More from the website I have just been reading ...
Regarding a claim on a gearbox, which falls outside warranty but might be a candidate for a goodwill contribution, the Vauxhall man says "you can have your vehicle serviced where ever you choose as long as it's per Vauxhall guidelines and genuine Vauxhall parts are used and this is just one criteria when we're reviewing a contribution."
His interlocutor responds: "Block exemption regulations only require parts as good as or of equivalent quality and in the case of oils, meet manufactuers [sic] specifications." But that is about dealers using parts of matching quality, and has nothing to do with warranty claims - still less to do with goodwill contributions. Contrary to what many people believe, the block exemption has never said anything useful about warranties - the Commission now recognises that they offer considerable scope to create obstacles to competition, but that's no more than an indication that the general competition rules will be applied, not a provision in the block exemption. If a customer wants a goodwill payment, they need to show goodwill themselves - and this is just one thing that Vauxhall say they are taking into account. If the customer feels aggrieved at that, there are ways to pursue it - through the courts, if the failed component was not of satisfactory quality, or under the code of practice.
Friday, 3 September 2010
Technical information - some misconceptions
There's more rubbish talked about the block exemption than just about any other piece of legislation in the entire world. Today I have been reading postings on a consumer website, where a Vauxhall representative was being engaged in discussions about customer care issues.
He - unwisely - mentioned that his colleagues had helped one consumer with some vehicle information. He was shot down by another poster who said that the block exemption had imposed a legal obligation on Vauxhall "to make freely available service and technical information available to all who wanted it as opposed to restricting it to dealers only". Wrong. Even assuming that "service information" is an accurate paraphrase for what is covered in addition to technical information, it only ever had to be made available to "independent operators", which includes a longish list of undertakings - but consumers are not "undertakings", the key feature of which is that they are engaged in economic activity. All manner of professional repaires are covered, but not the DIY mechanic.
That was the old regulation: the new one is silent on the matter, so now a fortiori that statement is wrong although the guidelines contain very similar language.
But at an even more fundamental level the block exemption never required vehicle manufactures to do anything, it merely offered them an easy way to operate certain restrictions on competition in their dealer agreements. In prctice, of course, they chose (generally) to comply, but it's quite wrong to read the block exemption (version 1, 2, 3 or 4) as making anything compulsory. To do so might offend against the competition rules, but that would take a lot of proving. Now, however, it could also be in breach of Regulation 715/2007, so the sweeping statement is closer to the truth than it deserves to be.
He - unwisely - mentioned that his colleagues had helped one consumer with some vehicle information. He was shot down by another poster who said that the block exemption had imposed a legal obligation on Vauxhall "to make freely available service and technical information available to all who wanted it as opposed to restricting it to dealers only". Wrong. Even assuming that "service information" is an accurate paraphrase for what is covered in addition to technical information, it only ever had to be made available to "independent operators", which includes a longish list of undertakings - but consumers are not "undertakings", the key feature of which is that they are engaged in economic activity. All manner of professional repaires are covered, but not the DIY mechanic.
That was the old regulation: the new one is silent on the matter, so now a fortiori that statement is wrong although the guidelines contain very similar language.
But at an even more fundamental level the block exemption never required vehicle manufactures to do anything, it merely offered them an easy way to operate certain restrictions on competition in their dealer agreements. In prctice, of course, they chose (generally) to comply, but it's quite wrong to read the block exemption (version 1, 2, 3 or 4) as making anything compulsory. To do so might offend against the competition rules, but that would take a lot of proving. Now, however, it could also be in breach of Regulation 715/2007, so the sweeping statement is closer to the truth than it deserves to be.
Thursday, 22 July 2010
Guest post: Bloggers or Blaggers? Stalkers or Leakers? Have OHIM stolen Europe's Auto Secrets?
Thanks to Dave Musker for permission to reproduce this from the Class 99 blog:
There is nothing the auto industry enjoys so much as the razzamatazz of a new car launch. Yet as mass expulsions remind us of the spy era, there are rumours that OHIM has a mole, who leaks new car designs to auto bloggers. "It's no great secret that the European Union's patent office has more leaks than a Soviet submarine" writes Noah Joseph of Autoblog, according to whom OHIM "has more leaks than a colendar". Alex Ricciuti of Worldcarfans claims to be publishing pictures "... courtesy of a leak from the European Office for Harmonization of the Internal Market (OHIM), where trademark records are kept."
Rather than take these alarming claims at face value, in this blog-eat-blog world a few quick searches enable us to reveal the truth.
Take first Ricciuti's claim to have published leaked designs of the Opel Ampera. His blog article is dated 18th February 2009. However, the pictures he shows had already, quite properly, been published by OHIM several days earlier on 11th February as RCD 001086300-0001.
On to Autoblog (motto: "We Obsessively Cover the Car Industry"). They revealed the design of the Suzuki Kizashi on 11th September 2008, acknowledging their source as OHIM's records, and not at that time claiming that there had been a leak. OHIM had published the design in question the previous day, as RCD 000990122-0001. On 18th January 2009, they broke news of the design of the Nissan 370Z Roadster, Joseph this time claiming that it was from an OHIM leak. In fact, lower down the article they quote their source as The Motor Report blog, on which the relevant article (also of 18th January) cites OHIM but does not claim a leak. And, indeed, OHIM had published the design as RCD 001030282-0002 on 14th January.
Joseph's "Soviet submarine" claim was made in the course of his disclosure of the design of the "stretch" Pullman Mercedes reported on 4th May 2009. But, as you are by now no doubt expecting, OHIM had published the design as RCD 000999024 (several parts) on 30th April.
In the same article, Joseph referred back to the Nissan Roadster "leak", and one other, dated 11th August 2008, concerning the "facelifted" Mazda 3. The Mazda 3 article quotes as its source an article on the Carspyshots blog. Here perhaps the timing is less clear. OHIM appears to have published the design in question as RCD 000977384-0001 on 11th August. So, how is it that the pseudonymous Carspyshots posting is apparently dated 9th August 2008, 23:45, and last edited on 10th August at 17:51? But even here, pPerhaps timezone differences enabled the editor to see OHIM's publication and then disclose the design the "previous" day.
Putting these claims together, there is no evidence that anyone has published OHIM applications before OHIM itself has done so. On the other hand, there is ample evidence that the blogs are closely monitoring publications in the car class (Locarno class 12.08) and publishing within a few days, or even hours - one could be forgiven for assuming that they were tipped off in advance, but the evidence does not require that assumption. Unless Joseph or Ricciuti care to reveal their sources, it seems likely that they are simply passing off stalking as leaking.
To take one last example, on 13th July, the Carscoop blog published an article disclosing some Chevrolet designs. OHIM had published these on 12th July, as RCD 001729088-0001 & 2. The filing date was ... only five days earlier, on 7th July.
The moral? OHIM is now publishing e-filed applications in a matter of days. Carmakers who want to keep their designs under wraps would do well to use OHIM's "deferred publication" system, to keep the publication date in their own hands.
There is nothing the auto industry enjoys so much as the razzamatazz of a new car launch. Yet as mass expulsions remind us of the spy era, there are rumours that OHIM has a mole, who leaks new car designs to auto bloggers. "It's no great secret that the European Union's patent office has more leaks than a Soviet submarine" writes Noah Joseph of Autoblog, according to whom OHIM "has more leaks than a colendar". Alex Ricciuti of Worldcarfans claims to be publishing pictures "... courtesy of a leak from the European Office for Harmonization of the Internal Market (OHIM), where trademark records are kept."
Rather than take these alarming claims at face value, in this blog-eat-blog world a few quick searches enable us to reveal the truth.
Take first Ricciuti's claim to have published leaked designs of the Opel Ampera. His blog article is dated 18th February 2009. However, the pictures he shows had already, quite properly, been published by OHIM several days earlier on 11th February as RCD 001086300-0001.
On to Autoblog (motto: "We Obsessively Cover the Car Industry"). They revealed the design of the Suzuki Kizashi on 11th September 2008, acknowledging their source as OHIM's records, and not at that time claiming that there had been a leak. OHIM had published the design in question the previous day, as RCD 000990122-0001. On 18th January 2009, they broke news of the design of the Nissan 370Z Roadster, Joseph this time claiming that it was from an OHIM leak. In fact, lower down the article they quote their source as The Motor Report blog, on which the relevant article (also of 18th January) cites OHIM but does not claim a leak. And, indeed, OHIM had published the design as RCD 001030282-0002 on 14th January.
Joseph's "Soviet submarine" claim was made in the course of his disclosure of the design of the "stretch" Pullman Mercedes reported on 4th May 2009. But, as you are by now no doubt expecting, OHIM had published the design as RCD 000999024 (several parts) on 30th April.
In the same article, Joseph referred back to the Nissan Roadster "leak", and one other, dated 11th August 2008, concerning the "facelifted" Mazda 3. The Mazda 3 article quotes as its source an article on the Carspyshots blog. Here perhaps the timing is less clear. OHIM appears to have published the design in question as RCD 000977384-0001 on 11th August. So, how is it that the pseudonymous Carspyshots posting is apparently dated 9th August 2008, 23:45, and last edited on 10th August at 17:51? But even here, pPerhaps timezone differences enabled the editor to see OHIM's publication and then disclose the design the "previous" day.
Putting these claims together, there is no evidence that anyone has published OHIM applications before OHIM itself has done so. On the other hand, there is ample evidence that the blogs are closely monitoring publications in the car class (Locarno class 12.08) and publishing within a few days, or even hours - one could be forgiven for assuming that they were tipped off in advance, but the evidence does not require that assumption. Unless Joseph or Ricciuti care to reveal their sources, it seems likely that they are simply passing off stalking as leaking.
To take one last example, on 13th July, the Carscoop blog published an article disclosing some Chevrolet designs. OHIM had published these on 12th July, as RCD 001729088-0001 & 2. The filing date was ... only five days earlier, on 7th July.
The moral? OHIM is now publishing e-filed applications in a matter of days. Carmakers who want to keep their designs under wraps would do well to use OHIM's "deferred publication" system, to keep the publication date in their own hands.
Monday, 5 July 2010
The modernisation of competition law
The European Commission is good at dressing up things that have to be done, to make them look as if they are actually desirable rather than simply inevitable. So, for example, its chosen approach to the motor vehicle block exemption - bringing dealer and repairer agreements under the umbrella of the vertical restraints block exemption - meant that multifranchising would be impossible to continue in the form the industry knew it: so they said it never really worked anyway. I don't think everyone agrees with that assessment, and the Commission's whole approach to the motor industry often looks like the work of people who trade in their Mercs or BMWs every couple of years and get their impression of the motor industry from that ...
So too a few years ago, when regulation 1/2003 was presented as a modernisation measure. Its most important feature was a switch from the old system under which you could only get exemption for a restrictive agreement from the Commission, which is what made block exemptions necessary. Since it came into operation on 1 May 2004 it has been for the parties to an agreement to decide whether it was caught by the competition rules, and if so whether it could be exempted. It became a matter for self-assessment - with the Commission and national competition authorities in the background, to keep the parties to the agreements honest.
Now, those of you with a penchant for modern European history will realise that 1 May 2004 was also the day on which the European Union expanded from 15 Member States to 25. Every previous enlargement had caused a flood - perhaps tsunami, or avalanche, would be a better word - of agreements to be sent to the Commission to get exemption. The old system not only gave the Commission the exclusive power to grant exemption (which for convenience it exercised in large part by promulgating block exemptions, permitting whole categories of agreements), it also said that once you send in your agreement with a request for exemption you are free to carry on operating it until the Commission says you can't. There were an awful lot of precautionary notifications, and the thought of all those agreements from the new members - and the languages they'd be written in! - left no alternative but to change the system. Or, as the Commission put it, "modernise".
That's not an arcane piece of knowledge, of interest only to competition law specialists. The block exemption is of central importance to everyone in the motor industry, and the modernisation regulation has a fundamental and far-reaching effect on the way in which it works (or, perhaps, doesn't). Remember, this change to the fundamentals of EC competition law came in while Regulation 1400/2002 was already in force, so the renewal process we're now going through is the first opportunity to judge how block exemption will work in this brave new world.
This is, of course, the fourth block exemption. The first two (in 1985 and 1995) were straitjackets: they told you exactly what you could do, what was not permitted was generally prohibited, and the block exemption was the right place to write prohibitions and conditions. Regulation 1400 took a radically different approach: what was not prohibited was permitted, which made it a lot harder to work out where you stood - and deprived dealers and authorised repairers (as well as independent repairers) of much of the protection that they'd previously had. (Leaving aside the fact that the protection often turned out to be an illusion, requiring as it did a complaint to the Commission and the will then for the bureaucrats to take it up.) But still, you needed to have the Commission's OK for your restrictive agreement, and if that were available merely by complying with the terms of a Regulation that wasn't too hard.
The new Regulations - the block exemption is now found in two separate instruments, the vertical restraints block exemption and the motor vehicle one - still offer what is now invariably, and trendily, referred to as a safe harbour for dealer and repairer agreements. The difference is that since modernisation the parties can decide, with the benefit of legal and economic advice, whether they need to seek shelter in the safe harbour or whether they can simply drop anchor in the open sea. The authorities can still tell them that they need to anchor elsewhere, and there are some heinous anticompetitive practices like price-fixing and export bans that will hardly ever be tolerated, but the block exemption has become very much an optional regime.
I recently reviewed an authorised repairer agreement for a dealer association. In previous years I'd been able to say whether each clause appeared to comply with the block exemption, and that was almost job done. Now, to do it properly, one would have to engage economic consultants, consider the state of the market and the vehicle manufacturer's position in it, and also the position of the network. It would be a massive job, and I bet it's never going to get done for any franchise.
Back in the mists of time, Commissioner Monti promised to put the consumer in the driving seat with regulation 1400. Regulation 1/2003 had effectively put the car manufacturers back in the driving seat long before regulations 330 and 461/2010 came along. The scope for taking issue with anything the manufacturers write into their agreements is negligible. Of course, commercially they don't enjoy freedom of action, but the additional constraints imposed on them by competition rules, so important for the protection of the networks in a hugely unequal relationship, have effectively been lifted.
So too a few years ago, when regulation 1/2003 was presented as a modernisation measure. Its most important feature was a switch from the old system under which you could only get exemption for a restrictive agreement from the Commission, which is what made block exemptions necessary. Since it came into operation on 1 May 2004 it has been for the parties to an agreement to decide whether it was caught by the competition rules, and if so whether it could be exempted. It became a matter for self-assessment - with the Commission and national competition authorities in the background, to keep the parties to the agreements honest.
Now, those of you with a penchant for modern European history will realise that 1 May 2004 was also the day on which the European Union expanded from 15 Member States to 25. Every previous enlargement had caused a flood - perhaps tsunami, or avalanche, would be a better word - of agreements to be sent to the Commission to get exemption. The old system not only gave the Commission the exclusive power to grant exemption (which for convenience it exercised in large part by promulgating block exemptions, permitting whole categories of agreements), it also said that once you send in your agreement with a request for exemption you are free to carry on operating it until the Commission says you can't. There were an awful lot of precautionary notifications, and the thought of all those agreements from the new members - and the languages they'd be written in! - left no alternative but to change the system. Or, as the Commission put it, "modernise".
That's not an arcane piece of knowledge, of interest only to competition law specialists. The block exemption is of central importance to everyone in the motor industry, and the modernisation regulation has a fundamental and far-reaching effect on the way in which it works (or, perhaps, doesn't). Remember, this change to the fundamentals of EC competition law came in while Regulation 1400/2002 was already in force, so the renewal process we're now going through is the first opportunity to judge how block exemption will work in this brave new world.
This is, of course, the fourth block exemption. The first two (in 1985 and 1995) were straitjackets: they told you exactly what you could do, what was not permitted was generally prohibited, and the block exemption was the right place to write prohibitions and conditions. Regulation 1400 took a radically different approach: what was not prohibited was permitted, which made it a lot harder to work out where you stood - and deprived dealers and authorised repairers (as well as independent repairers) of much of the protection that they'd previously had. (Leaving aside the fact that the protection often turned out to be an illusion, requiring as it did a complaint to the Commission and the will then for the bureaucrats to take it up.) But still, you needed to have the Commission's OK for your restrictive agreement, and if that were available merely by complying with the terms of a Regulation that wasn't too hard.
The new Regulations - the block exemption is now found in two separate instruments, the vertical restraints block exemption and the motor vehicle one - still offer what is now invariably, and trendily, referred to as a safe harbour for dealer and repairer agreements. The difference is that since modernisation the parties can decide, with the benefit of legal and economic advice, whether they need to seek shelter in the safe harbour or whether they can simply drop anchor in the open sea. The authorities can still tell them that they need to anchor elsewhere, and there are some heinous anticompetitive practices like price-fixing and export bans that will hardly ever be tolerated, but the block exemption has become very much an optional regime.
I recently reviewed an authorised repairer agreement for a dealer association. In previous years I'd been able to say whether each clause appeared to comply with the block exemption, and that was almost job done. Now, to do it properly, one would have to engage economic consultants, consider the state of the market and the vehicle manufacturer's position in it, and also the position of the network. It would be a massive job, and I bet it's never going to get done for any franchise.
Back in the mists of time, Commissioner Monti promised to put the consumer in the driving seat with regulation 1400. Regulation 1/2003 had effectively put the car manufacturers back in the driving seat long before regulations 330 and 461/2010 came along. The scope for taking issue with anything the manufacturers write into their agreements is negligible. Of course, commercially they don't enjoy freedom of action, but the additional constraints imposed on them by competition rules, so important for the protection of the networks in a hugely unequal relationship, have effectively been lifted.
Friday, 2 July 2010
Technical information, tools, training, and all that stuff
Diagnostic information and special tools and training have been bones of contention in debates on the block exemption for years. The independent sector had secured a set of rules in the last block exemption regulation, which for the aftermarket has just expired: what does the new one do?
Actually, that’s almost the wrong question now: the new block exemption (Regulation 461/2010) is deliberately much less draconian than its predecessor. Instead of setting down strict conditions and prohibitions, it leaves most restrictions in (and outside) agreements to be scrutinised under basic competition rules.
Changes brought in a few years ago make the competition rules a matter for something like self-assessment. Block exemptions are safe harbours that can be used by those whose arrangements will fit within them, or who want certainly above all. The European Commission has trimmed off those parts of the old block exemption that seemed to serve no competition-law purpose – minimum notice periods, requirements for arbitration or mediation, and rules about diagnostic information, training and tools. The basic competition rules will apply if the treatment of these matters have a detrimental effect in the aftermarket: action can be taken, but it no longer says on the face of the Regulation that these practices are prohibited.
Suppliers to vehicle manufacturers of spare parts, tools, and diagnostic and other equipment do still have an express right under the new Regulation to sell direct to the independent aftermarket. But while vehicle manufacturers can decide that they don’t actually need to be in the safe harbour, it’s just possible that they could justify such restrictions anyway.
Nor does the regulation oblige those suppliers to sell to the independents. If they unilaterally choose not to, that could be an abuse of a dominant position which the competition rules prohibit, but that’s an extremely blunt instrument and one that independents would find prohibitively costly to use.
The block exemption regulation is supplemented by Guidelines, which explain among other things how restraints are to be assessed outside the cut and dried situations set out in the block exemption. While it’s permissible for vehicle makers to select their authorised, repairers, anything they do to prevent independents competing could be prohibited – the buzz-word is “foreclosure”. Independents who don’t have access to technical information suffer this fate.
Vehicle repair and maintenance information is now dealt with in type approval legislation. Regulation 715/2007 obliges manufacturers to make the information available for passenger cars marketed after 1 September 2009. (Another regulation does the same for CVs, from the end of 2012.) As for earlier vehicles – which is probably what the independent sector is worried about – the Guidelines say that the Commission will take these regulations into account when assessing cases of withholding of information. The Commission will consider whether the item in question is available to authorised repairers, whether the information will be used for repair or maintenance or another purpose (such as writing a DIY manual), and whether withholding it will have “an appreciable impact on the ability of independent operators to carry out their tasks and exercise a competitive constraint on the market”. The nature of the information will also be relevant: if it is commercial rather than technical it can probably legitimately be withheld.
Technical information will include software, fault codes and other parameters needed to work on CPUs. Regulation 715 defines vehicle repair and technical information to include all information required for diagnosis, servicing, inspection, periodic monitoring, repair, re-programming or re-initialising of the vehicle which the manufacturers provide for their authorised dealers and repairers, including all subsequent amendments and supplements. It also includes all information required for fitting parts or equipment on vehicles. According to the Guidelines, vehicle identification methods are also included, along with parts catalogues (that’ll be contentious) and recall notices. Independents must be able to get access without delay and on demand: anything less wouldn’t truly amount to “access”. They can be charged, but not so much that they are discouraged: the charge must take account of the use they will make of the information. Independents must have access at the same time as authorised repairers get it, and cannot be obliged to buy more than they need for the job they are trying to do.
The Guidelines treat tools and training in the same way. Tools include diagnostic and other repair tools, plus software for those tools, updates for the software, and aftersales service for the tools. So the Guidelines seem to cover the problem fairly comprehensively – the only problem being how to make these rules stick.
Previously, you could at least point to the block exemption and say its requirements were being broken. Morally, the party in breach of the rules would be in the wrong, even though legally no-one did anything about it. Now you’d have to be sure of your ground, whether the other party is acting anti-competitively, and that inevitably requires a lot of expensive economic and legal analysis. The documents say all the right things, but who will make them stick, and how?
Actually, that’s almost the wrong question now: the new block exemption (Regulation 461/2010) is deliberately much less draconian than its predecessor. Instead of setting down strict conditions and prohibitions, it leaves most restrictions in (and outside) agreements to be scrutinised under basic competition rules.
Changes brought in a few years ago make the competition rules a matter for something like self-assessment. Block exemptions are safe harbours that can be used by those whose arrangements will fit within them, or who want certainly above all. The European Commission has trimmed off those parts of the old block exemption that seemed to serve no competition-law purpose – minimum notice periods, requirements for arbitration or mediation, and rules about diagnostic information, training and tools. The basic competition rules will apply if the treatment of these matters have a detrimental effect in the aftermarket: action can be taken, but it no longer says on the face of the Regulation that these practices are prohibited.
Suppliers to vehicle manufacturers of spare parts, tools, and diagnostic and other equipment do still have an express right under the new Regulation to sell direct to the independent aftermarket. But while vehicle manufacturers can decide that they don’t actually need to be in the safe harbour, it’s just possible that they could justify such restrictions anyway.
Nor does the regulation oblige those suppliers to sell to the independents. If they unilaterally choose not to, that could be an abuse of a dominant position which the competition rules prohibit, but that’s an extremely blunt instrument and one that independents would find prohibitively costly to use.
The block exemption regulation is supplemented by Guidelines, which explain among other things how restraints are to be assessed outside the cut and dried situations set out in the block exemption. While it’s permissible for vehicle makers to select their authorised, repairers, anything they do to prevent independents competing could be prohibited – the buzz-word is “foreclosure”. Independents who don’t have access to technical information suffer this fate.
Vehicle repair and maintenance information is now dealt with in type approval legislation. Regulation 715/2007 obliges manufacturers to make the information available for passenger cars marketed after 1 September 2009. (Another regulation does the same for CVs, from the end of 2012.) As for earlier vehicles – which is probably what the independent sector is worried about – the Guidelines say that the Commission will take these regulations into account when assessing cases of withholding of information. The Commission will consider whether the item in question is available to authorised repairers, whether the information will be used for repair or maintenance or another purpose (such as writing a DIY manual), and whether withholding it will have “an appreciable impact on the ability of independent operators to carry out their tasks and exercise a competitive constraint on the market”. The nature of the information will also be relevant: if it is commercial rather than technical it can probably legitimately be withheld.
Technical information will include software, fault codes and other parameters needed to work on CPUs. Regulation 715 defines vehicle repair and technical information to include all information required for diagnosis, servicing, inspection, periodic monitoring, repair, re-programming or re-initialising of the vehicle which the manufacturers provide for their authorised dealers and repairers, including all subsequent amendments and supplements. It also includes all information required for fitting parts or equipment on vehicles. According to the Guidelines, vehicle identification methods are also included, along with parts catalogues (that’ll be contentious) and recall notices. Independents must be able to get access without delay and on demand: anything less wouldn’t truly amount to “access”. They can be charged, but not so much that they are discouraged: the charge must take account of the use they will make of the information. Independents must have access at the same time as authorised repairers get it, and cannot be obliged to buy more than they need for the job they are trying to do.
The Guidelines treat tools and training in the same way. Tools include diagnostic and other repair tools, plus software for those tools, updates for the software, and aftersales service for the tools. So the Guidelines seem to cover the problem fairly comprehensively – the only problem being how to make these rules stick.
Previously, you could at least point to the block exemption and say its requirements were being broken. Morally, the party in breach of the rules would be in the wrong, even though legally no-one did anything about it. Now you’d have to be sure of your ground, whether the other party is acting anti-competitively, and that inevitably requires a lot of expensive economic and legal analysis. The documents say all the right things, but who will make them stick, and how?
Tuesday, 29 June 2010
The legislative jigsaw
Once upon a time, all there was to worry about was the block exemption regulation itself. The Commission produced a Notice setting out some detail about price differentials, and later one that expanded on how to recognise an intermediary, but essentially the rules that applied to the motor industry seemed pretty self-contained. Now the rules are split between two separate block exemption regulations, each of which comes with guidelines (items 1 to 4 in the list below), plus the manufacturers' concessions on dealer protection issues in the form of the code of good practice, while there are more guidelines and Notices that might be relevant to considering the application of the competition rules to motor vehicle agreements. And technical information is now dealt with in Regulation 715/2007. They can all be found through the Commission's website, but for ease of reference I'll post links here:
- Commission Regulation (EU) 461/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector.
- Supplementary guidelines on vertical restraints in agreements for the sale and repair of motor vehicles and for the distribution of spare parts for motor vehicles.
- Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices.
- Commission notice - Guidelines on Vertical Restraints (Official Journal C 130, 19.05.2010, p. 1).
- Code of good practice regarding certain aspects of vertical agreements in the motor vehicle sector.
- Commission notice on the definition of the relevant market for the purposes of Community competition law (Official Journal: OJ C 372 09.12.1997, p. 5-13).
- Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis) ( Official Journal C 368, 22.12.2001, pages 13-15).
- Communication from the Commission - Notice - Guidelines on the application of Article 81(3) of the Treaty (Official Journal C 101, 27.04.2004, pages 97-118).
- Commission Notice - Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty (Official Journal C 101, 27.04.2004, pages 81-96)
- Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6) and on access to vehicle repair and maintenance information.
The demise of multifranchising: problems for small networks?
One area where there are big differences between the new block exemption regime and the old one is in the treatment of multifranchising. In essence, the problem arises because of the different definitions of non-compete obligations in the old and new regulations. Under Regulation 1400, non-competes were permitted up to 30 per cent - meaning that a dealer or authorised repairer could be obliged to buy up to 30 per cent of its requirements from one source, which left room for them to have three sources (and a frustrating and useless bit to spare). That, you'll notice, is a rather liberal interpretation of "non-compete". Now, the vertical restraints block exemption (Regulation 330/2010)has become the relevant part of the patchwork of documents that now makes up the motor vehicle block exemption, and it takes a more logical but less helpful view of what amounts to a non-compete: it says 80 per cent is permissible.
The Commission has tried to justify this enormous change (and big step backwards, whether you approve of it or not, because it takes us back to the first motor vehicle block exemption which didn't permit multifranchising at all) by dismissing multifranchising (or multibranding, as they now like to call it) as something that never really worked anyway.
The idea of allowing dealers - by which I mean distributors and authorised repairers - to take on more than one marque is intended to prevent foreclosure of the market. A small manufacture, or a new entrant, needs to be able to get a toe-hold, and they can't expect to find lots of garages looking for a solus franchise. The only way competition can realistically be preserved in this area is by insisting that dealers be allowed to take on more than one franchise. So, for small manufacturers and their networks, as Automotive Management reports this week in connection with Hyundai, the changes are not good news.
Competition authorities will point out that if foreclosure is a problem the rules on competition can be brought to bear. It will be a breach of Article101 of the new Treaty, and if it is conduct that the block exemption permits, that permission can be withdrawn. True, but the Commission hasn't yet withdrawn exemption from a motor vehicle distribution agreeement and it's had 25 years in which to do so - and don't tell me there haven't been enough problems to justify it. Anyway, what dealer - especially the sort of dealer who's likely to be anxious about being able to multifranchise - is going to pick that sort of fight with a vehicle manufacturer?
The Commission has tried to justify this enormous change (and big step backwards, whether you approve of it or not, because it takes us back to the first motor vehicle block exemption which didn't permit multifranchising at all) by dismissing multifranchising (or multibranding, as they now like to call it) as something that never really worked anyway.
The idea of allowing dealers - by which I mean distributors and authorised repairers - to take on more than one marque is intended to prevent foreclosure of the market. A small manufacture, or a new entrant, needs to be able to get a toe-hold, and they can't expect to find lots of garages looking for a solus franchise. The only way competition can realistically be preserved in this area is by insisting that dealers be allowed to take on more than one franchise. So, for small manufacturers and their networks, as Automotive Management reports this week in connection with Hyundai, the changes are not good news.
Competition authorities will point out that if foreclosure is a problem the rules on competition can be brought to bear. It will be a breach of Article101 of the new Treaty, and if it is conduct that the block exemption permits, that permission can be withdrawn. True, but the Commission hasn't yet withdrawn exemption from a motor vehicle distribution agreeement and it's had 25 years in which to do so - and don't tell me there haven't been enough problems to justify it. Anyway, what dealer - especially the sort of dealer who's likely to be anxious about being able to multifranchise - is going to pick that sort of fight with a vehicle manufacturer?
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