VW Facing Court Battle Accused of Squeezing Suppliers

Paul Myles

TU-Editor

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19th November 2019

Volkswagen is facing an antitrust lawsuit claiming small suppliers are being squeezed on pricing brought by a family of US automotive supply companies.

The Prevent Group has filed the suit against Volkswagen AG and Volkswagen Group of America, Inc. alleging violations of federal antitrust laws, civil conspiracy, and tortious interference. It claims the automaker “used anticompetitive tactics to stop larger suppliers like Prevent from acquiring smaller auto parts suppliers in the US, including at least seven based in Michigan”.

Prevent suggest that small suppliers have been driven to the brink of bankruptcy by VW’s demand that they “comply or die” on unfair terms and supplied product pricing. The outfit claims that the automaker wanted to prevent small companies joining Prevent fearing they would then have the power to resist VW’s ability to extract prices and terms that were below competitive levels.

The family of suppliers highlights the case of it acquiring a company called Car Trim that had been a supplier of parts for Volkswagen vehicles. In response, the automaker launched an anticompetitive campaign internally called “Project 1” to stop any acquisitions of smaller, “high dependency” suppliers. Prevent alleges VW tracked these suppliers on a secretive “Problematic Suppliers List,” monitored potential M&A activity and then intervened to stop any sales that it deemed threatening to its market power.

The complaint alleges that these efforts escalated in the wake of Volkswagen’s agreement to pay $15.5Bn to settle public and private lawsuits resulting from its “Dieselgate” scandal. Prevent claims it was a direct target of this anticompetitive campaign following 15 years of acquiring smaller, Tier 2 and Tier 3 auto parts suppliers around the world, increasing their efficiency and output.

Prevent claims it has lost out to the tune of $750M in potential profits from the successful acquisition of target suppliers headquartered in the US thanks to the automaker’s tactics. Duane L. Loft, a partner at Boies Schiller Flexner representing Prevent, said: “This lawsuit painstakingly lays out the existence of a scheme by Volkswagen to maintain its stranglehold over automotive component parts suppliers, to stop acquisitions that would have been good for competition, and to harm consumers of automobiles. We look forward to justice being done and for Volkswagen to answer for its misconduct in open court.”

— Paul Myles is a seasoned automotive journalist based in London. Follow him on Twitter @Paulmyles_