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Thursday, 28 June 2012

Brussels conference final session

Guenter Bauer, of Austrian firm Wolf Theiss, discussed the relationship between manufacturers and distributors, which will change dramatically next June. There are also important competition issues surrounding the exchange of information between VMs and dealers, and the obligation on the VM to enforce selectivity criteria and control sales within the network.
He suggested that the abolition of the non-exemption of the location clause (can you cope with all those negatives?) wil have little effect, Few dealers invoke it and the de minimis rule limits its impact. The 30 per cent threshold will have little impact in vehicle distribution. Dealer protection provisions will of course be done away with: the Commission found them to rigid, ineffective and at times counterproductive. This assessment was supported by the Commission's findings in its consultation on unfair byb pcommercial practices, which showed a great deal of concern in the auto sector. The code of conduct, which is in the hands of the representative associations, will deal with dealer protection - and having said that he moved swiftly on ...
What about obligations for dealers to share information with the VM? The VMs clearly have an interest in sales-related information - and to know how the dealer is performing, whether it is doing enough promotional work. However,k the exchange of information carries with it potential legal problems. In a vertical agreement (the food industry has been particularly under the microscope) an information exchange might be indicative of RPM, customer allocation, territories? There are also problems where vertically-integrated importers are competitors of their independent distributors.
He reviewed the decisions on agency set-ups, identifying what factors tend to show that there is an agency relationship and those that suggest otherwise - it remains a tricky matter to set up an agent, certainly not as simple as at first sight it might appear.
If a selective distribution agreement is not enforced, it will create bad will because members of the network will lose sales to suppliers who simply should not have cars to sell. It's a problem that has been going on for years - ever since parallel imports first became an issue.
Andrzej Kmiecik of van Bael and Bellis then spoke about multibranding, which chairman Frank hoped woud be the final word on this topic (though I don't believe he really meant that - and it surely won't be: this one will run and run). To start with he ran through the changes that have taken plpace since Regulation 1400 came into force in 2002. Direct and indirect non-competes were a complete no-no under 1400, but now they are exempted for five years (with the proviso that if the site is owned by the supplier the exemption will carry on for ever). The previous 30 per cent loyalty requirement has chnged to 80 per cent, effectively knocking multifranchising on the head. the permitted requirement for separate sales areas is no longer relevant.
Full non-competes can fall outside Article 101 where the de minimis notice applies - which could be at 5 or even 15 per cent. They are not hardcore restrictions. The supplemental guidelines suggest that there will be no material foreclosure unless 40 per cent of the market is closed off by non-competes. However, the focus on duration suggests that a non-compete over five years might be in trouble.
But self-assessment outside the block exemption is relatively unimportant - given that the regulation gives VMs most of what they want. Fixed term agreements are still not popular in the industry, but a five year agreement has advantages in that the non-compete can run for the duration of the agreement. Having a re-negotiate-after-five-years clause would not serve much purpose - the dealer is unlikely to agree to it (unless wary of losing the franchise altogether?). It could be that the restriction is designed to reduce after five years - from a full non-compete to an 80 per cent one. Surely 80 per cent is to al intents and purposes a full non-compete?
A requirement in a dealer standard which effectively makes it economically unsustainable to sell competing brands will be regarded as an indirect non-compete. But there is lots of uncertainty around this: what, for starters, is a showroom? Does a separate showroom have to be in a separate building? Can it just have a brand-specific entrance? The economic sustainability test is all important here.
Paragraph 32 of the Supplemental Guidelines talks about qualitatative standards specifically designed to discourage the sale of competing brands. In the context of 80 per cent loyalty, such a standard is hardly going to be a problem.
Non-competes can be imposed on some dealers but not all, unless the supplier is dominant, but the dealer cannot be prevented from selling specified brands or only allowed to sell specified competing brands. And in any case the power of larger dealer groups is likely to prevent foreclosure in many markets.
In the spares market, non-competes are still permitted but the Commission is keen to preserve access to spares of competing brands for both authorised and independent repairers. It is strange in that case that they emasculated the block exemption. See Supplementary Guidelines, para 18. A prohibition on the use of parts of matching quality by authorised dealers is no longer a hardcore restriction.
A non-compete imposed on a repairer - not to repair competing vehicles - is in principle block-exempted. If repair markets are brand-specific (contrary to MAN), it is not even a non-compete! 
Next the panel discussion. Chairman Frank had three questions. First, does the new regime meet their needs and expectations? If there are to be particular enforcement issues will there be any particular practice to follow (I hope the meaning of that will become clear later)? And finally is there anything missing?
Klaus Heimgaertner (from ADAC) went first. He deplored the loss of clarity from 1400 to 461. He is anxious about the impact in the future of open platforms, which is only slightly to do with the block exemption. Marc Greven expressed surprise that anyone should worry about clarity - especially lawyers. But the regulators set out to be less prescriptive and to allow undertakings more flexibility.
Frank asked about the wisdom of kicking the whole aftermarket into self-assessment. It condemns the aftermarket to the most conservative position. Marc agreed that this was the case ... the industry is not necessarily keen on being very creative in this area, but some manufacturers are trying out new approaches. That requires self-assessment, and that's something that companies are not used to yet, but from what he hears companies do not see it as a particular problem.
Derek Ridyard (RBB Economics) said he observed convergence between what happens in the motor industry and outside it - and there is little convergence. Why is there so much regulation in a sector where there is so much competition? There is so much regulation where there is little need for it, that companies are inclined to take the safe route and stick to the conservative approach to anything. The modern approach to competition law should be to ask what is the case for intervening in this market? That still does not happen. Intervention is not aimed at a particular theory of harm - it is designed to protect dealers, often unnecessarily. The result is less efficient distribution than need be, depriving consumers of benefits.
Markus Erdmann of VW AG, said that there has to be a good reason to change contracts and that the changes required now are relatively small. It is expensive to change the contracts. Sylvia Gotzen (FIGIEFA) expressed pleasure at many of the features of the block exemption but noted that the small companies that are active in the market cannot deal with competition law problems with the same sophistication that the large companies represented in the conference could. They need certainty and clarity. The link with the type approval scheme is partly the product of problems with the old block exemption - getting DGs Enterprise and Competition to work together so that type approval underpins the block exemption is very important. But she calls for the Commission to remain alert to the need for enforcement - the rules are not working perfectly in practice. The French report shows that there are issues to be addressed. Increasing computerisation means that the technical information does not lie in wiring diagrams - it lies in the software.Obtaining passwords, user names and keys is often a lengthy process. Mar Greven responded by saying that the present situation goes far beyond creating a level playing field between authorised and independent repairers, and remarked that independents often don't use the websites that are made available to convey information to them. Perhaps they go ahead without the information? He suggested that this shows the nature of the debate is changing.
Sylvia Gotzen responded repairers can only function if the competition mechanism works at all levels. The need for technical legislation highlights defects in competition law.

I have done my best to keep up with proceedings today, and to blog the conference accurately (though not comprehensively). If you have any suggestions or corrections please let me know. I hope that (if you weren't in the room) you'll have got the impression that this is a great conference, with well-informed speakers, and you should make sure you come to it next year!

Brussels conference session 3

Alternative distribution models for original parts is the subject of the graveyard presentation immediately after lunch .... a tough assignment for Walter van Overbeek of Houthoff Barouma. This isn't an area where there has ever been much original thinking: not much has changed about the way original parts are distributed since - well, since as long as anyone can remember, I suppose, although having said that Unipart springs to mind as one example of a different approach. It's a case of not fixing something that isn't broken.
Of course, one problem with selling original spares is that you have to supply them to your competitors. the independent repairers who come to authorised outlets are competing for the same repair business, but of course the competition authorities cannot permit the authorised network to refuse to supply them (subject to what was said earlier about working out what is the relevant market, as only if there is a dominant position is there a legal problem.
I am reminded that years ago I regularly advised a factor who, as factors do, obtained supplies of parts wherever he could. Sometimes he would be able to get hold of a large consignment of original parts which he could split into more manageable lots and sell on to the retailers he served. He was frequently accused by the vehicle manufacturers of handling stolen goods, as they were unable (or unwilling) to accept that he could get hold of them legitimately. Once he called me in some alarm as he had the fraud squad after him, at the instigation of one particularly harsh VM.
And that reminds me of another story too - but for now I need to keep an eye on proceedings at this conference, which incidentally is excellent and deserves to have a bigger audience. The change in date from previous years seems to have resulted in a rather smaller attendance.
Presumably VMs will want to preserve selectivity in parts distribution. That should be a given. Within that constraint, what will the future shape of this relatively profitable part of the system take?
It is also fair to assume that VMs will not want to harm existing relationships and sales channels. No point in trying to do something new if in the course of it you destroy something old ... Equally, VMs are not going to want to set up direct sales channels. (No, I would add, because they like to unload their slow-moving stock onto the dealers who are obliged to be repositories for just about whatever the VM decides to make them buy - what in conversation with a dealer association client I would refer to as the P***** headlining syndrome (model name redacted)). I saw a similar problem with L***** suspension struts once.
But the VM isn't going to be able to solve the problem of engineering the ideal size of network by raising qualitative standards. All dealers and ARs will want to be able to handle parts. Quantitative selective distribution, which would have to be limited to parts where the market share was less than 40 per cent, would be possible but terribly complicated. It would require a separate parts distribution agreement, in addition to dealer and AR agreements. There would probably be fewer parts distributors and selectivity would be maintained, but Mr van Overbeek thought this would approach would not appeal to VMs. Apart from anything else, such a structure would lack legal certainty.
E-commerce offers an alternative, but it only makes buying easier - it does not help with delivery, which is an essential part of the parts distribution offering.
Paccar has pioneered a system in which outside parts are distributed to DAF dealers along with DAF parts. In the truck industry, where body builders and others have parts to get out to the dealers, there's scope for this which would not exist in the car spares market. In a universe in which all manufacturers use selective systems to distribute their parts, though, this extended offering could never take in other VMs' parts - they simply would not be available for resale.
Another alternative would be to set up separate parts agents, separate legal entities established by authorised repairers. VW have gone down this road in the UK. Not all ARs have spares agencies, so the number of outlets can be reduced. These are called "trade parts specialists". In an agency relationship (VW have tried this before, in other contexts - finance, I recall - and run into problems with the Court of Justice determining that the "agent" was not an agent at all) the principal can set the price and assign territories, which is why I don't fully understand why VMs haven't adopted this approach in other parts of the system. If it works, a non-compete obligation should be enforceable.
In a variation on this theme, joint ventures of dealers or ARs could be set up as parts agents, and could represent multiple OEMs not just one. Dealers can still sell parts to whomever they like. There are still potential problems and risks, which are largely those that flow from any situation that looks dangerously like a cartel, even when it isn't.
Next came a review of the legal implications, such as they are, of electric vehicles. The title also mentioned "licensing", which could be taken in one of at least two ways, but in the context of competition law it should be clear which meaning is intended. The speaker was Eva-Lena Bergqvist, who sounds like a character in a Wallendar novel, or another work from that genre of Swedish detective fiction - but in fact is a lawyer with Volvo Car, which of course is a Chinese company these days. The company's proposed hybrid V60 is a joint venture between Volvo and Vattenfall AB, a generator of electricity, which makes sense - this is where the licensing issues come in. From the experience, she said that they had learned of the importance of preserving freedom of action: at the time that the JV was put together, the company was being sold by Ford to Geely, which probably made life interesting. It's also necessary to have the right people involved from an early stage (SOTBO), which would be a useful lesson for a few organisations I can think of. Also, it's important that decision-makers understand the implications of the licensing agreements. Another SOTBO, perhaps.
Marc Greven (ACEA) asked about the distribution of electric vehicles, which is an interesting question. Would an agency or franchise be more appropriate for this new type of car? For hybrids, Volvo intends to use existing distribution channels. For pure electric cars, she said they were still thinking. A GM lawyer in the audience said that they had considered new routes to market but chosen to stay with traditional ones - while recognising that there are formidable and therefore expensive requirements for investment and training. Chairman Frank asked whether this was rolled out to the entire GM network - the answer being that any dealer who met their higher standards (so, not all of them but not a specially selected group) was given the new franchise.

OFT issues statement of objections in CV competition case

Price co-ordination, market sharing and exchange of sensitive commercial information are alleged in a statement of objections issued today by the Office of Fair Trading against Mercedes Benz and five of its dealers. Press release here.

Brussels conference session 2

Thomas Funke of Osborne Clarke had the task of talking about aftermarket competition and access to technical information. He wondered whether the automotive sector would become like the IT sector, especially as they become more like computers on wheels and the aftermarket becoming more valuable than vehicle sales. The French Autorité de la Concurrence (ADLC) has produced a draft report (having embarked on an investigation into the car market rather like the ones the Monopolies and Mergers Commission or Competition Commission used to do every few years) and it seems to confirm most of what the Commission's evaluation report found. It has a lot to say about the spares market ...
The ADLC's report  (the final version of which will be published in the Autumn) takes a detailed view of access to technical information. It considers, for example, the need for information to be aggregated - information about several marques being made available to authorised repairers handling more than one.
Remote diagnostic support is covered by the type approval framework, in the CV sector, and as vehicles become more and more like computers (internet-enabled ones, at that) remote data will be a more and more important issue. That's in the Euro IV system. What about Euro 5? There are some interesting topics here - service records, for one thing. If service records are kept electronically, you won't be able to hand it over when you sell the car - and in addition independent service providers won't have access to a vehicle's service record. Euro 5 is designed to deal with this, insisting that access must be given to the database containing all these data. The VM is also required to make available information about which parts are suitable for the car identified by a particular VIN. Interesting to see that the Commission takes the view that the definition of "database", missing from the type approval legislation, should be borrowed from the database directive!
Brand-specific tools are an emerging problem. They could have a significant impact on competition, given that buying multiple sets would be prohibitively expensive. Training can be expensive (he remarked that the same could be said of legal conferences: but he should have excluded the Motor Law conference from that generalisation). The growth of telematics poses new competition problems: they must not be allowed to limit the consumer's choice of service provider. They should be regarded as essential facilities, or perhaps in the same way as computer interfaces. The Microsoft decision, in which the Commission insisted that alternative browsers should be made available on a par with Internet Explorer, has lessons for this area. The Toll-Collect decision also has an impact on this area.
E-call also has ramifications for using this information to book a service for a vehicle - if the authorised network has exclusive access to this information it could be a major clog on competition. Likewise, the telematics might give early warning of a breakdown - valuable information for the authorised network if they alone had it. Commissioner Kroes has indicated that she is concerned to preserve consumer choice in this area.
The misuse of warranties remains a topical matter. The guidelines dealt with the subject a while back, and the Commission makes clear that it makes no difference whether it's a purchased warranty or the manufacturer's original offering. In the Saab case (2011) the Bundesgerichtshof analysed this from the consumer protection perspective, not the competition law perspective. It thought that only where inappropriate service behaviour was the reason for the failure should the warranty be voidable. There is a difference between mechanical and corrosion warranties as regards the need for inspection by an authorised person - but the BGH was unable to consider the full implications because competition points were not pleaded. We must await the Stockholm market Court judgment in the Kia case for further clarification (it is expected in October).
Joseph Vogel observed that the ADLC document is merely a preliminary report - it is more like a statement of objections, and VMs consider that they comply. VMs and dealers have appealed against it.
Anne Wegner, of the Luther law firm, spoke about distribution in the aftermarket. She began by casting the BGH as resisting the approach the Commission thinks it is taking to competition in the aftermarket, with its MAN judgment. Kia's approach in the Netherlands, imposing no restrictions, challenges the Commission's view that qualitative selection is the only way forward. They thought this would prevent them from having enough dealers. They realised that the only restriction that mattered was sales of parts to non-authorised resellers, and they could do without that. There is a lot of leakage anyway, partly because it was always necessary to supply independents for repair work but in practice one could never check that they weren't buying for resale. So Kia's agreement in the Netherlands contains no restrictions that require exemption, so there is no need to use qualitative selection.
She raised an interesting question about the refusal of an appointment to the network: that cannot be caught by Article 101(1) because there is no restrictive agreement. If the manufacturer were in a dominant position that would be relevant, but the application of Article 101 to refusals appears flawed. Interesting.
She then turned to the MAN decision. The new block exemption is unspecific on market definition, unlike Regulation 1400 - which had expired before this case came along. The Commisssion takes the view that the manufacturer's market share in the aftermarket includes supplier-owned repair shops and authorised repair shops. But the Commission's information on this is old, predating 2002, and fails to take account of differences between premium and volume brands which will be significant.
In the MAN case the repair shop claimed a right to be appointed based on German dominance rules, which apply a one-third market share rule.
The BGH said that where the end customer buys services is not the important thing for assessing dominance or market share. The important thing is whether the repairer really needs the contract in order to be active on the market. What is the market? It's all the goods and services needed to provide the services - and the authorised repairer contract is not one of them. As for the assumption that the market is brand-specific, because you are looking at it from the repairer's perspective, the market is not brand-specific. relevant market is upstream from consumer, which is what the Commission usually looks at.
Consequently, quantitative selective distribution is permissible, the block exemption applies, single branding is permitted - the whole model of the aftermarket posited by the Commission falls apart.
So is there an argument for saying that the market share for new vehicles and repair services should be aggregated? In the truck market, buyer's take whole life costs into account but they don't in the car market. This raises interesting questions about how to account for guarantee costs, which is likely to reduce the market share - even within the Commission's view of the matter.
Joseph Vogel addressed the matter of the aftermarket from the point of view of vehicle manufacturers and suppliers (consistent with the nature of his clientele). He spoke more about ADLC investigation - an own-initiative one - and its consultation document (rather different from a draft report!). It has been working on the matter for a year - and it has identified a number of issues, including protection for spare parts designs. However, although the issues in a market study might be more important than those in a competition infringement, the enterprises being investigated have far fewer rights - even though the economic impact of the proceeding might be more damaging to them than a formal penalty for a breach of competition rules. He explained why the manufacturers were so opposed to the investigation, including the point that given that European Union law reigns here there is no place for a national investigation.
The new block exemption regime raises seven points of importance when drafting contracts. It weakens the separation between sales and aftersales activities. It is permissible to ask distributors to do maintenance and repair work but no longer mandatory.
It is now accepted that warranties cannot be conditional on repair and maintenance within the network, but in France it has also been decided that the customer cannot be required to prove that a defect is not the fault of the independent repairer. The competition authority also takes the view that the same principles should apply to warranty extension. French consumer law also has to be borne in mind here: the law states that a "loss of warranty" clause has to be regarded as an unfair provision. Other countries (Germany,for example) has implemented the relevant directive in a different way.
What about the use of alternative tools and equipment? Can the manufacturer prohibit this? This coud be an abuse of a dominant position if there is no objective justification.
As for non-compete restrictions, which are not exempted under the new regulations, it seems in principle that they cannot be exempted individually, as far as the Commission is concerned.
The ADLC considers that there are too many price restrictions (maximum and minimum recommendations). But the VMs say they serve a useful purpose, and protect consumers from over-charging by dealers. The ADLC thinks that this leads to uniformity of pricing, though.
Recommended prices are also given for packages, and the practice has not previously been questioned. It gives consumers certainty and saves repairers time. But in practice contracts may not contain fixed or minimum prices, only recommended maximum prices.
Audit and inspection clauses in the contract are regulated quite differently from one country to another. Termination for fraud uncovered by such an audit can be a problem: it might be necessary (as it is in France) to allow the dealer to defend itself.
Incentive schemes are a complicated issue. they may constitute a vertical restriction if they have foreclosure effects. They have to be assessed on a case-by-case basis as the Commission acknowledged in its evaluation report. 1475 required different "baskets" to be created, to prevent full-line forcing, but that is watered down now. Captive and competitive parts must still be distinguished, and more falilies or baskets is better. there shoud be no fidelity-enhancing effect.

Brussels conference session one

The annual conference on the block exemption has moved from its regular January spot to the middle of the year which will be convenient given that big changes will happen this time next year. But it does mean that it is warm and humid in Brussels - not a good time to take a room at the wrong hotel and therefore have to take a lengthy walk after breakfast.
To start, the chairman Frank Wijkmans asked everyone present to introduce themselves - the audience being small enough for that to be practicable. Most of the usual suspects were present. He then explained that there was no speaker from the Commission today, because any speaker from that institution would have been obliged to say something about the long-awaited frequently asked questions and that would have been, for them, premature.
He then gave us a "helicopter perspective" (a modern, high-tech, trendy, version of a bird's-eye view, I suppose) of the subject, saying that in his experience there was less self-assessment going on than one might imagine: it is still common practice to stick closely and safely to the block exemption. But he reminded us that the starting point must always be Article 101(1) TFEU - the MAN case in Germany turns on that provision, as does the French Gremeau case (from 2007), raising the question whether there is a restriction on competition at all. That case is going to loom large in today's sessions - one of the speakers has ben asked to talk about it.
The FAQs are the other hot topic, and as Marc Greven of ACEA had mentioned in the opening self-introductions the document is on the way - but won't say much. Oh dear. The chairman's hope today is to ask our own questions (which will have a better claim to be frequently asked than the Commission's) and provide answers to them. He urged us not to underestimate the significance of the FAQs: previous FAQs have been treated almost as black-letter law.
The three Ts - technical info, tools and training - have been removed from teh blcok exemption, but the Commission  still threatens to return to the subject under the basic treaty articles, which is quite right. The inclusion of technical information issues in type approval legislation means that there are in principle significant sanctions for anyone who fails to make the information available.
The first speaker was Klaus Heimgaertner,  a lawyer with the ADAC, who had the job of presenting the consumer's perspective. He raised questions about the applicability of the block exemption in light of the Auto 24 case, which seemed to be misgivings shared by several other people to whom I have spoken. The way in which selection criteria may be applied is at least confusing. There are many frequently-asked questions about this - and many rarely-offered answers.
On dealer protection, he regarded the present situation (in which there isn't any) to be a step backwards, and  raised the possibility that national differences will emerge. Indeed, they already exist - which is why, as Joseph Vogel pointed out to me yesterday, there are about 100 court decisions touching on the block exemption in France but only one in the UK.
The German court concluded in the MAN case that the manufacturer did not have a dominant position in the Austrian market for repairs and servicing - taking a very different view of the relevant market. He said that other speakers would have more to say on the subject.
He spoke about an instance he had dealt with where an independent repairer had replaced a headlamp but had been obliged to send the customer to an authorised dealer to make the software adjustments to make it work. That was a new one to me - but not surprising. I am amused to see that he has abbreviated "repair and maintenance information" to "RMI". He bemoaned the lack of definitions in the new regulations, which meant that legal certainly gained over the lifetime of the previous block exemptions had been lost.
There seemed to be little in the way of a consumer perspective in his talk. In conclusion, he said that manufacturers are going to gain more influence from next year. There's a surprise. My only reservation about the truth of that is that they could hardly have more influence than they have at the moment. He thought that exclusive distribution will become common for premium brands, which would  be an interesting departure. As for the aftersales market, he drew a comparison with the Microsoft case in which the Court had just reduced (slightly) the penalty imposed on the software maker. It showed the unsuitability of antitrust law as a means of protecting consumers: it just takes too long to use.

Wednesday, 20 June 2012

Competition Law Challenges in the Motor Sector

IBC Legal Conferences hold what seems to be an annual conference on competition law in the automotive sector. In previous years it's been in February, but this year it's in June - next Thursday (28th) to be precise, in Brussels. You can read all about it here. The speaker panel seems to be a constant (although I have only ever been invited to speak once - did I say something wrong?): I have heard the same line-up in previous years and they are pretty good. I'm interested to see who the Commission speaker is ...

If you are interested in going, but haven't booked yet, Motor Law subscribers can enjoy (I use the word advisedly) a 10 per cent discount - drop me an email or give me a call if you wish to take advantage of this.

Tuesday, 19 June 2012

Insurer's own repairer's charges may be reasonable

In Coles & Ors v Hetherton & Ors [2012] EWHC 1599 (Comm) (15 June 2012)  the High Court (Cooke J) ruled that what was essentially Royal Sun Alliance's claim against two other insurance companies, in which RSA's use of its own repair facilities to fix its insureds' cars at the expense of the "at-fault" drivers who were insured by the other companies involved, was challenged. The case concerned three preliminary questions which had arisen at the case management conference stage of the proceedings, concerning the measure of loss (is it the reasonable cost of repair?), the test for a reasonable repair charge, and the recoverable amount (which seem very closely interconnected).

The judge took the view, after a long hard look at the precedents, that the measure of loss was indeed the reasonable cost of repair, and then (the most important point in the judgment) that the reasonableness of the costs was to be considered in the context of the arrangements made by the insured:
The reasonableness of the repair charge, as a measure of the diminution in the value of the damaged car, is to be assessed by reference to the position of the individual claimant, without reference to his insurers or to any benefits which he obtains under his insurance policy, for which he has paid premium. The well known and well established principles of insurance, as set out in the authorities to which I have referred, mean that the claimants' dealings with their insurers and the insurers' actions in relation to the indemnity granted are res inter alios acta, in the context of assessment of diminution in market value or costs of repair and behind the curtain for any tortfeasor who seeks to argue about mitigation of loss in payment of repair costs.
The charges made by RSA's repairer were therefore not inherently unreasonable, notwithstanding the relationship between the insurer and the repairer. And there are sound legal reasons for saying so, but they have to be considered - for wider purposes, not for the purposes of the case - in the context of other things happening in the motor insurance market, and in particular the OFT's reference to the Competition Commission in which competition in the industry is referred to, very un-legalistically, as "dysfunctional". (See my earlier post, OFT to refer car insurance market to Competition Commission.)

The third question, incidentally, was left for another day and another hearing as it features in an application for summary judgment.

The Daily Telegraph ("read by the people who remember the country as it used to be", as the rubric on the front cover of the late Prof Fred Hirsch's and David Gordon's excellent little book, Newspaper Money (Hutchinson, 1975, the year in which the unfortunate Prof started trying to teach me)*) reports in its customary balanced and thoughtful way that this could mean a 25 per cent hike in premiums. That is not a matter for the High Court in this action, but I hope it will be of considerable interest to the Competition Commission.

*In full (because it deserves to be read, dated as it is - though it has aged less than one might have expected):
"The Times is read by the people who run the country.
"The Guardian is read by the people who would like to run the country.
"The Financial Times is read by the people who own the country. [And me - ed.]
"The Daily Telegraph is read by the people who remember the country as it used to be.
"The Daily Express is read by the people who think the country still is like that.
"The Daily Mail is read by the wives of the men who run the country. [Editor's note: Margaret Thatcher had only just become leader of the Conservative Party. Her first cabinet, the first in many years to which the the Prime Minister did not appoint a woman, was five years in the future.]
"The Daily Mirror (which itself once tried to run the country) is read by the people who think they run the country.
"The Morning Star is read by the people who would like another country to run the country.
"The Sun - well, Murdoch has found a gap in the market - the oldest gap in the world."
Attributed to an anonymous advertising copywriter.

Thursday, 14 June 2012

Court of Justice on criteria for choice of dealer in selective system

The Court of Justice handed down judgment today in Case C-158/11, Auto 24 SARL v Jaguar Land Rover France SAS, a reference from the Cour de cassation. It's an important decision on the application of Regulation 1400/2002 which will remain relevant after the new rules come into force this time next year. While I read and digest the judgment, here's an extract from the press release to be going on with:
The present case concerns the quantitative selective distribution system established by Jaguar Land Rover France (JLR), which refused to appoint the French company Auto 24 as an authorised distributor of new Land Rover  motor vehicles in Périgueux (France).  JLR’s distribution system provided for the possibility of concluding 72 dealership agreements for 109 sites, set out in a table in which the town of Périgueux does not feature. 
Auto 24 brought an appeal before the Cour de cassation (France) seeking, in essence, compensation for the loss resulting from the refusal to appoint it as an authorised JLR distributor in Périgueux. That court asks the Court of Justice to interpret the term ‘specified criteria’ [found in Article 1(1)(f) of the block exemption]. In essence, the question is whether, in order to benefit from that regulation, a quantitative selective distribution system must be based on criteria which are objectively justified and applied in a uniform manner in respect of all applicants for authorisation. 
... [T]he Court explains that it refers to criteria whose precise content may  be verified. It states that  it is not necessary that the selection criteria used be published, at the risk  of compromising business secrets, or even facilitating possible collusive behaviour.  
The Court  points out that  the exemption regulation lays down distinct conditions for application according to  whether the system in question is classified as ‘quantitative selective distribution’ or ‘qualitative selective distribution’. Therefore, if, in the context of the regulation, the quantitative selection criteria had to be objective and non-discriminatory, that would result in a conflation of the conditions required by the regulation for the application of the exemption regulation to qualitative selective  distribution  systems and those required for the application of the exemption to quantitative selective distribution systems. 
Consequently, the Court's answer is that, in order to benefit from the exemption regulation, a quantitative selective distribution system must be based, inter alia, on criteria whose precise content may be verified, but it is not necessary for such a system to be based on criteria which are objectively justified and applied in a uniform and non-differentiated manner in respect of all applicants for authorisation. 
The emphasis is in the original.

Thursday, 7 June 2012

American Honda appeal against damages for inaccurate fuel consumption information

Automotive News reports that American Honda are appealing against a decision of a small claims court in California which awarded a consumer $10,000 because it considered Honda's claims about fuel economy of the Civic to be in accurate. This despite a court earlier approving a class action settlement, under which about 200,000 customers received payouts and rebates off new cars. The plaintiff in the latest case, a lawyer, opted out of the class action to pursue her own claim. Another 1,700 consumers are doing likewise - hence Honda's need to appeal that judgment.

Update (courtesy of Nicholas Yapp, Davenport Lyons): Honda have won the appeal, and Mrs Peters has been ordered to pay $75. She has no right of appeal. The judgment is here.

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.

US car dealers sue Mahindra & Mahindra

Dealers from five states have filed a lawsuit against Indian company, accusing it of fraud, misrepresentation and conspiracy. They claim that they were misled into investing and promoting the brand before reneging on its promises to deliver vehicles. The manufacturer allegedly walked away with cash and trade secrets worth $60 million.

An action brought against the Indian company in Missouri failed a while ago, and arbitration proceedings in London brought by Global Vehicles, the company's US importer, were concluded in Mahindra's favour in February.

The FT has the story here, and the dealers' lawyers Diaz Reus & Targ have more in a press release on their website here.

Construction and use regulations amended

Nothing remarkable about that, but as I have noticed the amending SI (2012 No 1404) let me give you a heads up - not that it's terribly exciting:

Regulation 3 amends the definition of “the emissions publication” in Schedule 7B to the 1986 Regulations by referring to the most recent (seventeenth) edition of the Department for Transport publication entitled “In Service Exhaust Emission Standards for Road Vehicles” (ISBN 978-0-9549352-7-6). The publication contains in-use emissions limits that petrol-engined cars and light vans are required to meet for the purpose of MoT and roadside emissions tests. The publication updates information on new models of such vehicles which have come onto the market since the previous amending Regulations (S.I. 2010/2060) came into force on 9th September 2010. It also revises a small amount of data on existing models.
So it's all about making the link between the legislation and the latest edition of the publication. Perhaps the more important news is that there is a seventeenth edition, which you can find here.

Tuesday, 5 June 2012

Ford F-150: now the whole vehicle is being copied

According to, which might not be the most reliable source of news in the world (but the story is elsewhere too), Ford's IP problems with the F-150 have not finished yet. First they had a spat with Ferrari over the designation of last season's formula 1 car (likelihood of confusion? but of course!) then there was GM's Superbowl TV commercial. And now a Chinese manufacturer, SAC, is alleged to have ripped off the design of the vehicle as a whole. It seems they have some form for doing so, and as Dave Musker told last year's Motor Law conference there are many Chinese vehicle designs that look suspiciously like other manufacturers' products.

It doesn't look to me too much like a slavish copy, though. The blue badge in the middle of the grille isn't very clever, admittedly, but the lines of the truck itself look distinctly different - and how much freedom does the designer of a pick-up actually have? It's a pretty generic-looking truck, to my eye. But Ford, I know, have their own ideas of what amounts to counterfeiting ... So far, although news of the vehicle has been out for a while, I've seen no report of Ford taking any action about it.

OFT to refer car insurance market to Competition Commission

And not before time, you might say. The Press Release can be read here if you want all the gory details. The OFT reckons that competition in the market is "dysfunctional", and although there's nothing in the legislation expressly outlawing dysfunctional competition (which might just be a trendy alternative to a boring but legally correct expression) it is pretty clear that there's something not right. Having carried out a market investigation, the OFT has decided that there are features of the market that restrict, distort or prevent competition, and as no quick fix can be identified it proposes to refer the matter to the Competition Commision.

The problems arise from the way that, after an accident, the not-at-fault driver's insurers are in the driving seat. This opens up all sorts of possibilities for brokers, credit hire organisations and repairers, to take advantage of this lack of control and generate revenues through rebates and referral fees. The result is inflated costs forinsurers of at-fault drivers. This, the OFT says, "is an inefficient way for the sector to operate, raising the total costs for providing private motor insurance which drivers end up paying." It reckons that it might be better if competition were based on the quality and value of the service provided to insurance companies' clients, not on trying to load costs onto the competition to make them put their rates up. And who can argue with that, if it's a fair summary of what's going on?