A former Caterpillar dealer that had an almost 100-year long association with the equipment major, has sued its erstwhile principal for over $100 million in damages, alleging fraudulent conduct and discrimination.
Caterpillar is facing the lawsuit from Venequip, a Venezuelan company that represented CAT equipment in the South American country. Specialising in mining, construction and oil & gas services, Venequip served as CAT’s sole authorised distributor in Venezuela since its inception in 1927 in a partnership that lasted nearly a century.
According to several reports, Venequip has alleged that CAT engaged in misleading and fraudulent conduct, discriminating against Venequip while favouring other dealers, despite previous assurances to the contrary. Venequip claims CAT engaged in a discriminatory pricing scheme, selling products to favoured dealers at discounts of up to 40% and allowing them to sell in Venequip’s territory at competitive prices.
Allegations against Caterpillar
The lawsuit accuses CAT of concealing its pricing scheme and retaliating when Venequip questioned these practices. CAT allegedly terminated its relationship, refused to sell to, and discouraged other dealers from doing business with Venequip.
The lawsuit states: “Unbeknownst to Venequip, CAT’s repeated representations to Venequip that CAT would not undermine Venequip in Venezuela were a lie and its effusive praise of Venequip was designed to lull Venequip into believing that CAT was Venequip’s trusted and committed partner. CAT’s disloyal, misleading and fraudulent practices: (a) decimated Venequip’s business, preventing Venequip from selling CAT products and servicing CAT equipment; and (b) harmed consumers of CAT equipment and parts in Venezuela.”
A further statement about the lawsuit issued on behalf of Venequip added that the manufacturer’s discriminatory pricing scheme was implemented “notwithstanding that it forbid Venequip from selling Caterpillar products in the United States and had represented to Venequip that Caterpillar’s dealer pricing was generally the same around the world”.
“These representations were false. Venequip further alleges that Caterpillar went to great pains to conceal its discriminatory pricing scheme,” the statement added.
The lawsuit alleges that when Venequip became aware of the discriminatory pricing scheme and questioned its principal, asking for pricing information, the company “retaliated by terminating the long-standing relationship, making Venequip the only dealer it ever terminated”.
Former lawsuits against Caterpillar
The lawsuit also alluded that the global giant “has been the target of numerous lawsuits and government investigations in recent years”, pointing out that in April 2024, a jury in Delaware, USA, ordered Caterpillar to pay $100 million to an importer in a legal dispute between the two companies.
Venequip also claimed that Caterpillar paid $1 billion in the matter of an investigation by the US Internal Revenue Service (IRS), whereas according to the manufacturer’s 2023 annual report, it reached a settlement in 2022 with the IRS after “vigorously” contesting disputed tax treatment of profits it earned from certain parts transactions, resolving all issues for tax years 2007 to 2016 without any penalties.
While Venequip had given Caterpillar until July 29 to respond to its lawsuit, no details are yet available on Caterpillar’s response.