ZF Meritor files antitrust suit against Eaton

ZF Meritor – a joint venture of ArvinMeritor and ZF Friedrichshafen – has filed a federal antitrust lawsuit in Delaware charging that Eaton Corp. is engaging in anticompetitive conduct in the markets for heavy-duty truck transmissions. Meritor Transmission Corp., an ArvinMeritor company, also is a party to the lawsuit.

In 1999, ZF and Meritor formed the joint venture in an effort to build on the 16 percent market share in heavy-duty transmissions Meritor still held at the time. In August of that year, ZF Meritor struck a deal with Freightliner to be the standard position in the databook on certain major Class 8 models. And in November 1999, ZF Meritor introduced a two-pedal automated manual transmission, the FreedomLine, which the company saw as important in a strategy to chip away at Eaton’s dominance.

ZF Meritor charges in its complaint that after the joint venture was formed in 1999, Eaton responded with “a series of exclusionary actions designed to reduce consumer access to ZF Meritor transmissions.” Eaton’s most significant action, ZF Meritor alleges, was to use its dominant position “to induce all heavy-duty truck manufacturers to enter into de factor exclusive dealing contracts,” foreclosing 90 percent of heavy-duty transmission sales.

For example, ZF Meritor charges that Eaton dislodged its supply agreement with Freightliner in late 2000 by guaranteeing “millions in annual rebates and other incentives” if Freightliner purchased 92 percent of its linehaul and vocational transmissions from Eaton. And Eaton demanded that it receive standard position on the models that previously had ZF Meritor as standard.

ZF Meritor’s share at Freightliner and Sterling was about 23 percent and 17 percent, respectively, in the fourth quarter of 2000. In the fourth quarter of 2005, those shares were 4 percent and 3 percent.

The complaint alleges that Eaton took action with respect to the other Class 8 truck makers to exclude ZF Meritor transmissions.

ArvinMeritor announced recently that it would stop supplying manual transmissions to the heavy-duty market and focus on the FreedomLine in the ZF Meritor joint venture. In its press announcement Thursday, Oct. 5, ArvinMeritor charged that “Eaton’s conduct forced ZF Meritor, though still a legal entity today, to cease operations.

“In a market without competition, innovation languishes, choice evaporates and prices increase,” said ArvinMeritor Chairman and Chief Executive Officer Chip McClure.

In response to the news of the lawsuit, Eaton issued a statement that it “has competed in a fair and vigorous manner in heavy-duty truck transmissions. Our customers chose to purchase transmissions from Eaton because we provided superior value, innovation and service.” The statement continues that Eaton “will not be in a position to consider commenting further until we have read the lawsuit. We expect to vigorously defend our position.”