TV show provides evidence of health and safety breaches

Ah, health and safety. A universal excuse for stopping people doing what they want, to which even the Data Protection Act has to concede first place. But of course it does a very useful job too. A recent prosecution demonstrates that you mustn't think the Health and Safety Executive won't find out if you're doing something not quite right.

A firm of stonemasons appeared on Monty Don’s Mastercraft television programme in March 2010. A viewer complained to the HSE about the working conditions shown on his or her TV, including the hard-to-miss fact that employees appeared to be working in a cloud of dust (as, presumably, stonemasons have done since time immemorial). The HSE found the dust in the workplace exceeded legal limits and served an Improvement Notice. Six months later, the HSE found that the ventilation system had not been properly checked and served a second notice. But still the dust problem remained, and on a third visit was twice the permissible level. The company pleaded guilty to failing to comply with an Improvement Notice and was fined £5,000 with £1,400 costs, despite its arguments that it took time to locate an engineer and then get the parts to fix the (Italian) machine.

If you are offered your fifteen minutes of fame, make sure you're not revealing something that the HSE will find interesting.

Taxing use of company vans

HMRC is reported to be increasing its monitoring of the use of company vans amid concerns that insufficient tax and NI contributions are being collected. More information can be found here on chartered accountants Dains LLP's website. Using a company van for private purposes should be charged to tax as a benefit in kind at £3,000 a year. The rules that apply to vans are not as strict as those for cars, an in particular private use of vans can be considered 'insignificant' and therefore tax-free. What is "insignificant" is like the length of a piece of string - but if private use isn't even governed by a policy, or being monitored, it's even more meaningless. Back in September HMRC sent questionnaires to a number of employers covering these issues and other aspects of company van use. Some sizeable tax (and NI) bills might be the result.

USA: Consolidator website's dubious practices reflect on dealers

The Internet is replete with websites that serve to bring together the offerings of traders who have things to sell: the word "parasite" came briefly to mind as I typed that, but comparison and consolidation websites can serve a useful purpose. They reduce consumer search costs, don't they? But what if they don't operate according to the sort of standards that one might expect?

The Colorado Department of Revenue Auto Industry Division has published a statement (thanks to Automotive News for the story) about how dealers might be affected when they advertise cars through sites like one called TrueCar. It noted several specific violations of advertising rules, and also the potential for "bait and switch" violations - getting a customer into the showroom by advertising a car that's already sold, then selling them something else. The important point is that in the particular case the dealers were responsible for what was being said on the TrueCar site on their behalf. They might not have been aware of what TrueCar said, and they might not have realised that it was their responsibility to ensure it was accurate.

The position in Colorado (and elsewhere in the US) is different in that motor vehicle dealers have to be licensed, and TrueCar wasn't. But that's only part of the story.  Although the law isn't exactly the same, similar principles could catch dealers out in the UK if they weren't careful.

US: Spot delivery and dealer's obligations

If you want to sell a car badly enough, you might do some daft things - rather like a lawyer starting work for a client without money on account, a mistake that I have made often enough. In the car trade, spot delivery (otherwise known as "yo-yo sales") is the equivalent, and it's driven in part by the phenomenon known as "buyer's remorse". It's a good idea to get the customer in the car and off down the road before they think twice.

Of course, there are legal issues to consider here - cooling-off periods where finance is involved, in particular. But Automotive News has a disconcerting story about a Florida dealer who put a customer in a used car under a conditional sale agreement, sent her on her way, then found that the finance company wouldn't do the deal. In that situation everything is supposed to be off, the car comes back to the dealer and the customer might end up with a more affordable set of wheels - but here the customer kept the car, and tried to make monthly payments to the dealer of the same amount as would have been due to the finance company. When the payments were refused, the customer sued the dealer (they do things differently in the USA, evidently) with what seems to be a kitchen sink full of claims, and the dealer counterclaimed.

Happily, for the dealer and for common sense, the court held against the customer. But it's still a remarkably risky way of doing business, even if problems can eventually be ironed out by the courts.

US: restriction on use of mobile phones

The land of the free is introducing restrictions on using mobile phones while driving, from 3 January (or January 3, as they say over there). But only for drivers of commercial vehicles. Fisher & Phillips LLP, a specialist, US-wide, employment law firm of whom, unsurprisingly, I had not previously heard, have a briefing about the new law here if you're interested. I like the explanation that "the device must either be mounted or otherwise securely within reach at the control panel (in the area where the vehicle controls such as climate control and radio are located)." I am old-fashioned enough to think that "vehicle controls" is apt to describe items such as accelerator, brake pedal, clutch, gear lever, indicators and light switch: climate control, which means window winder (a handle mounted on the door panel) or, ideally, hood (not in the American sense) hardly seems to me to be a vehicle control, and radio is merely a desirable but frequently inaudible (especially when using the ideal climate control technology) accessory.

I am also old-fashioned enough to loathe mobile phones and their ubiquitous use, and to question the sanity of anyone who uses one illegally while driving. But there we are.

OFT investigates private motor insurance market

Three months after it issued a call for evidence, the OFT has now launched a market investigation into the private motor insurance market. Details are on the website here. It will focus on credit vehicle hire companies and insurers' repairer networks, where it has reasonable grounds for believing that there are features of the market that distort or restrict competition, or both. Depending on what it finds, it might make a market investigation reference to the Competition Commission.

US: prosecutor alleges Hezbollah laundered money with used-car sales

As a practising solicitor, anti-money-laundering checks are the bane of my life, especially since I can't see how what I do for clients could ever possibly facilitate money laundering. Maybe I need to think a little more laterally, for Automotive News reports today that the US federal government has filed a civil complaint against Lebanese Canadian Bank and two Lebanese exchange houses, alleging that they helped launder more than $480 million for Hezbollah in a scheme involving buying and selling used cars.

A more productive use

The just-auto website tells us:

Almost half of closed former automaker sites in the US have been converted to new, productive uses, according to Ann Arbor, Michigan-based Center for Automotive Research (CAR).

Would I be right to infer that automaking is not a productive activity, I wonder?

Motor Law volume 12 number 11

The latest edition is out now - a bit late - and subscribers should be receiving their copies this morning. 

Equality cases can go to High Court

The Court of Appeal has today held that equality claims do not have to be brought in the employment tribunal, but may be brought in the High Court. The significance lies mainly in the time within which claims have to be brought: six months in the Tribunal, six years in the court.
The Court of Appeal, which expressed surprise that this was the first time in 40 years that the question had come before the courts, declined to allow an appeal to the Supreme Court - saying that although it was a matter of considerable importance, which could affect many other claims, it was right that the Supremes should make the decision about whether to hear a further appeal or not.
Birmingham City Council v Abdulla & Ors [2011] EWCA Civ 1412 (29 November 2011).

When a contract has been repudiated

The doctrine of repudiatory breach in contract law is notoriously difficult. It is not always clear which party is in breach and which has accepted the other's breach, which means it is then released from its obligations under the contract. The end result is that both parties are not doing what they agreed to do: which one started it?

The Court of Appeal considered just such a difficult case earlier this year, in DRLLimited v Wincaton Group Limited [2011] EWCA Civ 839. Wincanton provided logistics services to DRL and would invoice them weekly, deducting certain matters such as damage and stock loss liability. The invoices were to be agreed and signed off by both parties, and the agreement required DRL to pay without deduction, set-off or counterclaim although it was entitled to withhold payment of any sum subject to a bona fide dispute, provided it paid any sums not in dispute. A dispute did arise, and the parties agreed to suspend their respective positions to enable DRL to find another supplier. They would pay a lump sum to Wincanton, who would continue to perform the services, but shortly afterwards Wincanton threatened to stop deliveries unless sums relating to some old disputed invoices were paid. Later the threat was repeated and payment of one invoice demanded the same day. DRL refused to pay a current invoice, Wincanton stopped deliveries, and both parties claimed the other was in repudiatory breach.

The judge held that Wincanton's conduct had been improper and unjustified, but not repudiatory. DRL had committed the repudiatory breach by refusing to pay the current invoice, and Wincanton had accepted the repudiation when they stopped deliveries. The Court of Appeal disagreed.

Lloyd LJ, giving the leading judgment, said that Wincanton's demand for payment of the old invoices was a flagrant breach of the compromise that the parties had reached, especially given that under that agreement DRL had paid them a cool million pounds. He also referred to other things Wincanton had done: asserting a lien over goods held by them and diverting goods that were supposed to have gone to the new logistics company. He took the view that Wincanton were already

in breach before DRL's refusal to pay the invoice, notwithstanding that it was still delivering goods to customers day-to-day. Finally, its ultimatum to make no further deliveries unless payments were received the same day amounted to a repudiation of all its obligations under the compromise, and DRL accepted the repudiation when it said that it would not make any more payments.

Once this happened, the original agreement as a whole and the variations agreed in the compromise came to an end. DRL was not prevented from setting off amounts against the latest invoices, and it could assert cross-claims as reasons for not paying them: that meant that its refusal to pay the latest invoice was not a breach.

Romania: Ford face fine for underproduction

At first sight, it could be a throwback to the era of centrally-planned economies: why on earth might the authorities in Romania be threatening to fine Ford for not making enough cars at its plant at Craiova?

The answer, as Bloomberg (along with several other websites) reports, is that the manufacturer received state aid to set up the factory in the first place, and the production targets form part of the agreement supporting the financial help. 250,000 was the contractual volume this year, and going by the reports Ford haven't missed it very narrowly - so far they have manufactured only 7,600 units. €14 million is the fine being mooted, even though Romania isn't yet in the Eurozone (and might be wondering whether it really wants to join next year, as it plans).

Rogue salesman: where does the loss lie?

A case that's only recently come to my attention - Quinn v CC Automotive Group Ltd (t/a Carcraft) [2010] EWCA Civ 1412 (16 December 2010) - concerns the classic situation that arises when a finance agreement is not cleared on a car taken in part exchange. The buyer ends up with a new car, but still has to pay for the one he just gave away - and to make matters worse, the dealer's salesman was, as the court put it, a rogue.

The rogue, being the dealer's salesman, had express authority to do certain things on behalf of his employer: the court (both the trial judge and the Court of Appeal) was clear about that. He also had ostensible authority, so he could bind the dealer even if he had gone beyond what he was actually supposed to do. The question on appeal was whether the customer should have been put on enquiry when strange things happened - like meetings being held at a motorway service station, and being told by the salesman that part of an additional deposit that was suddenly asked for could be paid sometime later. What the salesman had done were all things that salesmen commonly do, and it was wrong for the judge to import an "inquiry" test, not to mention a reasonableness test.

In situations like this, the court has to decide which of two innocent parties bears the loss (because the rogue is unlikely to be able to compensate anyone). After an interesting review of the authorities on the point, the Court of Appeal concluded that the answer lay in the principle stated by Holt CJ in Hern v Nichols (1700) 1 Salk. 289:

Seeing somebody must be a loser, by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser, than a stranger.

That passage was described, with approval, by Diplock LJ (as he then was), in Morris v Martin (at p.733), as expressing an "old, robust and moral principle". By allowing the customer's appeal, and holding the dealer liable, the Court of Appeal considered that it was following that principle. But it's still a rough form of justice, and one that certainly requires dealers to be on their guard.

Forfeiture of deposit in business purchase

When a deposit has been forfeit, and when it should be returned, is not always an easy question. The chances are that the parties involved will have different views about the matter, but a recent High Court case sheds light on the question.
A purchaser failed to complete the purchase of a business from a company in administration. Frequently a sale as a going concern will be the best way to maximise the value of the insolvent company. Because cash reserves to keep the business going are likely to be small and the timetable for the sale will be tight, the administrator might insist on a non-refundable deposit to provide comfort that the purchaser will complete. It might be very difficult to find another purchaser if the first one pulls out.
Here, the buyer was not in a position to complete immediately. The administrator agreed that the buyer could occupy the leasehold premises from the date of exchange of contracts, and to operate the business, on payment of a deposit of 10 per cent of the value of the leasehold property and 50 per cent of the value of processing equipment. The deposit would be forfeit if the buyer did not complete in accordance with the contract.
When it did not complete, the administrator applied for a court order permitting him to distribute to the secured creditors such funds as had been realised. He expressly sought permission to distribute the buyer's deposit, but the buyer challenged this on the basis that the amount of the deposit was unreasonable. On the basis of Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] UKPC 7, a contractual clause permitting the forfeiture of a deposit could amount to an unlawful penalty, and the buyer argued that this was the case here. The court declined to follow that case, though, and held that a deposit could not be challenged in this way. It was not compensation for loss that might be sustained as a result of a failure to complete: it was to demonstrate to a seller that the buyer had a genuine commitment to complete. The court had power to order the return of the deposit - which it said amounted essentially to a discretion to order relief from forfeiture -  at common law or under section 49 of the Law of Property Act 1925. It might be appropriate to make such an order if the deposit were unreasonably large, although in this case the evidence on this point did not suffice to enable the court to decide one way or the other.
Amble Assets LLP and another v Longbenton Foods Ltd [2011] EWHC 1943 (Ch) (21 July 2011).

Tesco Cars' impact on used car market

Tesco Cars has been in operation for six months, and a report from Bryan Consulting (reported here in Automotive Management Online) concludes that it is able to offer used car prices 9 per cent lower than franchised dealers. The report also says that Tesco can source 2,000 cars a week - less than Tesco's original estimate of 3,000, but equivelant to a stock turn of at least once a week, which encourages customers to grab teh car they like when they see it.
The report is based on observations of the Tesco Cars website, and the author points out that it is impossible to say how many of the cars disappearing from the site are sales and how many are being remarketed due to lack of interest. But he concludes that Tesco Cars will succeed where Virgin Cars and Autoquake failed, party because of Tesco's 15 million loyalty card holders.
Tesco's success has major implications for the trade. Dealers will have increasing difficulty getting their hands on quality ex-fleet cars under five years old, and if Tesco get closer to their target volume it will become a great deal harder. On the other hand, Tesco do not offer part exchange and consumers are still relucatant to buy online, so the effect might be limited. Even so, with the changes being wrought by the changes to the block exemption, dealers are going to have to give serious thought to the shape of their business plans.

EU contract law threatens English legal profession

Here's an interesting take on the proposed EU contract law, from Alex Aldridge in The Guardian: English law's hegemony in international contracting would be compromised if the civil law-common law hybrid came into operation. Civil lawyers - that's lawyers from civil law countries, not simply well-mannered ones, though they are probably that too, most of them at least - appear to be rubbing their hands with glee.Should we be worried, or will this only hit a few large City firms who can take it? I think we should be worried, for the impact on Britain's balance of payments and standing in the legal world: fewer disputes would come to England for resolution in the courts or before arbitrators as well as lawyers being consulted yet. English law, and English legal education, remains a gold standard internationally, which is how I find myself tutoring Russian students reading for external London University law degrees.

The advantages of an EU contract law seem pretty nebulous. I rather like Ken Clarke's comment that the best solution to the problems of dealing with 27 different national laws is unlikely to be to create a 28th system. As for the interests of small businesses trying to trade across national boundaries, this will often be dealt with by appointing agents or distributors - although that tends to negate the advantages of Internet trading. But even if they could make their contracts under a single pan-EU law they'd still face the more troublesome problem of having to engage in litigation in foreign courts if things went wrong. Perhaps the rest of the EU should follow our lead (if they haven't done this already) and make litigation so expensive that it's beyond the reach of ordinary consumers.

The Motor Vehicles (Driving Licences) (Amendment) Regulations 2011

The Motor Vehicles (Driving Licences) (Amendment) Regulations 2011 implement the minimum standards of medical fitness required for diabetes mellitus, as specified in Directive 2009/112/EC of 25 August 2009 and Directive 2009/113/EC of the same date. They amend the medical standards applicable for driver licensing of applicants and licence holders with diabetes, set out in the Motor Vehicles (Driving Licences) Regulations 1999. They also amend the terms in which diabetes is prescribed as a relevant disability for the purposes of section 92(2) of the Road Traffic Act 1988, so that a person with diabetes cannot be granted a licence; and for the purposes of section 92(4)(b) of that Act, by which an applicant can be granted a conditional licence.

More antitrust trouble ahead for parts makers in US

According to Automotive News, investigations in the US into price-fixing in the car parts market have already led to a $200 million fine for Furukawa Electric Co and gaol for three of its executives. That case involved wire harnesses: it is expected that the investigation will look into the supply of other parts, too. Even bigger fines, and more gaol sentences, are likely.
As in the UK system, co-operation with the authorities can secure immunity from prosecution or from civil penalties, and parts suppliers seem to be engaged in an unseemly race to assist the Department of Justice. Wiring harness manufacturers are handing over information about price-fixing in other sectors.
In Europe, the Commission has carried out dawn raids on TRW Automotive and Lear Corp.
In the US, fines for price-fixing are up to $100 million or twice the profit made on the products - and in this case the DoJ is assuming a profit margin of 10 per cent.

Employment law red tape challenge consultation

The Government has opened a consultation period on employment law as part of its 'Red Tape Challenge' scheme, seeking the public's views on how regulations can be improved, simplified or abolished. Responses are invited on four areas of employment law:

• Taking people on
• Managing staff
• Letting people go
• Compliance and enforcement

Comments can be made here.

Latest edition - volume 12 number 10 (July-August 2011)

The latest edition went out some time ago. Here are links to the original source material for most of the stories in it:

• ACAS guidance regarding Olympic Games.
• Distance selling rules for broadcasters.
• BSS Group Plc v Makers (UK) Ltd (t/a Allied Services) [2011] EWCA Civ 809.
• Trebor Bassett Holdings Ltd & Anor v ADT Fire and security Plc [2011] EWHC 1936 (TCC).
• Red tape challenge.
• Agency Workers Regulations
• Autoclenz Ltd v Belcher & Ors [2011] UKSC 41 (27 July 2011) 
• BDW Trading Ltd (t/a Barratt North London) v JM Rowe (Investments) Ltd [2011] EWCA Civ 548 (12 May 2011)
• Towers v Premier Waste Management Ltd [2011] EWCA Civ 923 (28 July 2011) 
• Auto enrolment in pension schemes
• ASA decision on British Gas 
• OFT  consultation response on remedies for UTRs.
• The Distance Selling Hub
• The Motor Cycles Etc. (Replacement of Catalytic Converters) and Motor Vehicles (Replacement of Catalytic Converters and Pollution Control Devices) (Amendment) Regulations 2011

Consumer rights directive adopted

The Consumer Rights Directive was described in the latest edition of the newsletter, so I won't repeat it all here - but I will tell you that it has now been formally adopted and Member States have two years in which to implement it. You can read it here if you can stand the excitement.

Dealer claimed bonuses from unlawful registrations - Automotive Management

Dealer claimed bonuses from unlawful registrations: 23 September 2011



'via Blog this'

Right of first refusal

There are many reasons why a contract might contain a right of first refusal. In a case a couple of months ago,
Astrazeneca UK Ltd v Albemarle International Corp & Anor [2011] EWHC 1574 (Comm) (21 June 2011) the Commercial Court considered such a provision in an agreement for the supply of a chemical used in the manufacture of the active ingredient of an anaesthetic. It provided that if Astrazeneca stopped distilling the active ingredient Albemarle would have "the first opportunity and right of first refusal to supply [the active ingredient] to [AstraZeneca] under mutually acceptable terms and conditions". Was that a (very weak) agreement to agree, or something stronger? No, said the court, Albemarle had the right to be allowed to match any third party offer, notwithstanding that with detailed terms to be agreed this was itself a little vague. The information about the third party offer has to be given to the party with the right of first refusal before the offer is accepted, which could be a practical difficulty. If you are in a situation where such a contractual right needs to be given, make sure it is clear in the contract - and that you understand clearly what it is that you have to do.

When is a business fit to have a consumer credit licence?

The Office of Fair Trading has drawn attention to what makes someone fit to hold a consumer credit licence, after the Consumer Credit Appeals Tribunal rejected an appeal by a company which had had its licence revoked. The appeal decision is here and the OFT's press release is here. Although the company in question was a debt collection agency, the same principles could apply to other businesses that need licences.

The OFT points out that the decision highlights the need for credit businesses to check that when communicating with their customers they are clear and transparent and do not place undue pressure on the debtor. The Tribunal considered in particular that the company was not fit to hold a licence because:

• It  lacked sufficient skills, knowledge and experience to operate a consumer debt collection business.
• It did not have practices or procedures to deal fairly and properly with consumers.
• The payment demand letter was designed to look like an official or legal document, against OFT guidance.
• The managing director described himself to debtors as a lawyer, which was intended to create a misleading impression.
• The company was persistently obstructive in dealing with enquiries from the OFT and Trading Standards.

None of which is very reassuring in the light of the reorganisation of the apparatus of consumer protection and the abolition of the OFT.

US dealer awarded damages for negative publicity

Not something we are likely to see here. The story is in Automotive News and involves a Suzuki dealer in Missouri. The manufacturer was ordered to pay $18.5 million, not a trifling sum by any standards. The case arose from a "no payments for life" promotion run by a neighbouring Suzuki dealer (both in Kansas City), which, perhaps on the well-known principle that if something looks too good to be true it probably is, collapsed. Unfortunately, the dealerships belonged to brothers so the family name featured in both, and the fallout from the one stuck to the other.

So why should the manufacturer be liable? Because it had approved and funded some of the ads through co-op programmes. Mind, this is one of those jury awards that you get in the States - an English judge, even if liability were shown, might make a much more modest award. And of course jury verdicts can be challenged - as the AN report says,

American Suzuki spokesman Jeff Holland said the company is "disappointed" by the verdict and intends to appeal.

"Disappointed" might be in the running for an award for understatement of the year.

OFT on private motor insurance premiums

The press release starts:

The OFT today issued a call for evidence to establish the background to recent reports of rising UK private motor insurance premiums, and consider whether further work may be necessary to improve the way the market works.

There's certainly a problem there - but is it something the OFT can do anything about? One factor they mention is the provision of credit hire vehicles - and in the light of the Veolia case I blogged about the other day, it's easy enough to see how that might be part of the problem.

Credit hire vehicles: the latest round

W v Veolia Environmental Services (UK) Plc [2011] EWHC 2020 (QB) (27 July 2011) is another round in the long-running struggle between providers of credit hire vehicles and the insurers of defendants in motor accident claims. Two issues arise in this case:

• The defendant said that the credit hire charges were irrecoverable because of the effect of The Cancellation of Contracts Made in a Consumer's Home or Place of Work etc. Regulations 2008 ("the Regulations"). 
• The claimant raised the second issue, that since the hire charges in this case had already been paid (by one insurance company to another) questions of unenforceability under the Regulations are irrelevant and the only question is whether the payment amounted to a failure to mitigate.

The claimant's 21-year-old Bentley was damaged when it was struck by the defendants' refuse vehicle. He entered into a credit hire agreement, hiring a modern Bentley at an eye-watering rate of £860 a day. Being an actuary, he argued that he had to have an impressive car, but a little surprisingly he was unable to pay to hire the car himself (which would have cost an eminently reasonable £485 a day). The car was delivered to his home, where he signed the hire documents and an application for insurance for the hire charges. The indemnit under this policy was limited to £100,000, but he exceeded that by £38,000 and the defendants' insurers refused to cover the charges.

The defendants sought to rely on the requirement under the Regulations that a cancellation notice be given to the hirer, and this had not been done. The court agreed with that point. They argued that, because of this omission, the hire agreement was unenforceable and therefore the claimant had suffered no loss. However, this position became more complicated when the insurance company paid the charges in full to the hire company - what the judge referred to as "a litigation tactic". So, whether or not he was obliged to do so, the claimant had effectively paid the hire charges and had therefore suffered a loss. His duty to mitigate his loss did not extend to challenging the hire charges on the basis that the agreement was unenforceable: all he had to do was hire a car and pay the charges he incurred. Had he not done so he would have had a claim for loss of use instead.

Not surprisingly given the sums involved it seems that an appeal is likely, so we might hear more of this yet.

Acas code on social media

The use of social media in the workplace is a problem for businesses that's just going to get bigger and bigger - like, I suppose, the problem of giving workers access to telephones once was. The capacity for mischief is much greater with social media, though. It's not just the amount of time people might spend at work on Twitter, Facebook or their own blogs: it's the liability they could create for their employers when they write something bad, and it's the damage they might cause to their employers' reputations.
Acas (I don't know whether to put it in capitals or not: I can still remember when it was the Advisory, Conciliation and Arbitration Service, which it still seems to be although it appears to prefer the trendy acronym) has produced a guide which employers should find useful to help them find a way through this maze.

Compensation for pothole damage

Coventry City Council has faces having to pay £2,000 to a driver who claimed for damage to the wheels of his Mercedes car caused by potholes that developed in the winter of 2010. The Daily Telegraph reported the case in Coventry County Court - the council denied liability, but the judge had no doubt that its failure to keep the carriageway in good repair had caused the damage. I imagine there could be a problem with this case opening up the floodgates, and perhaps the council will be inclined to appeal: there are some complicated policy considerations involved, to put it mildly.

This comes not long after Thomas v Warwickshire County Council (2011) EWHC 772 (QB) - and not far away, either - in which the High Court extended the duty of the highway authority to maintain the road0. A lump of concrete which had dried to the surface was part of the fabric of the highway, not just a contaminant, and therefore it fell within the authority's duty to maintain the fabric under section 41 of the Highways Act 1980. The case is reported by Lawdit Solicitors here.

First prosecution under Bribery Act

And it has nothing to do with corporate hospitality - which is what people seem to have been most worried about. After all, if you were accustomed to going to sporting events or having slap-up dinners at someone else's expense, you would be concerned.

But this first prosecution is much more prosaic, albeit pretty worying. The Guardian reports that the first person to be prosecuted is a magistrates' court clerk who seems to have suggested that he could make a motoring offence go away for £500. Beside the massive figures that prompted the introduction of the legislation in the first place, that's not even small beer. It doesn't even count as still water. But it certainly shows that zero tolerance is with us, as it surely should be, and the hapless clerk is in custody, due to appear at Southwark Crown Court on 14 October.

But of course this proves nothing about the tricky corporate offence of failing to prevent bribery from happening. There's a lot more to the Act than one minor court official soliciting a payment.

Chinese copy?

Readers who were at this year's Motor Law conference in February will remember David Musker's entertaining review of copying problems in the motor industry. We have left all those boring arguments about copyright in spare parts far behind - nowadays, it's copying entire vehicles. This story in Just Auto about the interestingly-named Brilliance-Jinbei S50, which bears a close resemblance to the Kia Sorento (and where did that name come from, and did it lose an "r" on the way?), might be the latest manifestation of this tendancy. Worth bringing to your attention, anyway.

False claim about validity of warranty

It remains a common misconception that a car must be serviced by an authorised workshop if the warranty is to remain valid. Another popular misconception is that the block exemption changed this situation a few years ago. In fact the Office of Fair Trading put a stop to it in this country years ago, and the new block exemption reveals the Commission's resolution to do something about it. But whether because of a misconception or otherwise, advertising on the basis that using an authorised workshop is mandatory in this sense can land you in trouble.

Dumfries and Galloway Trading Standards have recently publicised an instance - let's not call it a case, because there's nothing in the press release to say that proceedings were issued - of a garage doing precisely that. In fact, according to the Dumfries & Galloway Standard, it seems that the Council simply required the garage to write to customers to undo the mischief, which seems fair enough. They don't know whether this is a widespread problem, and thought it worth highlighting it - so it's not really a matter of penalising the one garage.

In days gone by, this would have raised false trade description problems. Now the Trade Descriptions Act 1968 is no more, the Consumer Protection from Unfair Trading Regulations 2008 occupies the field. Misleading advertising like that is likely to constitute an offence under the Regulations - as it would have done under the old Act. Provided, of course, that the necessary mens rea can be shown, which - given the degree of ignorance of the law on warranties - might be very tricky.

CV manufacturer not dominant in repair market

I have posted a commentary on a recent German case in which it was decided that MAN was not dominant in the market for repair of its vehicles, so it was not an abuse of a dominant position when it refused to allow a Daimler dealer and authorised repairer to join its network. Read the posting on The Blog Exemption by following this link.

Liability for injury caused by broken-down truck

A recent case in the New South Wales Court of Appeal, Wagga Truck Towing Pty Limited v O'Toole; IAG Limited t/as NRMA Insurance v O'Toole [2011] NSWCA 191, deals with liability for Mr O'Toole's injuries sustained when a truck rolled onto him. Although - of course - it doesn't have direct application to what happens in the UK, it's a cautionary tale for operators of commercial vehicles (indeed, probably all vehicles) and for towing companies.

Mr O'Toole was a passenger in the truck, an Isuzu, owned by a Mr Russell, his employer, which was carrying a V8 Holden race car when it broke down. Mr Russell parked it up, put it in second gear and engaged the handbrake, then phoned the recovery company. Over the phone, Mr Cool, the recovery driver, suggested, given that he had tools to hand, and an assistant, he get the tail shaft (which I think is what I would call the propshaft - am I out of date?) off to save time once the recovery vehicle arrived. So Mr O'Toole, having asked Mr Russell if the vehicle were safe and having been assured that the handbrake was on, got under the truck and did just that. However, the handbrake did not operate on the wheels, it operated on some part of the transmission (the court heard no evidence about this so there was a lot of inferring involved, including that this particular truck was probably not unique in this respect), so removing the tail shaft freed it to roll down the incline on which it was parked, over Mr O'Toole, causing him serious injury. In fact the truck then proceeded to cross the carriageway and come to rest against a bank on the other side.

The trial judge decided that Mr Russell, who, for the purposes of the Motor Accidents Compensation Act 1999 was the driver and the person in charge of the vehicle, bore 70 per cent of the responsibility for the accident. The towing company which had given him negligent advice took the balance. The fact that Mr Russell had acted on that negligent advice and without it the accident would not have happened did not absolve him from responsibility - indeed, did not even reduce the burden much, although the Court of Appeal (which largely upheld the judge) split the liability 50:50. Mr Russell, though he raced the Holden, was no expert in mechanical matters - but the court thought a reasonable person would have understood that disconnecting the tail shaft would remove the benefit of having engaged the gears, even if they didn't realise that it would also make the handbrake ineffective. The reasonable person would have chocked the wheels before starting to unscrew bots from underneath the vehicle.

Incidentally, although the 1999 Act imposes "no fault" or strict liability in certain circumstances, this is not one of them - the case turned on whether there was negligence.

Cookie regulations

New regulations on the use of cookies (small computer files set by websites to record information about visitors) came into operation in May, and we were all told that they weren't as draconian as was feared. In particular, the government had concluded that there was no need to get prior consent to setting a cookie: consent obtained at any time would suffice. That was certainly a useful way of interpreting the legislation, removing much of the compliance burden from businesses.

It does, however, seem to fly in the face of logic. If I were to tell my children not to do something without permission, I would not expect them to do it and then later seek ratification. Consent by (usual) definition must be in place before the act consented to is performed - otherwise, logically, the act is performed without consent and nothing that happens thereafter will change that. But logic and interpreting EU directives have little in common.

The government's convenient approach to the matter is now in trouble. The excitingly-named Article 29 Working Party (comprising the data protection commissioners of the EU Member States, convened under the eponymous Article of the Data Protection Directive) has produced an opinion, floating a proposed definition of "consent" - a 38-page document, dealing with something that might usefully have been included in the data protection Directive in 1995 (from which the cookies directive adopts the idea of consent) - and they favour the logical approach. The opinion is only a suggestion to the Commission, though, and will not give rise to enforcement proceedings. Indeed, the Commission went so far recently as to announce that only five Member States had properly implemented the cookies Directive - the UK among them. maybe it will have to reassess that now.

Meanwhile, to comply strictly with the law, the right course is to follow the directive, not the UK guidelines. If the Commission thinks that the concept of "consent" implies "prior", as the Working Party says it should, that is the sensible way to look at it. Logical, too.

(See the story on Out-Law.)

Selling franchised dealerships

In addition to motor industry legal news here, I maintain a blog on the Block Exemption - not as frequently as I would like, but today I have posted a piece about the rules on transferring franchised dealerships and posting it on this blog as well seems unnecessary when a link will do just as well. I'll continue to use The Blog Exemption for block exemption news and comments.

Code of Conduct latest

The latest edition of Motor Law reports on developments on the much-vaunted Code of Conduct, intended to supplement the block exemption and re-establish a degree of dealer protection. The last word when the newsletter went to print was that the Commission had pressed ACEA to reach agreement with CECRA, with the threat that the Commission would impose something if the parties were unable to agree by November. Although ACEA, which has proposed a limited Code of Conduct, finds itself portrayed as the "baddie" (the inverted commas are to indicate that what's right and what's wrong in this situation depends almost entirely on where you are standing) it is important to remember that CECRA's original stance was to oppose a code and stick out instead for protective measures in the new block exemption - which of course were not forthcoming.

We now understand that ACEA has announced that it will not participate in further discussions about the content of a Code, which might well mean that the manufacturers will unilaterally promulgate their own Code without the additional protection sought by CECRA. Or maybe it's just another move in the perpetual game of horsetrading that goes on in Brussels ...

We also hear that the Q&A document on the new block exemption, promised by the Commission for July, will now not appear before September. Given the imminence of the summer holidays, that is no great surprise - perhaps any promise by the Commission that involves the delivery of something in July should instantly be discounted.

Motor Law volume 12 no 9 - links to source material

I thought readers might find it convenient to have links to documents mentioned in the Newsletter, so here's the first set. Your newsletter should be appearing on your desk very soon - if it hasn't already done so. For the future I hope these links can be embedded in the electronic version of the newsletter but they will also be posted on this blog anyway.

• Block exemption: Cecra press release on Code of Conduct, related Cecra press release and related article (in French).
• Ford truck dealers, in Automotive News, Financial Times, Cleveland Plain Dealer 
• Lincoln dealers, in Automotive News.
• Colorado law on dealer investments, in Automotive News.
• OFT action against online retailer: OFT Press release, 23 June 2011.
• Replacement of defective goods: Joined CasesC-65/09, Gebr. Weber GmbH v Jürgen Wittmer and C-87/09, Ingrid Putz v Medianess Electronics GmbH.
• Consultation on replacement of OFT: Empowering and Protecting Consumers (99-page /696KB PDF)
• Motor Codes consultation 
• Phoenix Four: Just-auto.com, Financial Times.
• Execution of documents: Williams & Ors v Redcard Ltd & Ors [2011] EWCA Civ 466 (20 April 2011).
• VW takeover of MAN: Financial Times.
• OFT publications on competition law: guidance on how businesses can achieve compliance and company directors and competition law.
• Restrictive covenants: Baldwins (Ashby) Ltd v Maidstone [2011] EWHC B12 (Mercantile) (03 June 2011).
• Unfair terms in gym contracts: The Office of Fair Trading v Ashbourne Management Services Ltd & Ors [2011] EWHC 1237 (Ch) (27 May 2011)
• New measures on consumer credit: OFT press release 62/11, 1 June 2011.
• Immunity for expert witnesses: Jones v Kaney [2011] UKSC 13 (29 March 2011).
• Small claims limit: MoJ press release.
• The Cross-Border Mediation (EU Directive) Regulations 2011.
• The Privacy and Electronic Communications (EC Directive) (Amendment) Regulations 2011 

Latest issue ...

The latest issue of Motor Law (May/June 2011) is now on its way to subscribers. Electronic subscribers have already received theirs - if you'd like to receive yours by email in future please let me know (post a comment to this, for example, or email me).

In the latest issue:

• New Dealer agreements: what’s the
• hurry?
• Dealer protection and the block exemption
• US: Ford ordered to pay damages to truck dealers
• US: Dealer standards
• Replacing defective goods
• US: Former Suzuki Dealer Facing Multiple Suits
• Consumer protection applies on the Internet too!
• Motor Codes
• Distance selling
• Consumer remedies for unfair trading
• OFT takes action against online retailer
• Replacing the Office of Fair Trading
• Review of redundancy and transfer laws promised
• Redundancy as unfair dismissal
• Honeywell and BorgWarner settle US turbocharger patent dispute
• ‘Imported from Detroit’ trademark
• Phoenix Four agree to be disqualified
• Execution of Documents by a company
• Car parts cartel raid
• VW takeover of MAN delayed 
• OFT publishes guidance and survey on competition compliance
• Restrictive covenants
• Unfair terms 
• Subaru urged to pull out of Saudi Arabia
• OFT announces package of measures to address concerns over credit practices 
• Expert witness immunity

Commission investigates BMW and VW state aid

The European Commission has opened a formal investigation into German aid to BMW and Volkswagen. Here is the press release.

Competition investigations in the parts sector

Antitrust scrutiny of parts-makers is increasing, throughout the world, the Financial Times reports. I mention some of this in the latest Motor Law, which incidentally will be in the post to subscribers in a day or two. The  story in the newsletter mentions investigations being carried out by the European Commission and the US Department of Justice which seem to be focussed on Autoliv and TRW and in particular on safety-related parts.

Of course, the motor industry has always attracted the attention of the competition authorities, which is why it has its own block exemption regulation. The Commission is presently engaged in an investigation into price-fixing in the truck industry, too. This is part of a general picture of increased enforcement activity across the board, and perhaps what is happening in the motor industry is just a proportionate share of that increased activity - but it feels like it's more than that. The FT report says that the US authorities are investigating cartel activity in the auto electronics industry, though the paper says that they declined to comment further: no doubt we will hear more about it in due course. There is also an investigation into suppliers of wiring harnesses (what were called "looms" when and friend and I replaced the one in my Frogeye in 1977), involving the Japanese competition authorities and concentrating on suppliers in that country.

This comes on top of financial penalties imposed by the Commission on members of a cartel of glass makers a couple of years ago. Car makers are pursuing damages against them. That will be an interesting case to follow, as civil claims for damages arising from competition breaches have never lived up to expectations.

The FT has some possible reasons for this increased scrutiny. There has been a great deal of consolidation in the parts market in recent years: Autoliv - hardly a household name - has made 11 acquisitions since 2000, the paper says, and I wouldn't be surprised if there weren't some others small enough to get under the radar. Another merger has just been approved: Commission approves acquisition of ThyssenKrupp Metal Forming by Corporación Gestamp, both suppliers to the automotive sector.The paper also points out that the four glass cartel members controlled 90 per cent of the market - and quotes an industry lawyer saying that it's  much easier to create a cartel when the market is concentrated in the hands of a few suppliers.

On top of all that, government aid to the motor industry during the GFC has attracted the attention of competition authorities, and globalisation of the industry has led the authorities to exchange information with increased urgency. There's also the simple fact that a car remains a big consumer purchase, so any dodgy behaviour in the market is likely to have a big impact on consumers' wallets.

It's timely, therefore, that the Office of Fair Trading has issued new guidance for businesses on how to comply with competition law, including a new film to replace the amazingly hammy one they did to introduce the new (1998) Act - which despite an update to include the cartel offence (the joins were very obvious) was distinctly long in the tooth. Having a compliance programme in place is an essential part of minimising the impact of the competition rules - not only by ensuring that you don't break them, but also by providing an opportunity to minimise penalties if it all goes wrong and you do fall foul of the rules, perhaps through the unauthorised actions of an employee. When I run awareness and compliance training courses (which I would naturally be very pleased to do for you, if the terms are right) I always stress to people that just the disruption to your business if you are investigated is enough to be worth investing a lot in avoiding.

Postscript: Automotive World reports that the Fair Trade Commission in Japan is investigating seven suppliers, including Denso.

MoT certificates to show historic mileage?

The Daily Telegraph reported on Saturday that the government is considering requiring historical vehicle mileage to be recorded on MoT certificates, in a bid to stamp out clocking. If the certificate showed you the readings from previous years, that would of course be a big help - unless it had been clocked in the first three years, when it didn't need an MoT test. Oh, and at the same time the government wants to make that four years.

At present, of course, clocking isn't illegal: it's only selling the car with the false mileage that is. This lacuna is allowing "mileage correction" businesses to flourish, and while they might have some legitimate purpose it's definitely outweighed by the less legitimate side of mileage adjustment, enabling others to pretend the mileage is less than it is. The only way to stop it completely is surely to outlaw the adjustment business altogether.

Dealing with scams

One of the banes of business life is the spurious but official-looking document that can so easily be signed and sent back - resulting in a claim that you now owe someone money for something you didn't realise you'd ordered. Back in the days when I worked at the CBI - the mid-eighties - it was directories: you thought you were verifying the information they claimed they were going to put in the directory (which would rarely ever get as far as being printed), but in fact you were signing an order for a very expensive entry. More recently, it's been dodgy data protection registration people, offering to attend to the simple matter of notifying the Information Commissioner's Office about your data processing activities for a substantial fee. In recent years there has been a boom in trade mark registration and renewal scams.

If you get any communication about a registered trade mark, treat it with caution. Especially if your trade marks are handled by a professional representative - if they are, all official communications should go to them, not to you. Before paying anything, consult your adviser.

There are plenty of other scams of various sorts going on apart from these. Documents come through the post, or by email, looking like something other than what they really are. We used to hope that the Unsolicited Goods and Services Act 1971 would help, and at least the contract would be unenforceable - but it's not in the scammers' business plans to get involved in legal proceedings, so we never got confirmation.

Now, the Business Protection from Misleading Marketing Regulations 2008 might be of assistance - especially following an unreported judgment of Mackie J in the High Court, in London Borough of Croydon v Austin Hogarth [2011] EWHC 1126 (QB), 5 April 2011 (unreported and not available on BAILII: thanks to the IPKat for drawing it to my attention). It involved what appeared to be a renewal form for a computer maintenance agreement which didn't actually exist. The judge decided they fell within the broad definition of "advertising" in the Regulations ("any form of representation which is made in connection with a trade, business, craft or profession in order to promote the supply or transfer of a product") and they were deceptive because they weren't what they were made to look like. The judge dismissed Mr Hogarth's explanation:

Mr. Hogarth denies that the agreement looks like an invoice. He says it does not. He says it states quite clearly at the top in big letters “Business Equipment Maintenance Agreement”, and that there is no way it can be mistaken for an invoice. He also says that it is misleading to rely upon: “If you would kindly fill in the number of machines on the enclosed document in the space marked with a cross, sign it and return to us within the next 5 days” bearing in mind the sentence before that. He points to other features which he says are likely to indicate that this is nothing more than, what he says it is, an invitation to enter into the contract. The question is whether that is misleading. In my judgment, it plainly is misleading. One must look at this in the context of apparently routine documents received during busy commercial life. The document appears to be one thing and is something quite different. That is an impression formed by the complainants, by the witnesses in this case, by the Advertising Standards Authority and by the OFT. It is not surprising that people have formed that view because, as I see it, it is blindingly obvious to anyone who has had any business experience that, when receiving a document of that kind, you would, unless you have checked it very carefully, take it to be something which it is not. You would sign a new contract thinking you were dealing with an existing company. The structure of the scheme was designed to mislead. There is no genuine commercial reason for the mailing to take the form it did. So, in my judgment, the communication is one that plainly deceives or is likely to deceive.

That, it seems, could cover a huge range of dodgy documents. It's no substitute for reading it carefully - but the whole point is, that's not always possible.

The Regulations don't give rise to a right to damages, only creating criminal offences - but if the contract be tainted with illegality, a civil claim should be possible.

Law suit over replica Batmobile

Over in the US, the maker of a Batmobile replica is facing threats of legal action from DC Comics. It's reported by the American Univeristy's Intellectual Property Brief blog, which wonders whether the publisher actually owns the rights in the design anyway, and comments on a few earlier replica cases. We've had similar issues in the English courts, though not for a while: and none of them ever made the law reports, as far as I know. I remember years ago Rolls-Royce Motor Cars Ltd used to get very excited about one John Dodd, who operated a spare parts delivery service using a vehicle known as The Beast which was connected with Rolls-Royce in that it was powered by a 27 litre Merlin engine. That Rolls-Royce's then company secretary was also called John Dodd was the source of some wry amusement. It didn't look anything like a Rolls-Royce, except for the grille, so they sued him. He drove it to court every day (it overheated and broke down in the London traffic), and I remember him turning up one day on horseback.

I also remember Ferrari threatening action over 250GTO replicas, which reproduced much more than just the grille: and the Caterham-Westfield dispute - as well as a meeting at the old Patent Office building, to which I took a delegation of SMMT members keen to obtain proper protection from replicas. The 250GTO was an interesting one, because although no-one was quite sure how many had been built it was definitely fewer than 50, so if the design were a copyright work (and it might well have come into the curious and somewhat inchoate category of works of artistic craftsmanship, having been formed out of sheet metal by Mr Scagliatti and a hammer) it would not be deprived of full copyright protection by reason of having been applied industrially. Unfortunately we never got beyond the stage of a conference with counsel ...

In many countries, making replica cars would probably be considered a form of unfair competition. We have no unfair competition law in this country, and there is little general enthusiasm for one, although it was one of the items on the agenda for that meeting at the Patent Office 25 years or so ago. The Paris Convention calls for such a law, and the UK signed it back in 1883 - the year in which Karl Marx and Richard Wagner both died, which sticks in my mind because it was also the year in which my old school was founded. I think it's important to keep unfair competition on the agenda, perhaps to try to develop passing-off law into an approximation of what we are supposed to have.

Clocking: at least regulate it

Motor Trade Insider calls for "a bit of common sense in the clocking debate". It strikes me as ridiculous that it should be necessary even to ask for this. Modern governments have a mania for regulation, whatever they might say, and this is an activity that cries out to be regulated. As MTI says, vehicle testers are heavily regulated - and as MTI also points out, much of the problem could be made to go away if only mileage information on the V5 were mandatory.

TDI not a good trade mark

A trade mark has to be distinctive to be registered, so there are a lot of signs in use in the motor trade that aren't good candidates for trade marks. The European Union's General Court, where appeals go to from decisions of the office about Community trade marks, recently confirmed in case T-318/09, Audi AG and Volkswagen AG v OHIM, that TDI is descriptive for ‘Vehicles and constructive parts thereof’. If the letters stand for ‘turbo[charged] diesel injection’ or ‘turbo direct injection’ they describe an essential characteristic of the vehicle and do not indicate the source of the goods.

Audi and VW recognised that descriptiveness would be a problem, so argued that through use TDI had come to identify their products only. Odd, given that it's also used for SEAT and Skoda models for starters - which of course are VW group companies but even so, that does rather dilute any disticntiveness argument and make it look more descriptive. Then there are Land Rover, Mercedes, Jaguar, Vauxhall, and goodness knows who else.

The court said Audi and VW had to show that it had acquired distinctiveness through use in all the Member States at the time the application was filed (2003, when there were 15). Advertising material was put in evidence which showed the TDI mark invariably used with other trade marks, such as the manufacturer's name. The court took the view, as it has done in previous cases, that where a sign that has no distinctive character is used alongside one that does, this does not prove that the public perceives the sign as indicating the commercial origin of the goods, so it had not acquired distinctiveness within the meaning of Article 7 (3) of the Community trade marks regulation and had rightly been refused registration. Other manufacturers using the TDI nomenclature don't have to worry too much - and the more they use it, the less suitable it will be as a distinctive sign.

Consumer protection applies on the Internet too!

In fact, if anything, doing business online is even more ferociously regulated than doing business in the real world - a topic I have to talk about shortly at an Auto Retail Network workshop. And the text for my sermon is conveniently provided in this article which I'll be writing up for the next edition of Motor Law, and for Auto Retail Network's Bulletin. The gist of it is that a used car dealer sold a Laguna on eBay. It was described as “part exchange car to clear with tax and MOT”, but not described as "unroadworthy", except for a statement to that effect on the receipt. The dealer - not only the business, which seems to be a limited company, but also the individual responsible - was prosecuted, which shows that rogues can't rely on being able to hide behind the corporate veil.

The defendants pleaded guilty to offences under the Consumer Protection from Unfair Trading Regulations 2008 relating to the eBay advert being untruthful and misleading. Sandwell Magistrates fined the company £3,000 and its director £800, and also awarded £1,200 in compensation. Add costs and victim surcharges and the total is not far short of £10,000.

US: Lincoln dealers asked to invest

It's a story very reminiscent of what happens over here too. Ford has told Lincoln dealers to put their hands in their pockets and come up with an average of $1 million to remodel their dealerships. For those dealers fortunate enough to represent Ford too, the average is $1.9 million, Automotive News reports. But maybe some British dealers (or  manufacturers) would regard that as small beer? All in the name of "dealer standards", "brand values" and "customer experience."

US: Ford Truck dealers in $2 billion victory

Automotive News reports that Ford is appealing against an award of an Ohio court in a case brought by one of the company's truck dealers. The dealer had taken action over the prices charged by Ford for some 11 years, from 1987 to 1998, and the case had become a class action involving a number of dealers - hence the astronomical damages figure.

An agreement to sell trucks at published prices sounds more than a little dodgy to me, but presumably it must have been done legally otherwise the dealers' claim could hardly have succeeded. I'll ensure there's more on this story in the next edition of the Newsletter.

Block exemption effect on property market

Nothing new about block exemption replacement creating uncertainty in all sorts of ways, including the property market. Automotive Management has this story. The trend, not only for block exemption reasons, is towards larger dealers, and it's the bigger dealer groups (not to mention the sponsored dealers) who are financially in a position to benefit from the disruption caused by the block exemption. I certainly recall clients deciding that it was time to retire when a new block exemption came along - back in '95 and '02.

Mike Pearce, of Rapleys, the nationwide commercial property and planning consultants, is quoted in AM on the demand for showroom properties from retailers and fast-fit outlets, which I suppose conveniently (in a way) meshes with dealers moving to ever-more-flamboyant gin palaces on the edge of town. He says that while manufacturers have not been raising the dealer standards bar during the financial crisis, they are changing tack now and the cost of entry to the established and especially premium networks, already high, will increase. On the other hand, he thinks that multifranchising (multibranding as the block exemption has unnecessarily rechristened it) for smaller marques will be the way forward for many smaller dealers as well as for smaller manufacturers and new entrants. What a pity that the Commission has effectively written multifranchising out of the block exemption at this stage - not that it's prohibited, of course, just not a right for dealers.

Refunding deposits - or not

What happens if a deposit has been put down but the deal does not go through? Normally, you'd expect that if it were because the customer had changed his mind he'd forfeit the deposit, and if it were because the dealer wasn't able to supply the car the deposit would be returned.
There's no law directly on the point, although where there's a credit deal involved the Consumer Credit Act does say that customer's right to withdraw includes the right to have the deposit returned. Speculators got their fingers burned back in the late eighties when the Jaguar XJ220 lost a lot of its expected value between them putting down deposits and delivery being due. Eventually 25 of them bought themselves out of their contracts for £100,000 each, including the £50,000 deposit, rather than risk the loss of some £200,000 at market prices.
The Unfair Terms in Consumer Contracts Regulations also apply, and the OFT used its powers under them back in 2001 to require a dealer to delete a clause that purported to make the deposit non-refundable in any circumstances. A year later, the OFT insisted that the RMI change its standard retail order forms which said deposits would be forfeit if the customer did not complete within 14 days of the car being ready for collection. It had to be changed to 21 days, and to permit the dealer only to retain enough to cover its costs - the rest of the deposit would have to be refunded.
This is an area where what the contract says is the crucial thing. The law does not tell you how a deposit works - although dealers must not ignore the fact that the OFT has power to require changes to be made if the contract is unreasonable.

Copyright protection for car parts in Belgium

Benelux legal firm Nauta Dutilh has successfully represented two large French carmakers (I wonder who they could be?) in claims before the Court of Appeal, Mons, concerning infringement of copyright in spare parts. The firm's report of the matter is available here.

There's a short report of the case in the latest edition of Motor Law, so I will confine myself firstly to giving some additional information here, for which I am grateful to the lawyer who acted for the car makers, Philippe Péters. The case involved underlying artistic copyright works, not some sort of copyright in the design itself, and the designs were for visible car parts - body panels, mirrors, lights, bumpers and the like.

Secondly, the point about the presumption of ownership mentioned in the Motor Law report is also interesting. No such presumption would arise in English law, and the copyright would remain with the parts makers - except that there would be no copyright in the parts to begin with. However, our unregistered design right would probably give protection (if the designs qualified and were sufficiently original, which appears to be the case from what the court said) and if the designs had been commissioned the rights would belong to the commissioner - a very different situation from that pertaining under copyright law.

It's also worth observing that the designs directive says that designs can also be eligible for copyright protection to designs, but doesn't do anything to harmonise that copyright protection. The extent of copyright protection, and the conditions on which such protection is available, are for each of the Member States to decide for themselves. So a design can have extensive copyright protection in Belgium and no copyright protection worth speaking of here (although it will enjoy, of that's the right word, the brief protection of that fair weather umbrella, unregistered design).

March/April 2011 Motor Law newsletter

The latest edition of the Newsletter will be on its way to subscribers very shortly. It's full of the latest legal happenings affecting the industry, including:

• Payment protection insurance - the Competition Commission's order;
• Facebook being used to serve a court order;
• No confusion between “ca” figurative mark and earlier KA marks for vehicles
• Combine harvester design invalid 
• Belgium: copyright law protects spares
• Germany: independent garage cannot use VM’s logoOFT launches
• market study into extended warranties
• Turkey: Competition Board fines car and CV businesses over cartel
• China: Car Resale Price Maintenance complaint
• Fair dismissal for inappropriate comments on Facebook

The list of contents is on the website.

Turkey: Competition Board fines car and CV businesses over cartel

Turkey's Competition Board recently concluded its investigations in the Turkish motor vehicles sector and imposed record fines, according to an article on Mondaq (free subscription) by Gönenç Gürkaynak of ELIG, Attorneys-at-Law, who  represented Mercedes-Benz Türk A.Ş.

The Authority launched an investigation against 23 passenger car and light commercial vehicle companies in September 2009, suspecting that a cartel was being operated contrary to the Competition Law. The  undertakings it investigated were suspected of having discussed future pricing policies, stock data, sales targets and sales strategies. 

The Board decided that the investigated undertakings violated Article 4 of the Competition Law (in similar terms to Article 101 of the Treaty on the Functioning of the European Union and Chapter 1 of the UK's Competition Act 1998) and imposed financial penalties on 15 undertakings, totalling approximately 277 million TL. This is by far the largest amount of fine that has ever been imposed by the Board.

Fair dismissal for inappropriate comments made on Facebook

In Preece v JD Wetherspoons plc ET2104806/10 (24 April), an employment tribunal decided that a pub manager had been fairly dismissed for gross misconduct having made inappropriate and offensive comments on Facebook about some of her customers who had been abusive to her and who had been barred as a result. The comments were posted while was was still at work rather than in her spare time, and the Tribunal's reasoning suggests that it might have made a  difference if she had done it from home. She acknowledged that it was in breach of the employer's e-mail and internet policy, but argued that she believed her privacy settings restricted the number of people who could read the comments to 40 or 50. She also raised in mitigation the abuse she had suffered from the customers, who were mentioned by their forenames so her friends knew who they were.

The Tribunal found the company had passed each stage of the test laid down in the leading case of BHS v Burchell [1978] IRLR 379.

• The company genuinely believed that Miss Preece had committed an act of gross misconduct;
• It  had reasonable grounds to sustain its belief, with clear evidence that Miss Preece had entered into a Facebook conversation in which she made abusive comments regarding customers who could be identified by name;
• It had carried out an investigation in to the matter that was reasonable in all the circumstances, and the enquiry and investigation was fair;
• It was not for the Tribunal to substitute what it would have done in the circumstances in place of the action taken by the company. It was not relevant that this was a case where the Tribunal may have been more inclined to issue a final written warning. The Tribunal decided that dismissal was within the range of reasonable responses in view of the damage to the employer’s reputation.

Although this is only an Employment Tribunal decision, and therefore not a binding precedent, employers will be relieved to know that what employees do in social media can be considered sufficiently proximate to their employment to justify action for gross misconduct.

The fact that the employer's email policy was certain and clear, and that the employee had known it, was important here. As in other areas where legal risks have to be dealt with, employers must not only ensure that their staff know the rules (especially when they form part of a voluminous staff handbook or something similar) but that there is evidence to show that they do - that they have been told at an induction session, perhaps, or that there has been training on the topic and the employee signed the attendance sheet.

We Buy Any Car: unfair practices by trader offering vehicle buying service

The Competition and Markets Authority  website gives details of the old OFT's investigation into teh activities of webuyanycar.com. This is from the release:

This investigation was opened by the OFT on its own initiative to investigate the business practices of We Buy Any Car Ltd, which offers a vehicle buying service to the general public.  Consumers are directed (via search engines or television or radio advertising) to the webuyanycar.com website where they are invited to input details about their vehicle and its condition to obtain a free online valuation. If the consumer is happy with the online valuation they can arrange an appointment at the trader's premises for their vehicle to be inspected. At the onsite inspection, the vehicle is given an examination and an offer is made to the consumer to purchase the vehicle. As at 3 August 2010, the company had 114 branches throughout England, Scotland and Wales.
The OFT investigation found that nearly 96 per cent (note 1) of customers who sold their car to We Buy Any Car Ltd between 1 July 2009 and 30 June 2010 received less for their vehicle than the original online valuation.  The OFT was concerned that We Buy Any Car Ltd was reducing the valuation of the vehicle for reasons other than that the condition of the vehicle at the inspection differed from that reported by the consumer when obtaining the online valuation.

As a result of its investigation, the OFT formed a view that We Buy Any Car Ltd may be operating in breach of certain provisions of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). In particular, the OFT identified the following practices that the company was or had been engaging in, amongst others, with which it had concerns:

1. giving the impression to consumers that they would be paid the online valuation amount if their description of the vehicle and its condition was accurate, when in fact the final valuation price offered at the appointment might also be dependent on other factors (such as market conditions)
   
2. giving the impression to consumers that their online valuation was valid for seven days when this was not in fact the case
   
3. failing to make clear that the online valuation figure included an amount for any road tax refund, which would be deducted from the final price offered.  The consumer would then have to claim the tax refund from the DVLA 
   
4. the use of key performance indicator ('KPI') targets for calculating bonus payments to vehicle inspectors that had the potential to encourage unfair conduct. In particular, the use of KPI targets based upon reducing the valuation of vehicles upon reappraisal by an average amount or percentage as against the original online valuation (known as 'chipping')
   
5. failing to make clear to consumers at the appointment that the next working day payment service (which incurs an additional charge of £24.75) was optional
   
6. failing to assess customer complaints in a fair, reasonable, consistent and professional manner, in particular as a result of a lack of formal written complaint policies and procedures
   
7. incorporating potentially unfair terms in its standard terms and conditions, such as limiting its liability for any damage done to the vehicle during the onsite inspection.
   

The OFT was concerned that the effect of some of these practices might be to encourage consumers to attend an onsite inspection without being aware of the true nature of the online valuation.  In the OFT's view, once at the onsite inspection consumers were more likely to accept a lower final valuation price, even if they were unhappy with it, because of the time and expense already incurred, or because their personal circumstances meant they needed a quick sale (for example, because they were in financial difficulties,  or were emigrating).  Had they been aware of the likely reduction in value they might have chosen to explore other options for selling their car first.
During the investigation We Buy Any Car Ltd engaged constructively with the OFT and affirmed its commitment to providing greater transparency to consumers in the way in which it conducted its business.
Following its investigation, the OFT warned We Buy Any Car Ltd that it was considering applying to the court for an enforcement order, and consulted with the company with a view to ensuring that the contended infringements were not continued or repeated. We Buy Any Car Ltd and its directors then signed undertakings to address the OFT's concern that the above practices may breach the law, which the OFT accepted. Whilst the company and its directors do not accept that their business practices breached the law, they have agreed to make revisions to those practices in light of the OFT's concerns.
The Undertakings require that We Buy Any Car Ltd does not continue or repeat the conduct of concern in this case. For example, the company has agreed:

• i. to make it clear to the consumer, both before and at the time when the online valuation is communicated to them, that the online valuation is not a price at which the company is offering to purchase the vehicle, but is a valuation that is based upon the consumer's own assessment of the condition of the vehicle, which may change following an onsite inspection;
  
• ii. to not reduce the valuation of a vehicle on the basis of a change in market factors, unless (i) it has made it clear to the consumer at the time when they receive their online valuation  that this might happen, and - in the event that it does - (ii) it has used reasonable endeavours to inform the consumer, at least twenty-four hours before any appointment, of the amount to which such change has reduced the valuation;
  
• iii. to ensure that its practices and procedures, including its use of key performance indicators, targets and rewards, do not encourage any conduct on the part of its employees to reduce valuations for reasons beyond the specific limited circumstances made clear to the consumer prior to the inspection;
  
• iv. to not make any statement to consumers to the effect that a valuation will be valid for a specified period of time unless it will be treated by the company as valid for that period of time;
  
• v. to not deduct from any valuation of a consumer's vehicle the amount of any refund that is available to the consumer from the DVLA in respect of vehicle tax;
  
• vi. to maintain effective and transparent procedures for the reasonable and prompt handling of consumer complaints;
  
• vii. to revise its terms and conditions to no longer use terms which have the effect, among other things, of excluding any liability on the part of the company for (i) oral representations made by or on behalf of the company; (ii) damage caused to a consumer's property by negligence.
  

During the course of its investigation the OFT was provided with investigative assistance by a number of Trading Standards Services, including Rochdale Trading Standards Service.
Note 1: Figures quoted here are based on vehicle purchase data provided to the OFT by We Buy Any Car Ltd, covering a period from 1 July 2009 - 30 June 2010.  The OFT excluded a small number of transactions that were obviously business transactions, that attracted VAT, or that clearly indicated recording errors.