S. retread
tire market for the commercial trucking industry by undermining Bandag's
dealer network, misappropriating trade secrets, spreading false rumors about
Bandag and engaging in predatory pricing.
    "We believe Michelin's goal is to control the truck retread tire market
and then shift the product mix from retreads to costlier new replacement
tires," said Martin G. Carver, chief executive officer of Bandag.  "This would
eliminate significant competition, ultimately raise prices and decrease
consumer choices.
    "Despite the fact that the defendants are subsidiaries of a company over
10 times larger than Bandag, we aren't going to be intimidated by their size.
The simple fact that Michelin has resorted to such tactics dramatically
underscores the strength of our business strategy and the quality of our
products," Mr. Carver added.
    Retread tires are manufactured by applying a new tread to a previously
used tire casing.  When the original equipment tires wear out, they can be
retreaded at a substantial cost savings compared to new replacement tires.
Forty years ago, Bandag pioneered the U.S. retread tire market as it is known
today, and now has a dealer network of more than 400 franchised locations
throughout the United States.  Michelin only recently entered the U.S. retread
market through its subsidiary, Michelin Retread Technologies, Inc.
    The suit, filed in the U.S. District Court for the Southern District of
Iowa, alleges six basic methods used by Michelin in its campaign against
Bandag:
    -- Raiding Bandag's distribution network by inducing and coercing Bandag
       franchisees to change over to Michelin's retreading system
    -- Improperly coercing Bandag franchisees to not renew their Bandag
       franchises
    -- Misappropriating Bandag's confidential, proprietary and trade secret
       information
    -- Making false and derogatory statements about Bandag and false,
       unsupported claims about its own products
    -- Pricing products below cost and in a predatory manner at major fleet
       accounts and dealers
    -- Leveraging its market power in new truck tires to coerce and force
       dealers to convert to Michelin retread tires.

    The suit charges that Michelin induced seven major dealers to breach or
not renew their agreements with Bandag and convert to Michelin, and that key
Bandag franchisees have been pressured to discontinue their relationships with
Bandag.  In some cases, the suit alleges, inducements worth millions of
dollars were offered to Bandag franchisees.
    The suit also alleges that Michelin wrongfully obtained confidential,
proprietary and trade secret information from Bandag, using it to create and
refine the Michelin retread prototype and system.
    Bandag is seeking actual and punitive damages and injunctive relief from:
    -- Soliciting Bandag franchisees to breach their Bandag franchise
       agreements or inducing them not to renew their agreements
    -- Retaining, using or acquiring any of Bandag's proprietary, confidential
       or trade secret information
    -- Engaging in false or deceptive advertising and making false statements
       to Bandag's customers and franchisees
    -- Otherwise engaging in predatory conduct and unfair competition.

    Coincidentally, the suit also notes that a European Commission law
enforcement procedure has commenced, charging that Michelin abused its
dominant truck tire replacement market position in France.   Michelin North
America, Inc. and Michelin Retread Technologies, Inc., both based in South
Carolina, are wholly owned subsidiaries of Compagnie Generale des
Etablissements Michelin, a French company with global distribution.
    Bandag, Incorporated manufactures retreading materials and equipment for
its worldwide network of nearly 1,300 franchised dealerships that produce and
market retread tires and provide tire management services.  Bandag's wholly
owned subsidiary, Tire Management Solutions, Inc. (TMS) provides tire
management systems outsourcing for commercial truck fleets.  Tire Distribution
Systems, Inc. (TDS), also a wholly owned subsidiary, sells and services new
and retread tires.