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Thursday, 2 August 2018

A new approach to controlling secondary markets

An article in The Guardian (and elsewhere, especially Newshub) today shows how vehicle manufacturers might have new opportunities to control secondary markets, which has been a sort of Holy Grail for them as long as I have known the motor industry.

Back when I started my career, it was - of course! - the spares market that attracted the vehicle manufacturers, or "assemblers" as the component manufacturers preferred to call them. Battles were fought and, generally, won over design protection and restrictions in dealer agreements. Servicing and repair was another battleground, although the block exemption in its early iterations obliged networks to provide sales and service together, for the convenience of the customer who had bought a good the essential point of which was that it could move around and might need servicing or repairing far from home. More recently, the block exemption has separated sales from service, which might be thought of as another defeat for vehicle manufacturers.

I could go on, citing the prevalence of PCPs which ensure the VM retains ownership and control over the car while the customer gets the use of it - a potent means of keeping the network's workshops busy - and the reluctance of the VMs to disclose repair and maintenance information to enable independent repairers to do their jobs. Approved used car programmes do a similar job. It's all about control, and specifically control of the secondary markets that surround the basic matter of moving the metal. Did I mention F & I?

New technology means new opportunities to control these markets. Connected cars have the ability to book themselves into an authorised workshop for servicing or repair (and of course if they are merely hired out on a PCP competition has already been excluded). Maintenance increasingly involves software, whether to reprogram the emissions controls or to update the four-wheeled computer that you're driving nowadays. We used to argue that selling cars was not like selling baked beans (as Asdadrive discovered, for those who remember the 1980s), but nowadays perhaps the comparison is with smartphones. You network provider can stop your phone working (and, if you haven't paid the bill, will do so): so too can your mobility provider (the company formerly known as the manufacturer of your car).

Tesla, whose offering to the car-buying public is so novel, seem to be exploring the limits of what they can do, according the article that started me writing this piece. It occurs to me that the existence of the secondhand market isn't actually in the interests of the manufacturers, who would make more profit from selling new cars even (perhaps) if they had to recycle old ones: but the fact that there is a market for used cars can be helpful, in that it lubricates the market for new ones - and it certainly helps the repair, maintenance and spares businesses. But according to the Guardian's story, Mr Darwin, the owner of an electric bike shop in New Zealand, has found his efforts to fix up a written-off Tesla and get it back on the road thwarted by the manufacturer.

Mr Darwin bought the car in an auction in Australia, where it is not legally possible to put a repaired write-off back on the road. It's hard enough in this country, of course, which is rather wasteful when cars are written-off so easily because their complexity makes the cost of repair of even minor damage so great, but in Australia it seems it simply cannot be done. New Zealand, however, is another matter, and the damage to Mr Darwin's Tesla was limited to the bodywork so he had it fixed in Australia then shipped home. It was "recertified and approved by Tesla" (this is where relying on press reports becomes unsatisfactory - so far my research has not told me what this means) but when Mr Darwin took it to a charging facility he discovered that his car was "not supported".

That's a concept we are probably all familiar with. Computer programs may not be supported by the latest version of Windows - a frequent source of irritation. When some apps were no longer supported on my old BlackBerry, I had little alternative but to get a more modern one - but that's a different matter from the Tesla situation, because that is a third party app provider being left high and dry by the maker of the phone and its operating system. In the Tesla case it's the manufacturer choosing not to support the charging function.

Tesla's argument, according to The Guardian's piece, is that it could not be sure that the car was safe, citing the "extreme amount of damage" it had suffered - which seems at odds with the buyer's version of the story, and he's the one who had seen it. So the safety of second-hand cars is a matter for the manufacturer? What about DVLA and VOSA, and their equivalents in New Zealand and other places? In the UK, the manufacturer would only be liable under the Consumer Protection Act 1987 if the defect were present at the relevant time - when the car was supplied - so subsequent repairs do not expose the manufacturer. (On the other hand, to be fair to Tesla, it might not have been a desire to avoid legal liability but a general promotion of public safety that motivated them.)

Maybe Tesla were acting from an excess of caution, which given the problems they have had with their so-called "Autopilot" feature is perhaps understandable. But they rather undermined their case by giving Mr Darwin access to "fast charging" (several hours) but not "supercharging" (under an hour) when his complaints became public - so they weren't keeping the car off the road completely, which would be consistent with their safety arguments, just taking it out of circulation for a few hours at a time.

In any event, what the matter shows is that modern technology gives car makers new powers that can overreach into additional markets, creating potential competition law problems under the cover of consumer protection concerns. Those concerns need to be left to the appropriate authorities, and any attempt by the manufacturer to control the secondary market has to be resisted. It comes down to the question of what you actually own when you buy a car - and with electric vehicles and connected cars, the manufacturer controls more and more of your wheels.




Thursday, 3 May 2018

General court allows restrictions on sales of spares to independent repairers

In a judgment from last October, the General Court has confirmed that suppliers may restrict aftermarket access to spare parts to authorised repairers. But before you get too excited, the case was about watches and the court specifically said that it did not apply to the motor sector. The fact that the motor sector has its own block exemption was one (fairly compelling) reason why the court excluded it from the scope of the judgement: it would have been surprising had the court applied the same principles to luxury watches and cars, although it begs the question whether perhaps luxury cars should be treated differently from volume ones.

The upshot of the judgment is that an authorised repairers can be refused access to spare parts, even if the supplier has a dominant position in the market for those parts. The case concerned a complaint, first made in 2004, by the European Confederation of Watch Repairer Associations (CEAHR). Initially the commission rejected the complaint on the grounds of the was insufficient interest the European Union level. On appeal, the General Court held that the Commission had failed to consider all the relevant facts and arguments and annulled the decision (Case T-427/08). In 2011 the Commission launched a new investigation which it closed in 2014 on the grounds that the cost was disproportionate to the likelihood of finding an infringement. (Surely it is equally important to make decisions that show where an infringement is not taking place?) Once again CEAHR appealed and once again the court sided with the commission.

It is of course quite common for the commission to identify separate product markets the primary products and secondary products – spares and replacement parts. Manufacturers have often been found to be dominant in the spares market, which is frequently brand specific - it is certainly taken to be in the motor sector. In this case, the Commission recognised a separate product market for the sale of primary products, namely luxury watches, and another market the maintenance and repair services as well as a market for the supply of spare parts. The Commission found that the secondary markets were brand-specific: Swiss watchmakers could be dominant, so was their refusal to supply an abuse of their dominant position?

The court, going beyond what should have been necessary for the purposes of deciding whether the Commission had been right to drop the investigation, took the view that selective repair systems were analogous to selective distribution systems. They are permissible under competition rules, provided the restrictions are objectively justified to preserve the quality of the products and to ensure their product use, and that admission to the network is based on objective criteria of a qualitative nature which are applied in a non-discriminatory fashion. Those criteria must also be proportionate.

If the manufacturer is dominant, the refusal to supply dependent repairers will only be an abuse where all effective competition in the parts will be eliminated. If there is still competition between authorised repairers and the network remains open to new authorised repairers, the petition will not be eliminated and there will be no abuse. Excluding repairers who do not meet criteria sept double. Preserving an distorted competition does not necessarily mean protecting independent repairers as such.

The court thought that the use of selective repair networks was probably justified the luxury watches, to prevent counterfeiting of the watches themselves and of spare parts. Significantly, it would not be justified to protect the brand image. CEAHR appealed to the Court of Justice, but later withdrew, so there the law stands.

Case T-712/14 CEAHR v Commission (27 October 2017) reported here by Baker & Mckenzie.

Thursday, 7 September 2017

Bentley: another cautionary trade mark tale

Bentley Motors has been involved in a trade mark dispute for many years, the other party being a company called Brandlogic which owns a number of trade marks of which the important verbal part is BENTLEY 1962, which have been registered for clothes since as long ago as 1982.

Bentley Motors has been using its trade mark on a small range of clothes for nearly 20 years. The prices of the clothes are, other things being equal, comparable to the price of the cars - a polo shirt will set you back £75, according to the Financial Times. Not happy about someone else using the name, Bentley Motors sought to have the Brandlogic trade marks declared invalid or revoked on grounds of non-use for five years. Although they succeeded in part, they were unable to clear the way entirely, and even an appeal (to the Appointed Person) left Bentley Motors in difficulties.

Now Bentley Motors have filed an EU trade mark application. They might have been hoping that this way they might do without Brandlogic noticing, because on the face of it their earlier trade marks will be a barrier to the new application. I've done it myself, usually the other way round - applying for a UK trade mark so the owner of an earlier EU trade mark wouldn't notice. If so, it hasn't worked. The reason the matter has been in the press recently is because Brandlogic's trade mark attorneys have switched sides, in a perfectly proper manner within the rules (although that's not to say that the rules, or the regulator, are right). Inevitably, they will want to act for the client with the biggest chequebook - that's the way the legal industry works (oh, you thought it was a profession?).

What is deplorable here is not that a company should be trying to maximise the power of its trade marks. As car companies go into making clothes - as everyone goes into making clothes, I suppose - trade mark registrations have to get wider. Often these conflicts are dealt with in a very heavy-handed way - the Goliath tries to bully David. I've seen it happen to my own clients and it isn't nice. But Goliath is answerable to its shareholders, and they are going to insist on trying every trick in the book to overcome the nuisance earlier trade mark, regardless of the merits. Often might alone (or at least a big chequebook) is enough. And that isn't a sound basis for a just trade marks system.

Sunday, 3 September 2017

Testarossa trade mark under threat

According to international IP firm Novagraaf, Ferrari face a challenge to their registration of the trade mark TESTAROSSA. Autec AG of Nuremberg has applied to register an identical trade mark (in Germany, presumably) for bicycles (including e-bikes), and Ferrari's opposition has been rejected by the German courts on the grounds that the Italian manufacturer has not used its trade mark for more than five years. Non-use for five years or more makes a trade mark registration liable to revocation, and Autec is now seeking to have Ferrari's German and EU trade marks revoked.

Ferrari had argued that the trade mark was in use, as it was providing maintenance and repair services for the Testarossa - which it stopped making in 1996. But the court, crucially, held that in fact those services were marketed under the Ferrari brand not TESTAROSSA.

That seems quite correct to me. Trade marks perform several functions, not just the traditional origin-indicating one, but essentially a trade mark owner must use a trade mark to indicate the origin of its goods and services. TESTAROSSA in connection with servicing and repair is an indication of the purpose of the services, and should not support the registration of the trade mark for cars. There are 11 various registrations in Ferrari's name for TESTAROSSA (and quite a few in other people's names, hardly surprising given that the word could just as well be used for many different goods), but none of them are for services. Replacement parts are covered, but I suspect that the objection that they are sold under the Ferrari name not TESTAROSSA (and, if it be used at all, that designation is purely descriptive of the purpose of the goods) would apply here too.

A cautionary tale for owners of "heritage" (that is to say, old) trade marks. In the UK, perhaps they don't need to worry so much because an action for passing off might lie even if the trade mark were liable to revocation, but far better and cheaper to keep the trade mark in use, somehow. When the modern Testarossa was launched in 1984 its chosen name harked back to the 1957 Ferrari 250 sports racing car, and the name could similarly be recycled now to maintain protection. 

Tuesday, 29 August 2017

Germany/Italy: BMW in claim for infringement of wheel design

This blog post from Dr Meyer-Dulheuer & Partners tells us that BMW have become embroiled in legal proceedings over a design for a wheel. Specifically, they have an EU Registered Design for the wheel, and an Italian company named Acacia has made wheels allegedly to the design. Acacia supply their products under the "Wheels Spare Parts" brand, which gives a pretty clear indication of how they hope to avoid a successful claim that they have infringed. Good luck to them, in light of the Round and Metal case in the UK. Of course the courts of another Member State might differ - and the history of EU design law tells us that continental countries don't necessarily share the UK's views on spare parts.

So far, the dispute has been focused on forum. Acacia applied to the Italian courts for a declaration of non-infringement, and the matter eventually found its way to Luxembourg where the Court of Justice held that the courts of the defendant's country were the right venue for the dispute. The matter is complicated by the fact that the so-called "repair clause" (the EU equivalent of the UK's "must-match" exemption) has been adopted in Italian but not in German law, so (between Germany and Italy) Acacia's defence could only work in its home country. Acacia's apparent hope that BMW's response to the Italian proceedings would give the court jurisdiction didn't work either - although parties to foreign proceedings must always take great care when faced with the need to take a step that could be regarded as accepting jurisdiction.

So now it seems that we can await, with great interest, the judgment on the substantive claim from the German court.

Here is the Judgement of the Court (Second Chamber) from 13 July 2017.

Friday, 11 August 2017

Volkswagen offers free telematics service to new and current company car drivers

Fleet News reports this development from VW. The service (which seems to be based on a mobile phone app) is aimed at fleet operators. It enables drivers (and presumably their employers) to monitor fuel consumption and driving style, and (here's the legally interesting thing) offers the possibility of linking to authorised repairers. Provided it's optional, the latter should be OK: it will be handy for operators, no doubt, and they are likely to be locked in to service contracts anyway. It's when such links tie consumers to the network that it gets worrying, both from the competition angle and as a data protection issue.



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Wednesday, 9 August 2017

VW offers trade-ins up to 10,000 euros in diesel clean-up

Reuters reports that VW is offering up to €10,000 off the price of a new car to encourage owners to trade in older diesel cars. Manufacturers had promised German government officials last week that they would modify software in more than 5 million diesel-powered cars, hoping to avoid a ban on diesel vehicles - several major German cities are talking about banning diesels, and with federal elections due next month the issue is urgent.

The discounts offered by VW vary (as you might expect) across the range, and cover several brands within the group. For the core VW brand, the rebate will be between €2,000 and €10,000: for Audi, €3,000 to €10,000, and for Porsche, €5,000, according to Reuters. BMW, Daimler and Ford have also announced incentives.

The VW offer will run to the end of the year, and additional incentives to go for hybrid, electric or natural gas models are also available.

BMW is also extending to the UK a similar scheme it launched recently in Germany. Details from BMW here.

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