The effects of block exemption regulations are often misunderstood. In the case of the motor vehicle block exemption, people have often ascribed to it powers that it was never intended to have. Even with Regulation 1400/2002, which adopted a much more permissive approach to exempting dealer agreements from the competition rules than had formerly been the case, it often seemed to be thought that the regulation could perform magic. Just because a clause does not comply with the terms of the block exemption does not mean that it is anti-competitive - competition laws exist to protect competition, no-one else.
A French court case provides a timely reminder about this. The decision comes from the cour d'appel, Paris, and was handed down on 2 September: it is helpfully reported by the leading French competition law firm, Vogel & Vogel (no relation, as far as I can see, to Bird & Bird) on the International Law Office service, for which you'll probably have to register, here.
A vehicle manufacturer - a small one, evidently, because the agreement fell within the Notice on agreements of minor importance - made an evergreen agreement, terminable on 6 months' notice, with a distributor. It then terminated the distributor during a reorganisation, and the distributor sued. At first instance the distributor lost, so the case went to the cour d'appel.
The distributor's case turned on Articles L420-1 and L442-6 of the French commercial code. It argued that because the termination provisions did not comply with the requirements of the block exemption they were prohibited under Article L420 (the equivalent of Article 101 of the EU Treaty, or the UK's Chapter 1 prohibition), and that they were actionable under Article L442-6 which prohibits discrimination between trading partners. (You can consult a copy of the commercial code, in English, here). The discrimination argument was based on the fact that the manufacturer had taken a long time to deal with a request for authorisation as a repairer. Finally, the distributor claimed that the notice period was too short - a quarter of the norm in the sector in Europe - another Article L442-6 matter.
The court rejected the discrimination claim, apparently on the grounds (among others) that with no cap on the number of authorised repairers there could be in the territory the distributor would still be able to become authorised. The court was at liberty to assess the reasonableness of contract terms (even in commercial contracts, unlike the position in the UK where remedies are usually available only to consumers) but it didn't limit itself to comparing the agreement with block exemption regulations, which required two years' notice: it looked at the situation in which the claimant found itself, noting that their relationship had only existed for five years and that the dealer had taken on a new franchise before the notice had expired. Far from suffering damage, it had seen its turnover increase by 3.84 per cent.
As for the notice period point, the manufacturer didn't have to comply with the block exemption anyway because its market share was so small. In any event, the court stated, just because a clause is not within the scope of the block exemption does not mean it is anti-competitive. Just because the manufacture terminated a dealer who had continued to meet the criteria set by the manufacturer did not amount to breach of the competition rules. An indefinite contract had to be terminable unilaterally by either party.
A French court case provides a timely reminder about this. The decision comes from the cour d'appel, Paris, and was handed down on 2 September: it is helpfully reported by the leading French competition law firm, Vogel & Vogel (no relation, as far as I can see, to Bird & Bird) on the International Law Office service, for which you'll probably have to register, here.
A vehicle manufacturer - a small one, evidently, because the agreement fell within the Notice on agreements of minor importance - made an evergreen agreement, terminable on 6 months' notice, with a distributor. It then terminated the distributor during a reorganisation, and the distributor sued. At first instance the distributor lost, so the case went to the cour d'appel.
The distributor's case turned on Articles L420-1 and L442-6 of the French commercial code. It argued that because the termination provisions did not comply with the requirements of the block exemption they were prohibited under Article L420 (the equivalent of Article 101 of the EU Treaty, or the UK's Chapter 1 prohibition), and that they were actionable under Article L442-6 which prohibits discrimination between trading partners. (You can consult a copy of the commercial code, in English, here). The discrimination argument was based on the fact that the manufacturer had taken a long time to deal with a request for authorisation as a repairer. Finally, the distributor claimed that the notice period was too short - a quarter of the norm in the sector in Europe - another Article L442-6 matter.
The court rejected the discrimination claim, apparently on the grounds (among others) that with no cap on the number of authorised repairers there could be in the territory the distributor would still be able to become authorised. The court was at liberty to assess the reasonableness of contract terms (even in commercial contracts, unlike the position in the UK where remedies are usually available only to consumers) but it didn't limit itself to comparing the agreement with block exemption regulations, which required two years' notice: it looked at the situation in which the claimant found itself, noting that their relationship had only existed for five years and that the dealer had taken on a new franchise before the notice had expired. Far from suffering damage, it had seen its turnover increase by 3.84 per cent.
As for the notice period point, the manufacturer didn't have to comply with the block exemption anyway because its market share was so small. In any event, the court stated, just because a clause is not within the scope of the block exemption does not mean it is anti-competitive. Just because the manufacture terminated a dealer who had continued to meet the criteria set by the manufacturer did not amount to breach of the competition rules. An indefinite contract had to be terminable unilaterally by either party.
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