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.
Thursday, 9 June 2016
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 systems, which 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.]
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 systems, which 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.
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.
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