Netherlands: Court rules on refusal to appoint repairers

Although it happened in July (on the 25th to be precise , reports of the decision of the Court of First Instance in Amsterdam have been slow to reach me. Brussels law firm Van Bael and Bellis, who have fingers in every interesting EU competition law case affecting the motor industry, and probably every other industry too, publicised it in their imaginatively-titled newsletter VBB on Competition Law in September, so it will be covered in the next Motor Law newsletter - but meanwhile you can follow the link to the horse's mouth.

The story is that three former authorised repairers brought an action against Kia Motors Nederland BV, which took over from the bankrupt former importer, claiming that it had unlawfully refused to reappoint them as repairers. The President of the Court ordered their temporary reappointment on 3 December 2009, and the case came before the Court on the merits this year.

In Case T-19/92, Groupement d'Achat Édouard Leclerc v Commission [1996] ECR II-1851, [1997] 4 CMLR 995 and Case T-88/92 Groupement d'Achat Édouard Leclerc v Commission  [1996] ECR II-1961, [1997] 4 CMLR 995 the Court of First Instance (now the General Court), referring to earlier cases, held that a selective distribution system is compatible with Article 85 (now Article 101 TFEU) if:

1. The characteristics of the product in question necessitate a selective distribution system, in the sense that such a system constitutes a legitimate requirement having regard to the nature of the product concerned, in particular its high quality or technical sophistication, in order to preserve its quality and ensure its proper use;
2. Resellers are chosen on the basis of objective criteria of a qualitative nature which are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion;
3. The system in question seeks to achieve a result which enhances competition and thus counterbalances the restriction of competition inherent in selective distribution systems, in particular as regards price; and
4. The criteria laid down do not go beyond what is necessary.

Both parties, oddly, agreed that Kia Motors' system did not meet these criteria - Kia conceding that they did not admit to the system all repairers who met the qualitative criteria - but they differed about the consequences. The excluded repairers argued that the system was automatically illegal, whereas the manufacturer contended that it was still necessary to consider the compatibility of the system with the competition rules before coming to a conclusion. The Court agreed with Kia that just because it did not apply the criteria in a non-discriminatory fashion did not mean that it automatically infringed the competition rules.

The next question for the court was whether Kia had refused to appoint applicants who were not also dealers as authorised repairers. This was not a hard-core restriction under the relevant version of the block exemption, but if it had happened the system would be likely to be in breach of the rules. However, the facts showed that Kia did not restrict admission to the repairer network to applicants that were also dealers, so the question of whether there was a breach did not arise.

The would-be authorised repairers also tried to argue that Kia's warranties breached competition rules, because they required vehicles to be serviced by authorised repairers: but the court found no evidence to show that a warranty would in fact be invalidated if the vehicle were serviced by an independent.

There was also an argument that Kia were abusing their dominant position in the repair market, and the court agreed that Kia were in such a position. However, they were free to choose with whom to contract. It was inherent in the system that authorised and unauthorised repairers would be treated differently, and the court was satisfied that the unauthorised ones were quite capable of competing.