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Saturday, 4 January 2020

Dieselgate: the Australian chapter of the saga ends

Australia's Federal Court has imposed a penalty of AU$125 million for Volkswagen AG's breach of section 29(1)(a) of the Australian Consumer Law, in that it failed to dislose the true nature of emission outputs when seeking importation approval for more than 57,000 vehicles. (Australian Competition and Consumer Commission v Volkswagen Aktiengesellschaft [2019] FCA 2166 (20 December 2019).

The penalty, by a factor of nearly five the highest ever imposed under the Law, was increased by the Federal Court, which took the view that the AU$75 million penalty imposed by consent of VW and the Australian Competition and Consumer Commission was "manifestly inadequate". Back in October, Foster J had said that the agreed penalty (plus AU$4 million costs) was "outrageous" and shouold have been "multiples of that amount" considering the scale of the wrongdoing (The Guardian, 16 October). In the judgment, he says that it did not meet the overriding objectives of imposing a penalty, namely specific and general deterrence.

The Guardian (20 December) reports that VW is (understandably) considering whether to appeal, saying that it believed the original agreed penalty was fair:
“Volkswagen AG firmly believes that the penalty of $75m agreed in principle with the Australian Competition and Consumer Commission to resolve the regulatory proceedings was a fair amount and is carefully reviewing the court’s reasons for deviating from that amount.” 
Nevertheless, it is substantially less than penalties imposed in other jurisdictions. In Germany the manufacturer was fined €1 billion, which equates to AU$1.6 billion. The Australian court could have gone as high as AU$520.3 million (so, about halfway to the German fine) because the law provided for a penalty of AU$1.1 per contravention. Under s.224(1) of the ACL, the court has to be satisfied that a settlement is appropriate having regard to all the relevant circumstances. The agreed penalty, noted the Judge (Foster J), was not supported by reasoning on either side, and VW was "more than capable" of paying a lot more.

Since Dieselgate broke, the penalties regime under the ACL has been toughened and more closely resembles what we have become accustomed to in the UK and EU. More information can be found (inter alia) from King & Wood Malleson's In Competition website, which is a main source of information for this posting.

An ACCC media release says that chair Rod Sims said Volkswagen AG’s conduct had been blatant and deliberate: but he made no mention of the $75m consent agreement.

Australian Securities and Investments Commission penalises VW Financial Services Australia

The Sydney Morning Herald reports that civil penalty proceedings have been brought against VW's financial services arm for breaches of consumer credit laws.

The breaches consist of failing to make reasonable inquiries or to verify borrowers' living expenses. Nearly 50,000 loan contracts are involved, and took place between 20 December 2013 and 15 December 2016.

Monday, 16 September 2019

Dieselgate: VW settles Australian class actions

Owners of VW, Audi and Skoda vehicles in Australia will have access to a minimum of AU$87 million in compensation (and possibly as much as AU$127 million) following settlement of a class action arising from the emissions scandal. Legal costs will be paid on top of the compensation, though VW makes no admission of liability.

Tuesday, 9 April 2019

Commission publishes draft guidelines on autonomous vehicles

Monday, 7 January 2019

Independent garage defeats vehicle manufacturer's trade mark

Thanks to Jane Lambert and her NIPC Law blog for drawing my attention to Jaguar Land Rover Ltd v Twisted Automotive Ltd [2018] EWHC 3536 (Ch) (20 December 2018) which is a judgment of Rose J in an appeal against the 15 May 2018 (O-289-18) decision of Ms Louise White acting for the Registrar of Trade Marks. In her decision, Ms White upheld the opposition by the Respondent to the registration by the Appellant of the trademark "LR" (except for bicycles and scooters and related goods): and in her judgment Rose J dismissed the appeal. Quite right too, IMHO, although on the facts it could be a pretty close-run thing.

Twisted, who trade as specialists in Land-Rover Defender vehicles, parts and services, had no registered trade mark, so they had to rely on section 5(4)(a) of the Trade Marks Act 1994 - which in essence required them to show that they could have succeeded in a passing-off action. The main reason that I think it might have been a close-run thing was that their use only goes back to November 2015, and although the point did not detain the learned judge the appellant pointed out that the date on which the strength of the respondent's goodwill had to be measured was the application date - 23 August 2016.

JLR put forward the interesting argument that their use of the sign LR would not be a misrepresentation, because the respondent was indeed dealing in Land-Rover products. Remember that what was at issue was not (as is usually the case when manufacturers sue independent repairers) whether the respondent could use the sign, but whether the appellant could be allowed to register it. JLR were, in a sense, too late: unless the Hearing Officer had got it very wrong (a gross over-simplification of the principles set out by Arnold J in Apple Inc v Arcadia Trading Limited [2017] EWHC 440 (Ch)) an appeal court cannot interfere, and anyway JLR's assertion that the sign would be recognised as identifying their business was just that, an assertion, unsupported by evidence. In fact, JLR had never used the sign at all. The learned judge saw no reason to interfere with the Hearing Officer's decision.

While on the face of it you might not expect such a short period of trading under the sign to create enough goodwill for a passing-off action to succeed, that didn't influence the outcome of the case. And actually in my view there could well have been enough goodwill. If (as the Mullers Margarine case tells us) goodwill is the attractive force that brings in custom, you have to take the customers as you find them. Land-Rover Defenders are specialist vehicles. Indeed, Land-Rover don't make mass-market vehicles at all, but I think there is a distinction to be drawn between its Range Rover, Discovery and Freelander ranges and the utilitarian Defender, developed from the original Land-Rover which required no fancy model name - indeed, had nothing remotely fancy about it and often attracted the adjective "agricultural", which was always meant in a good way. No-one buys a Defender as an ordinary family run-around: it is designed to do a particular job, which it does very well, and if you don't want a vehicle to do that you won't buy one. Simple. As I remarked in a slightly different context - in 2013, though it seems like only yesterday - not all car owners are the same. In that earlier post I was considering Porsche owners, but (while there might be little overlap with Defender owners) the same principle applies. We are talking about enthusiasts. "Petrolheads" might not be the right word, given that Defenders often have diesel engines, but you get my drift, don't you?

While the owner of a bog standard cooking family saloon or hatchback might not bother to understand the intricacies of the motor trade - distinguishing between manufacturer and dealer, and between authorised repairer and independent - and indeed these days might not even own their car but just lease it, we should not assume that enthusiasts are the same. They buy a Defender (or a Porsche, or whatever), not mobility. When they look for specialist services, or parts or accessories, they are quite likely to trust independent experts rather than authorised dealers.

It's a fact of life that authorised workshops only usually get to see cars under three years old. Once they reach MoT age they tend to become the preserve of independent garages. Maintenance contracts, personal leases and warranties might all contribute to extending that period of exclusivity, but as a rule the buyer of a secondhand car isn't as likely to entrust it to the authorised workshops for servicing and repair. They often cost more - sometimes a great deal more - and their up-to-date knowledge isn't particularly important if you don't have an up-to-date car. The last Defender (apart from a limited edition for the 70th anniversary in 2018 - only 150 examples) was made nearly three years ago, so Land-Rover dealers will be seeing less and less of them anyway: owners will be aware of the independent sector, and to keep their running costs proportionate to the value of their vehicle they will be inclined to use it.

Enthusiasts, such as Defender owners, should be assumed to know the value of the independent sector and to understand the differences between it and the franchised motor trade. So while this isn't how Rose J reached her decision (neither is it how the Hearing Officer Ms Louise White reached hers), I think it demonstrates that the decisions were absolutely right.

BSI publishes new cybersecurity standard for self-driving vehicles

A Department for Transport press release, New cyber security standard for self-driving vehicles (19 December 2018) has announced the publication of a new BSI cybersecurity standard, PAS 1885:2018, enticingly titled “The fundamental principles of automotive cyber security – Specification”. It is available for £120. BSI subscribers can obtain it for half that.

The DfT's press release says:
Working with academics and experts from leading businesses in the car industry including Jaguar Land Rover, Ford and Bentley, as well as the National Cyber Security Centre, and funded by the Department for Transport, the British Standards Institute developed the guidance to set a marker for those developing self-driving car technology. The UK market for connected and automated vehicles is forecast to be worth up to £52 billion by 2035.
Jesse Norman, Future of Mobility Minister, said:
As vehicles get smarter, major opportunities for the future of mobility increase. But so too do the challenges posed by data theft and hacking.
This cyber security standard should help to improve the resilience and readiness of the industry, and help keep the UK at the forefront of advancing transport technology.
This follows the government’s publication last year which set out key principles of cyber security for automated vehicles, such as the expectation that systems should be designed to be resilient to attacks and respond appropriately when its defences fail.
Car manufacturers will be able to use the new standard published today to demonstrate that they are following these principles.

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.