ALDI sues Lidl: cutthroat competition heads to court | InfoWatch

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ALDI sues Lidl: cutthroat competition heads to court

In a federal lawsuit filed Friday against Lidl and the two former ALDI employees, ALDI accuses the employees of conspiring to steal ALDI’s proprietary expansion plans in order to share them with their new employer, Lidl – giving Lidl an unfair, illegal advantage as it tries to gain a foothold in the U.S. and make inroads against ALDI, the website Coupons in the News reports.

There are many similarities between ALDI and Lidl. Both are small-format German retailers that sell a limited assortment of mostly store-brand grocery items at lower prices than traditional grocery stores. Both are in the process of expanding their presence in the U.S. market. And due to what ALDI calls the “brazen actions” of two former employees, both retailers allegedly now have access to some of ALDI’s most closely-held business plans.

So ALDI is taking Lidl to court.

 “Lidl has struggled in the U.S., in part because of its ill-conceived real estate strategy,” ALDI’s lawsuit reads. Since opening its first U.S. stores nearly two years ago, Lidl has indeed suffered some well-documented bumps in the road, slowing down its ambitious growth plans and walking away from as many as half of the 200 sites it had eyed for future stores. A searing report in a German business magazine last year criticized the company for doing a poor job selecting sites for stores. Lidl’s U.S. team haphazardly chose any “plots that were currently available, as long as they were on a busy road,” the magazine reported, while Lidl executives back in Germany “were usually content to look at locations on Google Maps” before okaying the choices.

So it appeared to be a bit of a coup when Lidl was able to hire ALDI’s former Director of Real Estate in its North Carolina and Virginia regions to do a similar job for Lidl, helping it select sites for future Lidl stores in the same area.

The problem, ALDI alleges, is that its former employee took with her maps of future ALDI locations and other specific, confidential information about ALDI’s expansion plans. ALDI says she also enlisted a former co-worker who still worked at ALDI to send her even more information, and started working at Lidl months before her ALDI separation agreement allowed her to accept a position with a competitor.

And ALDI claims Lidl was fully aware of all of this, and complicit in the scheme to use ALDI’s illicitly-obtained strategic plans to its own advantage.

ALDI says it learned about the scheme through a call from a tipster who said he used to work at Lidl. During a meeting with the former ALDI employee who was now his new boss, he said she announced that Lidl would be “changing its real estate strategy” and “pulled out a color-coded aerial map with ALDI logos that represented the locations of current ALDI stores, stores under construction and sites for future stores.” He said he questioned her about whether it was proper for her to be in possession of such material. Shortly thereafter, he said, she fired him.

ALDI says it began investigating and learned that the former employee’s onetime assistant, who still worked at ALDI, was emailing company information to her former boss. ALDI says the assistant had access to information about “ALDI’s growth and business development strategies, including… the location of its future stores, the format and layout of those stores, construction plans, cost-reduction strategies, and remodeling strategies.” When confronted with these findings, ALDI says the assistant immediately resigned – and said that her former boss had hired her to work at Lidl.

The former employees’ “attempts to obtain ALDI’s confidential Information and trade secrets have been blatant and without regard to ALDI’s investment in and exclusive right to such information,” ALDI’s lawsuit alleges. Furthermore, ALDI claims that “the evidence also strongly suggests that Lidl was not only complicit in this scheme,” but likely encouraged its new hire “to disclose and use confidential Information and trade secrets that she had unlawfully procured from ALDI”.

ALDI says Lidl has even admitted that the former ALDI employee “is in possession of ALDI information and property” and that she has “uploaded and/or saved ALDI documents and information to Lidl’s network”. But it says Lidl “has refused to take any measures to assure ALDI that it will not use its critical information for its own benefit”.

When asked for comment, a Lidl spokesperson declined to respond to ALDI’s allegations.

ALDI’s lawsuit says Lidl and its former employees are guilty of violating trade secrets, unfair and deceptive trade practices and conversion. It also accused the former employees of breach of contract and unjust enrichment.

ALDI is requesting a temporary restraining order and a preliminary injunction against its former employees, whose “brazen actions prove that absent an injunction, they will continue to use ALDI’s information without consequence”, the lawsuit reads. ALDI is also seeking an unspecified amount of damages, is asking the court to prohibit its former employees from working for Lidl for a full year, wants the former employee already employed by Lidl to give up any salary she earned while still subject to her noncompete agreement, and wants “an independent review of Lidl business plans and strategies… to determine whether ALDI’s confidential information and trade secrets were used in their development and/or implementation”.

In the retail industry, “real estate strategy is king. Lidl’s historical failures with respect to its real estate decisions prove this point,” ALDI argues. “Now, with its biggest competitor’s real estate strategy at its disposal, Lidl has a significant competitive advantage, which it obtained through unlawful means.”

The grocery business is already fiercely competitive. And ALDI’s plans to open hundreds more stores across the country, coupled with Lidl’s entry into the U.S. market, have made it even more so. Now, it could be up to a federal judge to decide whether the competitors in this case are fighting fairly, in the intense battle for your grocery business.