Thursday, 9 June 2016

Slovenia: Competition Protection Agency adopts commitments for Hyundai Auto Trade

The Slovenian competition authority has accepted undertakings from the local Hyundai concessionaire, which are intended to ensure that warranty terms are no longer used to keep repair and maintenance work within the authorised network, according to a report from law firm Shoenherr. The case was brought under domestic competition legislation (Article 6 of the Prevention of Restriction of Competition Act) but the principles contained in the block exemption were applied.

Friday, 3 June 2016

Germany: court recognises repair and service market is brand-specific

In 2011 the Bundesgerichtshof controversially took the view in the MAN case that the aftermarket is not brand-specific, so quantitative restrictions on authorised repairers are permissible. Now the same court has come to the opposite conclusion, in a case (KZR 41/14) involving Jaguar. 

Wednesday, 1 June 2016

Court of Justice to consider online sales ban in selective distribution

The whole idea of selective distribution is that the manufacturer is allowed to decide how its goods will reach the market - through a certain type of reseller, which in the motor sector means a dealer who meets a raft of standards imposed by the manufacturer. Luxury goods might be limited to shops with a certain ambience, and in only the best locations. In Case C-439/09, Pierre Fabre, the Court of Justice ruled that absolute bans on online sales were prohibited, in selective distribution agreements and elsewhere. But can selected retailers be prevented just from selling the goods using online platforms like eBay and Amazon?

That's the topic of a reference from the Oberlandesgericht Frankfurt am Main to the Court of Justice (Case C-230/16, Coty Germany). The courts in Germany have taken a different view from that of the competition authorities there, which is a bit of a problem: the competition authorities have struck down online sales bans, while the courts (or at least the OLG Frankfurt am Main, here) have been upholding them. That court applied something very like the traditional justification for selective distribution, that a manufacturer has a legitimate interest in ensuring that its branded products are perceived as high-quality products, and that customers receive the right sales advice, so the manufacturer is free in principle to dictate the conditions under which its products are sold provided that they are necessary to meet its quality standards. Note that the court was there concerned with branded goods: it looks as if the fact that the new reference to Luxembourg concerns luxury products is significant, as the headings of the court documents suggest. The earlier case concerned "The question of the admissibility of the prohibition of Internet sales of brand-name items and their setting in the price search engines" and the new one is headed "Decision on the admissibility of selective distribution systemswhich are directed on distribution of luxury and prestige goods" (thanks, Yandex Translate).

The motor industry is still quite a long way from having a big problem with online sales, with new car transactions still being showroom-based - but that isn't going to remain the case for ever. Depending on what the Court of Justice says, it might be a long, long time before online sales become significant. But we'll have to wait a while just to know that - about 15 months, according to one commentator.

[Hat tip to Isabelle Rahman, a partner in Sheppard Mullin's Brussels office, on the firm's Fashion Apparel Law blog - the commentator cited above.]

Wednesday, 10 February 2016

IAAF calls guilty verdict against Kia a 'major victory' for IAM | Professional Motor Mechanic

Professional Motor Mechanic reports an appeal decision in Sweden which IAAF has hailed as a major victory for the independent sector (though using criminal law terms like "guilty" can't be right). In December 2012, the Market Court in Sweden had ruled (MD 2012:13) that exclusivity clauses in Kia's 7-year warranty contracts breached competition rules. If the customer breached the terms, the warranty was not void - it was reduced to three years (although whether the terms remained the same is not clear). The company was ordered to allow its customers to choose independent repairers as well as authorised ones, and was fined SEK 5 million. Three years later the Supreme Court in Stockholm dismissed Kia's application for leave to appeal and for a retrial.

Manufacturers are generally prohibited from refusing to honour a vehicle's warranty on grounds only that it has been serviced by a non-authorised repairer or non-original parts have been fitted. Kia's warranty required servicing to be carried out by an authorised workshop. The Association of Swedish Car Parts Wholesalers (SBF), the Swedish member of FIGIEFA, reported the matter to the Competition Authority, which declined to take action. The SBF then took legal action against the manufacturer in the Market Court, which granted an injunction against Kia under Chapter 3, section 2 of the Competition Act - a provision which enables a party to obtain an injunction to bring an infringement to an end, when the Competition Authority has decided not to proceed. (Of course, that's a different matter from the Competition Authority deciding that no infringement has been committed: it might well decide not to proceed for other reasons, perhaps - I'm guessing here - because there is insufficient public interest, although this shouldn't have been a case where that was a good reason for not devoting resources to it.) In essence, it allows a private interest to take action where the public body hasn't.

Section 2 does not enable the party bringing the action to claim damages, but it does deal directly with the problem - and there remains the possibility of a follow-on action for damages anyway. The Market Court has decided a number of cases - 14, according to the CELEC report, which is now three years old: and the petitioner has been successful in "several" of them.

The Market Court took the view - unsurprisingly, I think - that the relevant market for servicing and repairs was a brand-specific one. It decided that the condition in the warranty had serious foreclosing effects because independents were excluded from competing: one of the objects of the condition was to restrict competition. It would be prohibited under Article 101 TFEU and the equivalent provision in the Swedish competition law.

Prof Henriksson of the Center [sic] for European Law and Economics (CELEC) questions whether it is correct to view the agreement between Kia and its authorised repairers as restricting competition because of the condition imposed on customers. It's an interesting point, although it might be answered by scrutinising the authorised repairer agreement. If Kia have been clever, though, I guess the agreement will be silent on the matter and the restriction will be imposed through the back door, by deterring consumers from going elsewhere. Perhaps the AR agreement says that dealers will not honour warranties in the prescribed circumstances - or in practice they will be prevented from doing so, within the framework of the AR agreement, by the fact that they won't get paid for their work.

Prof Henriksson also asks whether this is indicative of a difference of opinion between the competition authority and the court about what amounts to a breach of the prohibition. That seems unlikely: Christer Liljenberg, Chairman of SBF, is quoted by FIGIEFA as saying that the competition authority had indicated that it did seem to be a breach.

Tuesday, 23 June 2015

Consumer Welfare in EU Competition Law: What is It (Not) About? by Victoria Daskalova :: SSRN

Consumer Welfare in EU Competition Law: What is It (Not) About? by Victoria Daskalova will be of interest to anyone concerned about the working of the block exemption - like me. The abstract reads:

"More than a decade after the proclamation of consumer welfare as a goal of EU competition law, a fundamental question remains unanswered: namely, what is the content of the EU consumer welfare standard? What types of benefits and harms count respectively as welfare and as harm? Whose harm and whose benefit is included in the definition? Few answers have been available to these crucial, from a legal perspective, questions.

The goal of this article is to explore the meaning of consumer welfare in terms of these questions. In particular, considering the assumption that the notion of consumer welfare in EU competition law is borrowed from economics, the article will attempt to verify to what extent consumer welfare coincides with the notion of consumer surplus in economics. The focus is therefore on 1) whether consumer can be taken to mean the final consumer or the intermediary purchaser and 2) whether the notion of harm refers primarily to price effects. Part I of the paper focuses on the definition of consumer welfare in antitrust law and in economics. Part II considers the definitions of consumer welfare in the Commission’s soft law and argues that a finding of an end user surplus cannot be supported. Part III turns to the jurisprudence of the European Courts and argues that support for end-user surplus cannot be found in the Court’s case law. The paper concludes that although we do not find support for an end-user surplus standard in the Court’s jurisprudence, the change in language in the 2012 Post Danmark ruling leaves us wondering as to whether and in what direction the Court’s approach might change."
If you feel an urge to read the 26-page article in full, you can download it from the link above.

'via Blog this'

Friday, 19 June 2015

Another trip down memory lane: Richard Cound v BMW, Clover Leaf Cars v BMW

While I am on the topic of old law which we should not forget (a couple of weeks ago it was the Supply of New Cars Order), I thought it worth mentioning these two important Court of Appeal cases on the block exemption. The first one, that is, but potentially still relevant. The trouble is I don't have complete reports, but on the basis that something is better than nothing and I want to have a readily-accessible note of the cases I thought it worth writing as much as I could here.

Richard Cound Ltd v BMW (GB) Ltd [1997] Eu. L.R. 301 was decided on 10 May 1995. The judges in the Court of Appeal were Balcombe LJ, Pill LJ, and Sir Roger Parker. Clover Leaf Cars Ltd v BMW (GB) Ltd [1997] Eu LR 53 was decided in the Court of Appeal (Staughton LJ and Thorpe J) on 28 December 1995 (and at first instance in the Chancery Division, apparently on 20 December that year, by Rattee J). Given that the termination of the dealer agreement in the second case was to take effect on 31 December, one can see perhaps why the courts dealt with it so urgently. (I don't at present have information about the situation in the Cound case, but as I recall the same facts applied - BMW terminated the agreement from 31 December 1995 - but the case was brought a bit more promptly.) In the Clover Leaf case, and (subject to confirmation) in Cound too I think, the key fact was that the dealer had been taken over by a PLC and BMW did not want too many of them in its network, so it gave (as it was entitled to do) 12 months' notice.

In each case, the important matter was not really whether the restrictions in the agreement on ownership were prohibited by Article 85(1) (as was, and in my mind often still is) and, if so, exempted by Regulation 123/85: the manufacturer's freedom to terminate without having to state a cause (to terminate for convenience) on 12 months' notice was enough to make the termination lawful. What was really interesting was the contention by the plaintiffs that the allegedly prohibited and therefore void provisions of the contract could be severed and the rest of the contract enforced without them. The court held that the issue of severance was governed by English law, following Chemidus Wavin Ltd v Societe pour la Transformation et l'Exploitation des Resines Industrielles SA [1978] 3 C.M.L.R. 514. The judge in Cound had been right to conclude that the effect of severance would have been to alter the character of the agreement and that the agreement did not permit the excision of void terms such as to alter its scope and intention entirely: Hinton & Higgs (UK) Ltd v Murphy 1988 S.C. 353. In Clover Leaf, the court was able to follow the judgment in the earlier Cound case.

Also noteworthy, I think, is the court's holding (in both cases) that the termination was to be viewed as unilateral conduct by the manufacturer, not as something that constituted an agreement.