Volkswagen Accused of Anticompetitive Campaign by Supplier

(Bloomberg) -- Volkswagen AG allegedly waged a campaign to “demolish” a Bosnian parts supplier by conspiring to freeze it out of the market and denigrate it in the press, according to a U.S. lawsuit.

Prevent Group claims in the lawsuit it was targeted by VW after a 2016 dispute tied to canceled orders for seat covers and transmission cases that forced the carmaker to temporarily close plants making Golf and Passat cars and layoff workers.

Top VW officials, including Ralf Brandstätter, head of its main car group, launched a conspiracy, code-named “Project 1,” to drive Prevent Group out of business, according to the suit. The aim was to send a “warning to other suppliers about what will happen if they stand up to Volkswagen’s anticompetitive terms and prices,” the Bosnian company said in the 56-page complaint, filed Monday in federal court in Detroit.

Christian Minkley, a VW manager working on the project leaked taped conversations to the press about how to direct the company’s car-seat contracts to another supplier, according to Prevent Group. In August, Minkley was found dead in his car. German authorities are still investigating his death. VW also asked prosecutors to investigate the leak of the tapes.

VW officials dismissed the suit as part of a failing legal effort to coerce the carmaker, based in Wolfsburg, Germany, into acknowledging Prevent’s complaints. They said on Monday that the case was “meritless.”

“We believe this new lawsuit is just the latest in a series of pressure tactics in a yearsold dispute that follows extensive litigation in Germany, where Prevent Group has repeatedly lost in court,” VW said in an emailed statement.

Plants Closed

Europe’s largest automaker was forced to temporarily halt output at six factories in 2016, affecting almost 28,000 workers, after two German subsidiaries of closely held Prevent Group withheld parts deliveries as part of its VW dispute. The companies reportedly settled the same year.

Public dust-ups over price negotiations and orders are extremely rare in the auto industry, which relies on smooth cooperation between vehicle manufacturers and suppliers to safeguard fine-tuned assembly processes.

Prevent Group is led by the family of businessman Nijaz Hastor, who spent decades expanding the group’s activities across the auto industry. After Hastor’s sons took over operations, the conglomerate adopted a more aggressive business style, which included making an ultimately unsuccessful hostile takeover bid for German seat maker Grammer AG.

Prevent Group officials claim VW’s retaliation campaign included efforts to interfere with acquisitions, hiring private investigators to spy on the Bosnian company’s executives and manufacturing negative press” about the supplier.

VW’s main effort was to persuade other parts suppliers, such as Adient Plc and Lear Corp., to refuse to use Prevent Group’s parts to satisfy other carmakers’ orders in return for getting all of the German company’s car-seat cover business, according to the suit. Those companies control 77% of the market for such covers, Prevent said.

“The effect of this tortious and anticompetitive campaign was felt immediately,” Prevent said in the complaint. “Until 2018, plaintiff had received approximately $360 million in seat cover revenue from Adient and Lear. In 2018, following the unlawful agreements with Volkswagen, that revenue virtually disappeared.”

Lear doesn’t generally comment on matters in litigation, said Katya Pruett, a Lear spokesperson, but the company will “continue to uphold high standards of ethical behavior in the conduct of our business in compliance with all applicable laws and requirements.”

Mary Kay Dodero, a U.S.-based spokeswoman for Adient, didn’t immediately return calls and emails for comment made after regular business hours on Monday.

The case is Prevent Dev GMBH v. Adient Plc, 20-cv-13137, U.S. District Court for the Eastern District of Michigan (Detroit).

©2020 Bloomberg L.P.