Aftermarket

ArvinMeritor Prevails in Eaton Antitrust Suit

October 08, 2009

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A U.S. District Court jury has ruled in favor of ZF Meritor and Meritor Transmission Corp. in the companies' antitrust lawsuit against Eaton Corp.
The court concluded that Eaton engaged in exclusionary and anticompetitive conduct in the sale and marketing for heavy-duty truck transmissions.

The case will continue on to the damages phase through a separate trial. According to Bloomberg News, Meritor will claim more than $800 million in damages.

Three years ago, ZF Meritor and Meritor Transmission Corp. filed an antitrust lawsuit against Eaton, accusing its competitor of engaging in anticompetitive conduct.

The lawsuit alleged that Eaton offered truck manufacturers "lucrative rebates and share penetration incentives" in an attempt to divert purchasers of ZF Meritor transmissions to Eaton transmissions. It also claimed that Eaton threatened one or more OEMs with price retaliation if they purchased ZF Meritor transmissions and that it required truck manufacturers to exclude ZF Meritor transmissions from their sale materials and/or penalize customers with higher prices or other punitive measures if they specified ZF Meritor transmissions.

The end result, according to the lawsuit, was to harm competition in the markets by "limiting consumer choice, eliminating competitive checks in pricing and suppressing innovation."

ZF Meritor is a joint venture of ArvinMeritor and ZF Friedrichshafen AG formed in 1999. Although ZF Meritor still exists as a legal entity, ArvinMeritor said it was been forced to stop selling transmissions because of Eaton's actions.

"We are elated that the jury recognized Eaton's wrongful conduct in violation of antitrust laws that harmed competition in the markets for heavy-duty truck transmissions, forced us to exit the NAFTA line-haul transmission business and led to the demise of our joint venture with ZF Industries," said Chip McClure, ArvinMeritor's chairman, CEO and president. "Due to the exclusionary tactics employed by our competitor, we believe our products became difficult and ultimately impossible for our customers to choose as alternatives to Eaton's offerings."

In response to the verdict, Eaton said it was "disappointed with the decision in U.S. District Court today," and is considering its options for an appeal. The company also stressed that the court has made no ruling on the allowable damages at this point.

This is the latest in a long string of legal battles between the two companies. A year ago, ZF and Meritor won a victory in their long-simmering patent battle. That goes back to 1997 when Eaton filed suit against ArvinMeritor's predecessor, Rockwell International, charging that its Synchro Shift (ESS) transmission -- offered prior to ZF Meritor's FreedomLine system -- infringed on Eaton patents. To learn more, see "ZF, Meritor Prevail in Patent Lawsuit," 10/20/2008.

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