Skoda Auto fined CZK 49 million for margin fixing

Reuters reports that Škoda Auto has been fined CZK 49 million (which converts to a much less-impressive-souding £1.3 million) for margin-fixing. The penalty was imposed last December, but only now published after documents had been suitably redacted to remove confidential information. The manufacturer's offence was to fix margins with its Czech dealers in 2011 and 2012.



'via Blog this'

AW: Direct sales approach gaining momentum in US

Automotive World (subscription required) reports that direct sales, cutting out the franchised dealers, are becoming more popular. Perhaps some would argue that the level of legal protection enjoyed by dealers in the US is encouraging manufacturers to find other ways to engage with customers?

Be careful with free offers

The BBC News website reported last week (before I became diverted by the election) that a dealer had found itself being taken advantage of: 'Free meal' garage customer's £700 bill at top London restaurant. A customer offered a meal out for two in apology for damage caused to her car on the premises managed to run up a bill of £714, including a surprising amount of alcohol ("four glasses of champagne, two bottles of wine costing £69 each, six cocktails totalling £86 and a sloe gin": is that humanly possible?). The dealer is offering to split it with the customer, which (knowing only what is in the BBC report) seems to me to be highly optimistic: even if there is no legal obligation (and this could be no more than a gift, with no consideration to make it a binding contract, as the actual damage was fixed and a courtesy car provided) it plays very badly in the media.

Of course, the solution is quite simple, and the dealer is no doubt kicking its corporate self for missing the obvious: put a cap on the amount you'll spend. And there is nothing to stop someone in the same position designating the restaurant too, providing an opportunity to give a customer a little business at the same time as making a disgruntled customer a little more gruntled.

On another point, as I have frequently observed the motor trade is in the odd position of manufacturers' goodwill being in the hands of its dealers, a matter which the manufacturers have in fact exacerbated over the past decade by increasing the prominence of their own identity over that of the actual dealer. The result is that the wronged party in this story, which now might be seen to be squirming to try to claw back a sum of money that the public will probably consider paltry by its standards, is not the dealer but Audi. (That makes it even more paltry, of course.) It is sad to see anyone trying to do the right thing being so badly taken advantage of, but it's worse perhaps when that person is wrongly identified.

Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism by Daniel A. Crane

Cross-posted from the Motor Law blog:

Thanks to Public Lawyer's Consumer Law & Policy Blog  I can bring to your attention an interesting article entitled Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism by law professor Daniel Crane. Here's the abstract, to save you following the link back to CL&P:

Tesla Motors is fighting the car dealers' lobby, aided and abetted by the legacy Detroit manufacturers, on a state by state basis for the right to distribute its innovative electrical automobiles directly to consumers. The Tesla wars showcase the important relationship between product innovation and innovation in distribution methods. Incumbent technologies may block competition by new technologies by creating legal barriers to innovative distribution methods necessary to secure market acceptance of the new technologies. While judicial review of such special interest capture is generally weak in the post-Lochner era, the Tesla wars are creating new alliances in the political struggle against crony capitalism that could contribute to a significant re-telling of the conventional public choice story.

I can, I hope, perform a useful service by explaining the significance of Lochner v. New York, 198 U.S. 45, (1905), a case which marked the beginning of what is now called the Lochner era in the Supreme Court, marked by the Court's using its interpretation of substantive due process to strike down laws held to be infringing economic liberty or private contract rights, including state legislation that regulated business. The relevant Wikipedia entry will tell you probably all you need to know, perhaps rather more. The era came to an end with the Court's decision in West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937), where it upheld minimum wage legislation introduced in Washington State and thereafter took an attitude more favourable to the New Deal than had previously been the case. (It is thought that Roosevelt was about to pack the Supreme Court with new appointments who would take a different view of the constitutionality of his policies, but in the end it was not necessary.)

Four former Chrysler dealers could reopen under U.S. appeals court ruling

Four former Chrysler dealers could reopen under U.S. appeals court ruling according to Automotive News. This comes as the result of a decision of the 6th Circuit Court of Appeals, which held earlier in January that the federal law which created the arbitration process in which the dealers won against the manufacturer prevailed over state laws that would on their face allow nearby competitors to challenge the reopenings.

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.