USA: Nissan dealer's sales affected by local Chevrolet plant

Ah, if only we had laws like the ones in the USA that protect dealers. What little we had under the block exemption disappeared at the end of May. Sims v Nissan 2013-Ohio-2662 is a case in the Ohio Supreme Court involving a Nissan dealer in Warren, Ohio. There is a GM plant in Lordstown, about six miles away. The Ohio Supreme Court agreed with the dealer's argument that Chevrolet's unusual popularity in his market makes Nissan's sales expectations for him unrealistic.

There was a time, not so long ago, when a European dealer would have been able to invoke the dispute resolution procedures required by the block exemption to get such a problem sorted, by an arbitrator or expert third party. No longer. The Code of Good Practice issued by ACEA states that dealers will have the right to refer disputes to an independent expert or arbitrator, but what provides the basis for a dispute that can be referred? The dealer would have to argue that the target was set so high that it amounted to an unlawful restriction on competition - perhaps it would prevent the dealer in question taking in additional franchises. But it's pretty nebulous.

And while it might sound like an unfair commercial practice, the Unfair Commercial Practices Directive (Directive 2005/29/EC), which sounds as if it might be the right instrument to look to for redress, only applies to B2C transactions, not B2B which is what dealer agreements are. It is occasionally mentioned as a possible source of dealer protection, but for this simple reason it doesn't look very useful. But there is a green paper under discussion at present in Brussels, on unfair commercial practices, which was originally launched with a view to looking at practices in the food retailing sector. However, 34 per cent of responses (of which there were 746 altogether) came from the motor trade, and the NFDA is now pushing for the Commission to reintroduce some dealer protection measures. The consultation is being carried out by the Commission's Directorate General for Internal market and Services, and as so often happens it is quite possible that you'll get a different answer from them than from DG Competition - whose agenda, of course, is quite different. The UK government's response to the Commission's consultation is here.

USA: Federal Statute Precluding Enforcement of Arbitration Clauses in Motor Vehicle Franchise Contracts Inapplicable to Snowmobile, ATV Dealer Agreements

Mandatory arbitration clauses are common in franchise agreements, including motor vehicle franchise agreements. Whether a manufacturer can enforce such a provision requires an analysis of competing state and federal statutes and a determination of whether the vehicles sold fall within the statutory definition of a “motor vehicle.” In an opinion addressing the various statutory regimes, a federal district court in New York held the Motor Vehicle Franchise Contract Arbitration Fairness Act, 15 U.S.C. 1226 did not limit a franchisor’s effort to arbitrate a dispute concerning dealer agreements for snowmobiles and all-terrain vehicles (ATVs). At the same time, the court held that the Fairness Act did serve to block arbitration of claims regarding the same dealer’s motorcycle franchise.

Champion Auto Sales, LLC v. Polaris Sales Inc., 2013 U.S. Dist. Lexis 65219 (E.D.N.Y. Mar. 27, 2013). 

Full casenote on Day Pinkney LLP's website here. 

USA: No cure opportunity has to be given if dealer's breach cannot be cured

Many state motor vehicle dealer statutes require that dealers have a chance to cure contractual breaches before being terminated. Does a statutorily-mandated cure provision require a motor vehicle franchisor to provide a dealer with an opportunity to cure a breach that, absent the statute, would be incurable? The New York Franchised Motor Vehicle Act requires that a franchisor provide a dealer with a "reasonable time" to cure a material breach of contract that forms the basis for a termination. It does not, however, expressly address the interplay of the statutory cure period with common law principles applicable to incurable breaches. In Giuffre, the court concluded that the Dealer Act does not require a motor vehicle franchisor to provide a dealer with an opportunity to cure breaches that were incurable under New York common law.

Giuffre Hyundai, LTD v. Hyundai Motor America, No. 13-cv-0520, 2013 U.S. Dist. LEXIS 67795 (May 10, 2013)

Read the full casenote on Day Pitney's website, here.

 

New Hampshire Supreme Court Holds Settlement Unenforceable Under Anti-Waiver Provisions of State Motor Vehicle Franchise Law

In the US, where dealers enjoy protection that would cause apoplexy in the European Commission, state motor vehicle franchise laws often proscribe agreements that purport to waive the statutory protection given to dealers. When a new franchise relationship is formed, a manufacturer cannot pressure the new dealer into forgoing legislative safeguards against termination or encroachment, among other things. But what happens when a dealer waives such rights in connection with a settlement of litigation? In New Hampshire, at least, such a settlement agreement will not be enforceable, according to a recent ruling by that state's supreme court.

Sounds not unlike what's going on with Fiat's dealers in Greece ...

Strike Four, LLC v. Nissan North America, Inc., No. 2012-193, 2013 N.H. Lexis 37 (April 12, 2013). 

 

See the full story here from Day Pitney LLP.

Greece: Fiat dealers asked to waive rights

The transition from one block exemption to the next has always been troublesome, although we seem to have got past the technique of terminating the entire network and offering reappointment to some or all of them. However, this time round Fiat Group Automobiles Hellas S.A. (FGAH) seem to have excelled themselves. Determined, it seems, to enter fully into the spirit of the new regulation, which of course contains nothing in the way of dealer protection, they are requiring their dealers to waive any accrued rights that they might have under the old Regulation.

They have sent out a letter of intent, in English as well as in Greek, which requires dealers to waive their rights against FGAH in relation to their existing agreements and the termination of those agreements. On 31 January next year, dealers will be required to declare that they have no claims against Fiat arising from the existing agreements and their termination, and irrevocably to waive any claims they do have.

Greek FIAT dealers are not amused. They consider the importer's and the manufacturer's actions unacceptable. The Greek car market, in common with much of the Greek economy, is in crisis, and dealers fear that FGAH is intending sometime probably next year (hence the date mentioned in the letter) to transfer the import contract to a third party. Waiving claims to protection from termination with that in prospect is not an attractive proposition for the dealers (though for the importer, in anticipation of handing over the franchise, it makes commercial sense to clear the decks).

Moreover, under Greek law I am told that a dealer may very possibly have a claim for a goodwill indemnity on termination based on the commercial agents directive (Directive 86/653 EC) and the Greek law which implements it, Presidential Decree 219/91. Recent Greek Supreme Court judgments (139/2006 and more recently 15/2013 and 16/2013, although I am not convinced that the first of those links is to the right case) indicate that dealers are more likely than not entitled to a goodwill indemnity. The Fiat letter seems to be designed to ensure no such claims will be possible, notwithstanding that Article 19 of the Directive specifies that the parties may not derogate from the indemnity and compensation provisions (Articles 17 and 18) before the contract is terminated. It would also rule out claims for sunk costs.

The commercial agents directive has been mooted by CECRA and the European Distribution Lawyers as an alternative source of protection for dealers, given the removal of their protection in the latest block exemption. But it could never serve such a purpose directly, for the simple reason that dealers are not and never have been commercial agents. At best, the directive could provide a model to be used to create a European equivalent, perhaps, of the dealers day in court acts found throughout the United States. What the Greek Presidential Decree says I do not know, but if it extends commercial-agents-style protection to dealers, it goes beyond what the directive requires, and I cannot see that a EU point involving Article 19 can arise - which is not to say that the Decree itself contains no such provision, just that if it does it's a home-grown Greek thing.

Fiat's action makes the conclusion of the new contract conditional upon the acceptance of unrelated terms and obligations, and takes undue advantage of the situation in which dealers who have significant sunk investments find themselves, especially in a crisis market with no alternatives. Lawyers acting for dealers contend that this approach is illegal under Greek law, so we might find ourselves watching this for quite long time.

Beware the Taj Mahal dealership revovation

Although it is about Canada, this article by John Sotos of the eponymous Toronto law firm will resonate with dealers all over the world who have been asked (or told) to renovate their premises.  You can find it on Mondaq  or read it on the firm's own website.
There is little point in my repeating what it says in my own words, but I will always be indebted to Mr Sotos for alerting me to the phrase "Taj Mahal dealership renovation". We have talked here about gin palaces but the allusion to the Taj Mahal is much classier - and better hyperbole.

Antitrust: Commission consults on review of safe harbour for minor agreements ("De Minimis" Notice)

The Notice on Agreements of Minor Importance has always been a key document in EU competition law (and EC competition law before it). It defines what agreements (and other arrangements) are too small to be worth bothering with, because they can safely be assumed not to affect competition, or at least not appreciably. Specialised car manufacturers can rely on the Notice to save them from having to comply with the block exemption. Now the Commission is consulting on a new Notice: here's what its press release says.

The European Commission invites comments on a proposal to revise its guidance notice for assessing when minor agreements between companies are not caught by the general prohibition of anticompetitive agreements under EU competition law. The proposal aims at updating the present Notice, in particular taking into account recent developments in the case law of the European Court of Justice (ECJ*). Comments can be submitted until 3 October 2013. In light of these comments, the Commission will then adopt a new notice in
2014.
Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements that are aimed at or result in appreciable restrictions of competition. The current De Minimis Notice (adopted in 2001) defines, with the help of market share thresholds, what the Commission considers not to be an appreciable restriction of competition (see IP/02/13 ). It creates a safe harbour for companies whose market shares do not exceed 10% for agreements between competitors or 15% for agreements between non-competitors. If an agreement contains a hardcore restriction, that is, a very serious restriction for which there is a presumption of anti-competitiveness, the companies cannot benefit from the safe harbour.
The Commission's proposal is aimed at ensuring consistency with other recently amended competition rules, in particular the 2010 Vertical and Horizontal Block Exemption Regulations (see IP/10/445, MEMO/10/138, IP/10/1702, MEMO/10/676) and with an ECJ ruling of December 2012 (case C-226/11 Expedia). 
Questions from a French court in the Expedia case raised the issue of whether agreements aimed at restricting competition (restrictions having an anti-competitive "object") can be considered as "de minimis" and therefore fall outside the scope of Article 101(1). The Expedia judgment has established that a restriction with an anticompetitive object constitutes, by its very nature, an appreciable restriction of competition. The proposal therefore clarifies that agreements containing a restriction by object are always seen as an appreciable restriction of competition.

The consultation documents are available at: http://ec.europa.eu/competition/consultations/2013_de_minimis_notice/index_en.html

* It annoys me when lawyers lazily give the Court of Justice the adjective "European". It annoys me a great deal more when another European Union institution does so. The Court is properly called the Court of Justice of the European Union, but that title refers to the institution which consists of two courts, the General Court (which we used to call the Court of First Instance, which made it a bit easier to understand what it was for) and the Court of Justice - just that, which is utterly confusing but must be respected as best we can. Valentine Korah always used to call the Court of Justice "the Community Court", so I wonder whether she'd now call it the "Union Court"? I shall try to find out.

Dealers cannot be prevented from selling online

My friends at Dreyfus & associés in Paris have blogged about an important decision of the Autorité de la concurrence in a matter involving Bang & Olufsen and their selective distribution network. B&O tried to stop dealers selling online, and were (not very surprisingly) hit with a penalty of €900,000. The blog posting is here: http://blog.dreyfus.fr/2013/02/online-selling-inseparable-from-selective-distribution-bang-olufsen-heavily-penalized/. Do read it! Alternatively, you might prefer http://blog.dreyfus.fr/2013/02/la-vente-en-ligne-indissociable-de-la-distribution-selective-lourde-sanction-pour-bang-olufsen/.

Auto 24 case: final decision from French court

The Auto 24 case, which I wrote about here, came back to the French courts from its short trip to Luxembourg and on 15 January 2013 the Cour de Cassation ruled that Jaguar Land Rover France was entitled to limit the number of dealers appointed to its selective distribution network in France.

The Cour de Cassation followed the Court of Justice's ruling, rejecting Auto 24's argument that JLR's limit on the number of its distributors restricted competition. The court stated that no legislation or regulation, national or EU, requires a manufacturer to justify its decision to draw up a numerus clausus as a criterion for quantitative selection. The clause in suit expressly limited the netwok to 72 dealership contracts for 109 sites, so it constituted a specified criterion whose content could be verified - which is what the Court of Justice said was needed. The supplier's freedom to define the scope and composition of its network therefore seems to be safe.

More details from Van Bael and Bellis via Mondaq (for which you might need a free subscription) here. This piece cross-posted from the Motor Law blog.