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VW must face auto parts supplier Prevent's $750 million antitrust lawsuit, US judge says

May 20, 2023

The logo of carmaker Volkswagen Commercial Vehicles is pictured at the IAA Transportation fair, which will open its doors to the public on September 20, 2022, in Hanover, Germany, September 19, 2022. REUTERS/Fabian Bimmer

Aug 4 (Reuters) - Volkswagen must face a $750 million lawsuit from automotive parts supplier Prevent USA that accuses the German vehicle maker of abusive business practices in violation of U.S. antitrust law, a federal judge ruled on Thursday.

Chief U.S. District Judge Rodney Gilstrap in Marshall, Texas, denied Volkswagen's effort to dismiss the lawsuit, in an order upholding a report from a magistrate judge who had recommended in June that the case against the automaker move forward.

Gilstrap's order, a setback for Volkswagen, will prolong a dispute that has unfolded in the U.S. and Germany for more than seven years.

Prevent twice lost in related, earlier U.S. federal court litigation in Michigan. The case in Texas also comes after "failing numerous times" in German proceedings, a spokesperson for Volkswagen Group said in a statement on Friday. The statement said the Texas litigation was "abusive" and did not belong in a U.S. court.

A representative for Prevent and a lawyer representing the company did not immediately respond to requests for comment.

At its heart, Europe-based Prevent and its U.S. affiliate contend Volkswagen has taken steps to block them from acquiring other parts companies, allowing the automaker to maintain its power over its suppliers.

Prevent has alleged Volkswagen, as a major parts buyer, can use its "power to force its suppliers to do something they would not do in a competitive market."

Volkswagen has disputed Prevent's allegations and has asked the Texas court to dismiss the lawsuit.

Volkswagen's attorneys argued in a filing that prior rulings in the related litigation in Michigan should bar Prevent from further pressing its claims. They also said that Germany was the proper forum for the case because the allegations involved foreign companies and foreign conduct.

U.S. Magistrate Judge Roy Payne rejected Volkswagen's assertions.

"Volkswagen's argument appears to ignore the allegations in the complaint. Here, Prevent USA's antitrust claims do involve foreign conduct, but multiple allegations concern parties, conduct, and harm in the United States," Payne wrote.

A trial in the case is not expected until late next year.

The case is Prevent U.S.A. Corp v Volkswagen AG et al, U.S. District Court, Eastern District of Texas, No. 2:22-cv-00506-JRG-RSP.

For Prevent: Samuel Baxter of McKool Smith

For VW: Sharon Nelles of Sullivan & Cromwell

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