Code of Good Practice

Speaking, or writing, of the Code of Good Practice - what was supposed to be the voluntary arrangement under which the dealer protection provisions of Regulation 1400 would be continued, even perhaps extended, in the New Age of block exemption - it seems like a good moment to provide an update. Not very up-to-date, as it happens, but this will serve to record what's happening.

The main thing is, there isn't just one Code of Good Practice, there are two. Now, in some circumstances having two of something instead of one would be an advantage. This glass of wine which my wife just placed on my desk is a good example, although perhaps a second one would shortly give rise to some eccentric blogging. But that does not hold true of codes of practice.

In my naivety, I had assumed that a code of practice would be an agreed document, into which the manufacturers and dealers both bought. Oh, no. That would be far too simple. ACEA produced theirs, and CECRA produced theirs, and never the twain shall meet. You'll find some further comment on CECRA's website here and here and in the interests of fairness the announcement of the ACEA code (in 2010) is here.

The need for a code arises because the Commission decided that a competition regulation is not the place for dealer protection provisions. I disagree - but I'll leave it at that for the moment. Actually it was far more convenient for the Commission to excise the dealer protection stuff from the new block exemption when it was obliged to go down the route of lumping automotive dealer agreements in with vertical restraints in general. But, as Paulo Cesarini made clear when he was the man in charge, the block exemption was no longer the right place for such provisions.

So will the Commission help to create a single code to fill the gap? Yes, but only as an "honest broker", without favour to one side's code or the other's. So John Clark, from Mr Cesarini's old Unit in the Competition Directorate (now Mrs Rehbinder's), told the Motor Law conference in March. I suppose it's logical: competition is the name of the game, so a choice of codes of practice is quite right. I wonder how many manufacturers will opt for the CECRA offering, though?

Dealing with dealer disputes: the Canadian way

How dealers will be protected from the arbitrary exercise of manufacturers' market power is, of course, a key topic whenever one talks about the block exemption (and who doesn't?). Here's an interesting piece (and here's another) by Irvin Schein, a commercial litigator at Minden Gross LLP, about how such disputes are handled in Canada, where National Automobile Dealer Arbitration Program exists to deal with precisely that sort of thing.

It sets out rules which bind both parties once they adopt them by signing an implementation agreement, usually at the same time as signing the dealer agreement. Where there is a conflict between the program and the dealer agreement, the program explicitly takes precedence. Very similar in many ways to the much-vaunted code of good practice to be operated as a supplement to the block exemption. Make that codes of good practice, as it is unlikely that there'll be one agreed code.

The Canadian program is more than just procedural rules: it also contains substantive provisions. There's a long list of the sorts of disputes that will be covered, including refusals to renew a dealer agreement. So manufacturers and importers are obliged to renew, unless they have cause not to do so. Just as US dealers have their Day in Court Act, so Canadian ones have their day in arbitration.

Just what we need over here - some would say.