Dealer Protection Code - Dead in the Water

The much-vaunted code of conduct to which the Commission encouraged the two sides of the industry to agree after removing the dealer protection measures from the 2010 block exemption, has finally been knocked on the head by ACEA. Auto Retail Network reports the Association’s Legal Director Marc Greven, stating at CECRA’s European Car Dealer Conference in Brussels in late September that the organisation did not plan to agree to a code.

That is not to say that there will never be a code, just that ACEA does not consider that its job includes agreeing one. Mr Greven said it was a contractual matter between manufacturers and their dealers. But if that is the case, what was the draft code promulgated by ACEA JAMA supposed to be for? CECRA never liked that much, and of course the manufacturers never liked the dealers’ proposals either. Has the ACEA/JAMA code also been dropped?

The Commission announced last December that if the two sides did not agree, it would impose a solution, and it set the end of this year as a deadline – coinciding with the conclusion of work on the CARS 2020 Project (see Motor Law, volume 13 number 11 and this posting). That looked encouraging, for those who like the idea of a code, but it appears that it failed to take into account that the Commission was up for a replacement in the interim, and as we are seeing now new Commissioners are being appointed as the old ones make their exits. Commissioner Almumia’s parting speech is reported elsewhere in this issue. So along the line, the Commission’s commitment went from a statement of intent to see this through, to reserving the right to introduce legislation on unfair trading practices. Since when, incidentally, did the Commission have to reserve the right to do something within its powers?

Carlo Pettinelli, currently Director of Industrial Innovation and Mobility Industries in DG Enterprise & Industry, did however assure the CECRA Conference that the subject was still firmly in the minds of the people responsible. So action before the year end can still be expected.

Commission rejects Federauto's complaint against VW

The European Commission has rejected a complain lodged by the Italian dealer organisation, Federauto, concerning SEAT dealer agreements. The complaint alleged that competition rules had been broken because teh manufacturer (Volkswagen Group Italia) had unilaterally reduced the dealers' margin from 15.85 per cent to 12.85 per cent, and had converted part of the margin from fixed to variable. The case is number AT.40050: it is not easy to find on the Commission website (a Google search found it for me) and anyway it is 10 pages of Italian, which might be more useful to you than it is to me. It is however helpfully reported by our good friends at Van Bael and Bellis: here is a link to the article on the Mondaq service, for which you might have to register. It is also in that firm's competition law newsletter, the relevant edition of which you can download from here.
Federauto argued that this violated the rationale underlying Art 3 of Regulation 1400 as well as being contrary to the vertical restraints block exemption regulation (Regulation 330/2010). Not a great start to be basing your case on the law's rationale rather than its clear words, and always a bad idea to rely on positive obligations created by a block exemption, because generally there aren't any. If you read the argument as being that because of the failure to comply with the conditions for exemption set out in the Regulation(s) the agreement was in breach of Article 101 of the Treaty, that sounds a bit better: but it still doesn't get you to where you want to be, because you then have to convince the Commission that there is a breach Article 101 somewhere.
The Commission was not convinced. There was no evidence of a restriction of competition, such as would breach Article 101(1). The clauses in the dealership contracts concerning margins were not hardcore restrictions. The new margins did not amount to retail price maintenance because dealers remained free to fund their own discounts on sales to consumers.
The complaint also touched on another, very sensitive, area: Federauto complained that VWGI did not have a code of conduct regulating relationships with dealers. The Commission's Supplemental Guidelines on Vertical Restraints in Agreements for the Sale and Repair of Motor Vehicles tells us, of course, that the existence of such a code is a relevant factor in assessing a supplier's conduct in individual cases concerning pressure on dealers to achieve anti-competitive outcomes. However, there was no evidence that such pressure had been exerted and the Commission stated that mere failure to have a code did not amount to a breach. Nothing very surprising there.
The complaint could be seen as a last-ditch attempt to restore dealer protection principles to the block exemption regime, following their removal in the latest iteration of the Regulation. If that is what it was, the best that can be said is "nice try". Dealer protection is never going to be restored by asking the Commission to read something into the Regulation that clearly isn't there: it is going to come from the Commission imposing a code of conduct on the manufacturers, or adopting legislation like the commercial agents' directive.