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LeMond Dealers Unfazed by Trek Lawsuit

Published May 2, 2008

WATERLOO, WI (BRAIN)—Trek retailers expressed sadness but little surprise that Trek plans to sever its 13-year relationship with Greg LeMond.

“A lot of the comments that LeMond made about Armstrong left a sour taste in people’s mouths, so I’m not surprised that they parted ways,” said Mike Nix, owner of Liberty Bicycles in Asheville, North Carolina. “It’s just sad because he’s such a great rider, he was the first American winner, and what he did was incredible.”

Trek last month asked a federal court to release it from its agreement to license the name of three-time Tour de France winner Greg LeMond for road bikes.

Its suit cites breaches of contract including LeMond’s inconsistent behavior, unauthorized sales of bicycles, and public criticisms of Trek-endorsed athlete Lance Armstrong and other prominent cyclists.

“For years, Trek has tried our best to make this relationship work. And for years, Greg LeMond has done and said things that have damaged the LeMond brand and the Trek brand as a whole,” said John Burke, president of Trek Bicycle Corporation. “After years of trying to make it work, we are done. It’s time to sever this relationship.”

Trek licensed the LeMond brand name in 1995 and began producing road bicycles under the LeMond Racing Cycles name.

Since then, Trek has paid LeMond more than $5 million and has invested millions more to design, manufacture and market LeMond bicycles.

The licensing agreement was scheduled to expire in 2010.

Burke met with LeMond last fall to notify him that Trek would meet its contractual obligation but would not extend the relationship beyond that time.

LeMond in March served Trek with a suit that alleges Trek breached the contract by devoting insufficient attention to the brand in recent years.

Burke characterized LeMond’s suit as containing false and irresponsible allegations that “forced us to immediately end our relationship with Greg.”

Brand Building

Burke said in the early years, the future of the LeMond brand looked bright. By 1999, Trek had grown sales of LeMond bikes to $9.5 million.

Issues then began to surface that led to the rift today.

In 2000, LeMond launched an accessories brand sold through mass merchants that Burke said devalued the brand in the specialty channel.

The following year, he began to publicly raise questions about Armstrong’s affiliations.

Burke said the brand’s current annual sales are about $15 million and that it sells about 12,000 LeMond bikes each year.

He said LeMond sales remained flat in recent years while other brands enjoyed substantial increases due to the dramatic growth of the road bike market, which Armstrong helped fuel.

“Had all the stars aligned with Lance and Greg, if he had kept a positive relationship, it would have ended up a $30 to $35 million brand,” Burke said.

Trek argues that LeMond is to blame for hampering growth of the brand. LeMond, for his part, alleges that Trek’s efforts to promote the brand were inadequate.

Suit Happy

In March, LeMond served Trek with a lawsuit. Although LeMond did not file the complaint with the Minnesota court, under state law private service signals formal legal action. The policy protects the parties and allows them to settle privately.

Despite LeMond’s attempt to maintain confidentiality, Trek made the document public.

The suit closely resembles a prior suit LeMond filed against Trek in 2004 that the companies settled out of court.

In the current complaint, LeMond requests an injunction to maintain the parties’ relationship and asks Trek to satisfy its contractual obligations.

LeMond claims that Trek has sought to wind down the LeMond brand and that it failed to exert “best efforts” to promote the brand. In particular, he alleges that Trek has done too little to market LeMond bikes internationally.

LeMond alleges that Trek had begun to phase out the brand under pressure from Armstrong. He cites examples at Trek’s dealer event last year during which the brand received less attention than other Trek brands. He also alleges that dealers approached him regarding Trek’s plans to discontinue sales.

“It’s our intention to seek damages for what we consider to be pretty insufficient efforts to do something with the LeMond brand,” said Denise Rahne, LeMond’s attorney. Her firm, Robins, Kaplan, Miller & Ciresi, has represented LeMond on other matters over the past five years.

In response Trek filed a countersuit in Wisconsin. Trek stands to gain a home court advantage if the dispute goes to trial in Wisconsin.

Trek filed its complaint with the court, however, it had not served LeMond with the complaint at press time. He is not required by law to respond until he is served.
Trek’s suit asks to terminate the licensing agreement based on claims that LeMond repeatedly damaged his brand and Trek’s other business interests.

Trek alleges that as early as 2001, LeMond began publicly disparaging Lance Armstrong. It claims that during the 2004 Tour de France, he intensified his public critiques of Armstrong and other professional cyclists.

The complaint states, “Instead of helping to grow a valuable business, Greg LeMond has for years impaired, and now destroyed, 13 years’ efforts by Trek and its dealers.”

Trek also alleges that LeMond undercut its dealers by selling bikes directly to consumers.

The contract states that LeMond was entitled to 15 bikes each year for his personal use.

According to the filing, LeMond since 1999 has purchased numerous LeMond bicycles at employee pricing from Trek with the intent to resell, barter or otherwise distribute them.

The suit cites a Trek dealer who in March 2008 sold two LeMond Zurich bicycles. After the dealer had placed the order, one of the customers returned and informed the dealer that he and the other customer had purchased LeMond bicycles directly from LeMond at a price much lower than retail.

According to the complaint, “Greg LeMond has used these improper purchases to act as an unauthorized dealer of LeMond-branded bicycles, wrongly competing with dealers in breach of Trek’s exclusive rights and knowingly and intentionally harming dealers, Trek and Trek’s relationship with its dealers.”

Retail Reaction

Around 800 retailers in North America currently sell LeMond bicycles. Those Bicycle Retailer and Industry News spoke with said they had sold fewer LeMond bikes in recent years and had found it increasingly difficult to support the line.

“It’s really hard to sell bikes when the spokesperson for the line is engaged in a continuous barrage of negative statements about bike racing,” said Mike Jacoubowsky, owner of Chain Reaction Bicycles in Redwood City, California.

Jacoubowsky felt as though a weight had been lifted.

“It is with some relief that I no longer have to be concerned with Trek reps coming into the store saying I need to do a better job supporting the line. Just as it is a relief that I will no longer have to engage customers in conversations about doping that are counterproductive to my business,” he said.

U.S. retailers said they felt Trek in recent years had poured significant development resources and dollars into the LeMond line—perhaps more than the brand warranted.
The company created an entirely new LeMond line for 2006. Last year, it designed and launched the LeMond Tete de Course, which pushed the weight barrier.

“They have stuff in the LeMond line, a new frame platform, that’s not in Trek. A lot of us were scratching our heads wondering why they were paying all this attention to the LeMond line,” Jacoubowsky said.

But retailers said certain LeMond models would be missed.

Dave Guettler, co-owner of River City Bicycles in Portland, Oregon, the No. 1 LeMond dealer last year, said the Poprad steel ’cross bike and the Fillmore steel singlespeed would be hard to replace.

“The steel stuff is very popular up here in the Northwest,” Guettler said. “The steel cyclocross bike the staff loved and consumers loved. I don’t see anybody that’s going to fill that hole right now.”

Trek would have introduced 2009 and 2010 model years of LeMond bikes under the existing licensing agreement. It now seeks court approval to end production with current models.

Retailers lamented that Trek announced its decision at the start of the season.

“I have confidence that Trek will stand behind the product sold and I don’t have any fear of not selling the bikes,” said Brad Hill, president of Goodale’s Bike Shop in Nashua, New Hampshire. “But it is bad timing. July would have been better. Hopefully I can maintain my margins.”

Burke said Trek will work with its dealers to sell through LeMond bikes.

Trek is offering dealers a rebate to encourage sales of current inventory.

The rebate covers inline LeMond models sold through June 30.

Trek will continue to fill orders for LeMond bicycles from existing inventory, but will not discount 2008 models.

It also will continue to provide warranty support for current and previous LeMond models.

—Megan Tompkins

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