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Wednesday, 19 December 2012

MEPs reject vehicle noise amendment

European Voice reports that the European Parliament's environment committee (ENVI, as it is rather bizarrely known) has rejected an attempt to dilute a European Commission proposal for stricter vehicle noise limits, by a single vote. This is the proposal opposition to which in the Parliament seemed to have Porsche's fingerprints all over it (see earlier post).

Czech MEP Miroslav Ouzký, rapporteur for the committee, said after the vote that he will not begin negotiations with member states based on the committee vote. Instead he will try to get the decision reversed in a plenary vote by the full Parliament.

Tuesday, 18 December 2012

US: Toyota fined record amount for delay in reporting safety issues

The NHTSA has announced that Toyota has been fined the maximum penalty, $17.4m,  the single highest civil penalty amount ever paid to NHTSA for violations stemming from a recall, for taking too long to report safety issues to the authorities. Federal law requires safety defects to be notified within five days. NHTSA became aware of "floor mat pedal entrapment" issues in early 2012, and approached the manufacturer in May: Toyota admitted that it knew of 63 alleged incidents since 2009, which shows fairly clearly that it had not made the required reports in time.

The agreement between NHTSA and Toyota can be read here.

Wednesday, 12 December 2012

Motor Law volume 13 number 5

Here are links to more information on some of the stories in the latest edition (which will be in the post very shortly - if you'd prefer to receive your copy electronically a few days earlier, please drop me a line):

Tesla coming to Europe

And - following on from that last posting - Tesla are setting up a European distribution centre in Tilburg, The Netherlands, according to this report from Automotive World. It doesn't say how they will sell the cars, though.

US: Tesla licensed in Massachusets

Tesla wins license to sell cars near Boston, says Automotive World. Not a matter of direct concern to us in Europe, but another illustration of the way dealers are protected in the United States. Tesla's approach to selling cars, which has been compared to Apple's retail operation, cuts right across dealer protection and licensing legislation, and is proving highly contentious (though I can't help feeling that the dealers are trying to stop an incoming tide). Hard to imagine having to obtain a licence to sell cars - hard also for Americans to imagine a manufacturer getting such a licence, as they are supposed to be there to protect dealers ...

Friday, 7 December 2012

ASA rules Halfords' ad misleading

Following a complaint by the SMMT, an advertisement in which Halfords Autocentres claimed that customers would save up to 50% over dealer pricing has been held by  the Advertising Standards Authority to be misleading.  The company has been ordered not to run the advertisement again, and has been instructed to ensure that in future "if it made a comparative claim that was not on a like-for-like basis, it clearly communicated the significant differences between the products or services being compared and did not select the elements of the comparison to give themselves an unrepresentative advantage".

In the complaint, the SMMT argued that the claimed savings were misleading and could not be substantiated.  The advert did not make clear the basis of comparison, nor did it take into account the class of vehicle or regional pricing variations.  It was also doubtful whether the advertiser was comparing services on a like-for-like basis.  According to Halfords, the research had been carried out by a third party which had arranged for a team of mystery shoppers to contact 190 dealerships and get quotes for a full service on a three year old vehicle.  Data were collected for six different classes of vehicle.  Dealers were randomly selected from a database, and there was a quota for each region.

The callers were asked to collect data from the dealers which included the price of a full service, the checks carried out as part of our service, whether a courtesy car was provided, and any promotional offers.

According to Halfords, the make selected for each individual comparison was matched with the garage's franchise.  The results were matched with the nearest Halfords Autocentres by postcode, to ensure the the comparisons with geographically sound. Halfords provided the ASA with all the results that they had collected, but despite all this care, the ASA was not impressed.  According to their spokesman:
We understand that Halfords compared its web prices with the dealers' prices which had been quoted over the telephone.  However, the terms and conditions listed on Halfords website stated " before booking is made directly with the Autocentres, either by telephone or in person, prices may differ".  We also understand that the prices for Halfords for service, as stated in the comparison table supplied, included a £30.00 discount which was available only if the service was booked online and for a limited time only.
We acknowledged that Halfords was willing to amend the claim further, but considered that in its existing form, the comparison Halfords and made between its own time-limited, on-line prices and the non-promotional prices quoted by the car dealerships surveyed was not made on a like-for-like basis.  We therefore concluded that the claim was misleading.
Grasping at the straw relied on by so many independents who don't seem even to have read it, Halfords argued that the block exemption "regulations" gave aftermarket service providers "every right" to advise motorists have the savings they might make by going to a non-franchised workshop. The regulation does no such thing, although - importantly - it does not prohibit such comparisons. But it certainly doesn't override the ASA's jusrisdiction over misleading advertisements.

Friday, 23 November 2012

Owner of mileage correction business jailed for car clocking

This press release from the Office of Fair Trading reports that for the first time the owner of a mileage correction business has been convicted of, and imprisoned for, clocking. This must be a major step forward in the fight against this type of fraud.

Tuesday, 13 November 2012

Motor insurance certificates: paper is passé

The Department for Transport has announced a consultation on removing the requirement for insurance certificates to be issued. The web site says:

This consultation seeks views on amending the Road Traffic Act 1988 to remove the need for insurers to issue a motor insurance certificate when an insurance policy is taken out. At present the certificate is used as evidence of valid insurance cover and there are circumstances when it must be produced by the insured to demonstrate they have valid cover. 
Insurers are required by law to enter details of all motor insurance policies onto the motor insurance database (MID). This consultation document considers using the MID as the single source for checking if insurance cover is in place and considers what further changes and developments are needed to make this work.
 Comments are invited by 11 January.

Friday, 9 November 2012

DFT consults on speed limits for HGVs on single-carriageway roads

Examining the speed limit for heavy goods vehicles over 7.5 tonnes on single carriageway roads is the snappy title of the consultation launched today by the Department for Transport. Schedule 6 of the Road Traffic Act 1984 currently prescribes a speed limit on single carriageways forthem of 40 miles per hour. HGVs those between 3.5 tonnes and 7.5 tonnes are limited to 50 mph on the same roads. The government promissed in ‘The logistics growth review – connecting people with goods’ document published in November 2011, to consult on this issue during 2012, and (in the eleventh month, so not quite the eleventh hour) they are doing so.

The 40 mph speed limit has been criticised because it causes unnecessary costs to vehicle operators, congestion, and avoidable overtaking accidents, and it creates an uneven playing field for businesses. Raising limits should lead to quicker journeys, so lowering costs for the transport sector. This should assist economic growth and will also reduce frustration for drivers who stuck behind slower-moving lorries and unable to overtake. Against this are safety and environmental considerations.

The consultation document can be downloaded from the page linked above.

Thursday, 8 November 2012

Consultation on consumer rights directive

The government has held a consultation on the Consumer Rights Directive, which has to be implemented in the next couple of years. The Directive demands important changes to the rules on distance contracts, including the information that must be given, cancellation rights, and performance. The official EU press release (from last year, when the directive was adopted) is here and the BIS page on the directive (including a link to the consultation documents) is here.

MoT certificates will record historic mileage

From 18 November, MoT certificates will show the mileage at the previous three test dates as well as the current one. VOSA announced the change last month (having trailed it earlier this year), but where this announcement can be found neither I nor Google can tell you. But it is in the trade press (Motor Trader here for example) so it must be right, and must have come from somewhere. And the NFDA welcome it, not surprisingly as it fits well with their desire to deal with the menace of clocking.

FLA publishes supplementary briefing on OFT guidance for credit brokers and intermediaries

As their press release said (back in September, when it happened):
A supplementary briefing designed to help lenders and their associates implement the Office of Fair Trading's (OFT) Guidance for Credit Brokers and Intermediaries has been published today by the Finance & Leasing Association (FLA). 
The briefing – which is designed for lenders who use intermediaries such as motor dealers, high street retailers and credit brokers – aims to assist companies in complying with the OFT’s Guidance on issues like transparency in credit advertising and disclosing the presence of commission.
The FLA has consulted finance companies, the OFT, and the National Franchised Dealers’ Association (NFDA), in developing the briefing. 
Paul Harrison, Head of Motor Finance at the FLA, said:
“The OFT’s Guidance sets out its expectations of intermediaries, including motor dealerships, when they offer credit to borrowers and so it is essential reading for all credit brokers and intermediaries. We have developed this supplementary and non-binding FLA briefing to help lenders work with their business associates to ensure compliance.”
You can download a copy here.

PS: the NFDA has also produced guidance on the topic, which is available to RMI members only. There is an information pack and also a tool kit, both tailored for the motor industry and available in web and print formats. Both demonstrate how to detect conflicts of interest when providing financial products to customers and what to information disclose about commission.

Tuesday, 6 November 2012

Netherlands: Court rules on refusal to appoint repairers

Although it happened in July (on the 25th to be precise , reports of the decision of the Court of First Instance in Amsterdam have been slow to reach me. Brussels law firm Van Bael and Bellis, who have fingers in every interesting EU competition law case affecting the motor industry, and probably every other industry too, publicised it in their imaginatively-titled newsletter VBB on Competition Law in September, so it will be covered in the next Motor Law newsletter - but meanwhile you can follow the link to the horse's mouth.

The story is that three former authorised repairers brought an action against Kia Motors Nederland BV, which took over from the bankrupt former importer, claiming that it had unlawfully refused to reappoint them as repairers. The President of the Court ordered their temporary reappointment on 3 December 2009, and the case came before the Court on the merits this year.

In Case T-19/92, Groupement d'Achat Édouard Leclerc v Commission [1996] ECR II-1851, [1997] 4 CMLR 995 and Case T-88/92 Groupement d'Achat Édouard Leclerc v Commission  [1996] ECR II-1961, [1997] 4 CMLR 995 the Court of First Instance (now the General Court), referring to earlier cases, held that a selective distribution system is compatible with Article 85 (now Article 101 TFEU) if:
  1. The characteristics of the product in question necessitate a selective distribution system, in the sense that such a system constitutes a legitimate requirement having regard to the nature of the product concerned, in particular its high quality or technical sophistication, in order to preserve its quality and ensure its proper use;
  2. Resellers are chosen on the basis of objective criteria of a qualitative nature which are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion;
  3. The system in question seeks to achieve a result which enhances competition and thus counterbalances the restriction of competition inherent in selective distribution systems, in particular as regards price; and
  4. The criteria laid down do not go beyond what is necessary.
Both parties, oddly, agreed that Kia Motors' system did not meet these criteria - Kia conceding that they did not admit to the system all repairers who met the qualitative criteria - but they differed about the consequences. The excluded repairers argued that the system was automatically illegal, whereas the manufacturer contended that it was still necessary to consider the compatibility of the system with the competition rules before coming to a conclusion. The Court agreed with Kia that just because it did not apply the criteria in a non-discriminatory fashion did not mean that it automatically infringed the competition rules.

The next question for the court was whether Kia had refused to appoint applicants who were not also dealers as authorised repairers. This was not a hard-core restriction under the relevant version of the block exemption, but if it had happened the system would be likely to be in breach of the rules. However, the facts showed that Kia did not restrict admission to the repairer network to applicants that were also dealers, so the question of whether there was a breach did not arise.

The would-be authorised repairers also tried to argue that Kia's warranties breached competition rules, because they required vehicles to be serviced by authorised repairers: but the court found no evidence to show that a warranty would in fact be invalidated if the vehicle were serviced by an independent.

There was also an argument that Kia were abusing their dominant position in the repair market, and the court agreed that Kia were in such a position. However, they were free to choose with whom to contract. It was inherent in the system that authorised and unauthorised repairers would be treated differently, and the court was satisfied that the unauthorised ones were quite capable of competing.

Australia: GST on incentive payments

Moore Stephens quarterly automotive update - Spring 2012 covers a story I mentioned briefly in the latest edition of the newsletter: if you're interested in the topic (which is, it has to be said, a bit removed from our usual fare) that source will give you more detail than I did.

Oh, and don't wonder why it has taken so long for this story to be reported (as I did at first). Spring in Australia was much more recent than it was here.

Motor Law volume 13 number 4

India: 'No evidence of cartelisation in tyre industry'

'No evidence of cartelisation in tyre industry' is the headline in India's Business Standard. The Competition Commission found no evidence of cartel activity among accused tyre makers, and closed its file, which sounds a little more generous than the way the Office of Fair Trading does things (or, I should say, did them: practice might have changed since I last had a cartel investigation case on my desk, but then the OFT's grudging closing of the investigation implied that they had merely been unable to prove what they seemed certain was happening). It sounds as if, like the case I was involved with a few years ago, it's not easy to distinguish the behaviour of a cartel from that of a bunch of rational oligopolists.

The All India Tyre Dealers’ Federation has already let it be known that it will appeal. One member of the CCI dissented from the ruling, which suggests that an appeal might have some legs, and it also appears that the official in charge of the investigation was convinced of there being wrong-doing. Another space to watch.

There is, it hardly needs to be said, a great deal of activity about cartel activity in the markets for component parts for cars: we seem to have been reporting various investigations, rulings and penalties for quite a while now, and in several different countries. Competition law has come on a long way in recent years.

US: legal action over mileage claims

Hyundia and Kia sued over gas mileage claims, says US legal website Inside Counsel. (There's a story on the Automotive News site too, but it's paywalled.) The complaint was filed on Sunday in the US District Court for the Southern District of Ohio, where voters currently hold the outcome of the presidential election in their hands - one or two hanging chads might be all it takes. The manufacturers have apologised, but that's not enough to see off a class-action suit. (Not that the action has class-action status yet, but that's what the plaintiffs are after at this stage.)

Apparently the mileage figures were overstated by one or two miles per gallon. And it's not as if these were typical American gas-guzzlers: surely the margin of exaggeration would be well within the effect of a slightly heavy right foot (let alone a godasse de plombe such as French motor-racing fans attributed, quite rightly, to Jean-Pierre Jarier, one of the more entertaining drivers of his time). Doesn't de minimis non curat lex mean anything in the States? Perhaps we'll see.

Friday, 19 October 2012

Ontario Court Rules Automotive Dealership May Not Be A Franchise Under Ontario Franchise Legislation

Here's an interesting article by Rebecca Hamovitch of Canadian lawyers, Cassels Brock, about a case (Butera et al. v. Mitsubishi Motors et al.) on 31 August in which the Ontario Superior Court of Justice granted a motion for summary judgment brought the defendants and dismissed the action brought by the plaintiffs. The Court held that the dealer agreement in this case did not give rise to a franchise relationship, so the Arthur Wishart Act (Franchise Disclosure), 2000 did not apply.

The long title of the Act (if that's the correct name for the statement of what it's all about in Canada) describes this piece of legislation as:
"An Act to require fair dealing between parties to franchise agreements, to ensure that franchisees have the right to associate and to impose disclosure obligations on franchisors."
What an extraordinary idea! Imagine interfering with the free operation of market forces like that. It would give the European Commission palpitations.

The story is that in 2002, Butera submitted an application to acquire a Mitsubishi dealership. He included sales forecasts which he based on figures from the United States and the defendants' predictions of expanded sales in both the United States and Canada (in the case of Canada, expanded from nothing, as Mitsubishi cars were not being sold there at the time). Those predictions later formed the basis of the claim, which alleged misrepresentation, breach of collateral warranty and failure to comply with the Arthur Wishart Act.

The judge threw out the claim and allowed the defendants' counterclaim. There was no evidence that the figures of sales in the United States were not accurate, nor was there any evidence to suggest that the defendants' agents did not honestly believe their predictions of success. So there was no misrepresentation. The facts that there was an entire agreement clause in the dealer agreement, and the dealer was himself a lawyer, also appear to have been persuasive. As for the Act, because the dealer was not required to pay the manufacturer the agreement fell outside the definition of "franchise". Even if that were wrong, the Act would not be any help to the dealer because it largely codified the common law, on the basis of which the plaintiff's claims had already been thrown out.

We still use the word "franchise" rather loosely over here. There isn't the same degree of statutory protection for franchisees in the EU as there is in Canada, so there's little to be gained by trying to argue that a dealer agreement is in fact a franchise, but the likelihood is that it would be doomed to failure ... When it comes to trying to extend dealer protection in the EU, the commercial agents directive is a much more promising starting point.

Saturday, 13 October 2012

McLaren allowed deduction from corporation tax for governing body fine

The normal principle is that you cannot set a fine against your liability to tax. The public polisy reasons for that rule are not difficult to appreciate. However, McLaren have been permitted to deduct the amount of penalties imposed by the FIA from corporation tax (after they obtained confidential technical information about Ferrari's car) because the penalty was sufficiently "connected with the trade" of the business, and related to "activities so closely associated with mainstream of McLaren's trade" that the judge could not say "that they were not a part of it". The first-tier tribunal's judgment is here.
That is not to say that all civil penalties (as opposed to criminal fines) will be tax-deductible - breaches of competition law may give rise to civil penalties, but I cannot imagine that they could be set against corporation tax liability. In any case, I am surprised that the judge was prepared to hold that the penalties were close enough to McLaren's mainstream business to be allowable: that could be seen as a rather damning view of the way McLaren conduct themselves, which I am sure is not intended.

Singapore: motor traders breach competition rules

The Competition Commission Singapore has proposed to take action (and, presumably, soon will do so) against 13 traders who have been caught bid-rigging at auctions: CCS Issues Proposed Infringement Decision Against Motor Vehicle Traders - Competition Commission Singapore. A pretty heinous breach of competition law just about everywhere in the world.

Challenge to Tesla's "Apple Store"-style distribution model in US

Dealers call Tesla factory stores illegal, says Automotive News: the gist of the story is this:

Dealer associations in a handful of states, and state regulators in at least one case, say Tesla's stores violate state franchise laws that prohibit factory ownership of dealerships. 

From a legal perspective, that explains a lot - and also serves to show that it could never happen in the same way over here.

Former Chrysler dealers sue manufacturer in New York

Another item from Automotive News (I have been catching up on my reading after a week that allowed for little reading time): the fall-out from Chrysler's woes continues, and in the latest development two former dealers are taking action alleging that they were wrongly terminated back in 2009. Another illustration of the huge difference in the protection afforded to dealers in the States compared with what the block exemption (and domestic legislation) offers over here.

Volvo Group to reorganise EMEA dealer networks

Automotive World (subscription required) reports Volvo Group has announced its intention to introduce a new organisation for its truck dealer network in Europe, the Middle East and Africa. It often surprises me to see those three areas being lumped together - but it is pretty common these days. Dealer agreements that comply with the block exemption might seem pretty odd in the middle of the dark continent ...

OFT urges top retailers to change their websites

"The OFT has written to 62 of the top online retailers ahead of the busy Christmas period after a sweep of 156 websites found signs that many may not be fully complying with consumer protection law", according to a press release from the Office. They were looking for for breaches of the Distance Selling Regulations and other consumer protection laws. The press release goes on the detail some of the areas of concern:

  • 33 per cent of sites that provided information on cancellation appeared to impose unreasonable restrictions on customers' rights to a refund. Most common was requiring that the product must be in the original packaging or in the original condition, which can infringe on consumers' rights to reasonably inspect/ assess the product.
  • 60 per cent provided a web contact form rather than an email contact address, as required by the E-Commerce Regulations. Two per cent provided no electronic contact details at all.
  • While 60 per cent of sites indicated upfront that compulsory charges would be added to the first price shown, 24 per cent of these sites went on to add further unexpected charges at the check-out.
  • However, the sweep also found that the majority of sites were compliant with the DSRs in providing other required information to the consumer. For example, 99 per cent of sites provided details on when the goods would be delivered or the service would start and 95 per cent provided a full geographical address when payment was required in advance.

Huge numbers of websites fail miserably to comply with the fairly simple legal requirements, and it is not just retailers such as those the subject of this OFT initiative (though their failings are likely to have particular effects on consumers). Dealers should watch out too.

For the full story, follow the link to the press release.

Wednesday, 10 October 2012

BMW Financial Service (GB) Ltd v Hart [2012] EWCA Civ 1959 (10 October 2012)

When does a cause of action relating to an HP agreement accrue? It depends on the wording of the agreement itself. Sometimes the failure to make an instalment payment will create a cause of action: sometimes it will only be when notice of termination has been given. If proceedings have to be brought, they must be brought within the limitation period - the courts show no sympathy for claims issued late, even by just a day. For most motor finance claims, the limitation period is six years from when the action accrues, which is why it is so important to know when that happens. And it is not always easy to know.

It can even need the assistance of the Court of Appeal, as in BMW Financial Service (GB) Ltd v Hart [2012] EWCA Civ 1959 (10 October 2012), to work out when the clock starts to run. Mr Hart had agreed to pay monthly instalments, and a final balloon payment at the end of the agreement. The agreement said that BMW could only claim from him after serving a notice of termination on him, or when he had repudiated the agreement and they had communicated their acceptance of his repudiation.

Mr Hart failed to pay two instalments, which amounted to repudiation, and on 26 August 1999 BMW sent him a letter accepting his repudiation and giving notice of termination. Nothing happened for six years after that, when BMW sued on 26 August 2005. Mr Hart had moved abroad, so it was a simple matter for BMW to obtain judgment in default. The first that Mr Hart knew about the judgment was when he returned home in 2011. He applied to have the judgment set aside, arguing that the claim had been issued outside the six-year limitation period.

At first instance, the court agreed with him, holding that the limitation period started to run from when he first missed an instalment payment (July 1999).But the Court of Appeal decided that the wording of this particular contract meant that BMW could only make a claim once a termination notice had been given, or it had communicated its acceptance of Hart's repudiatory breach, both of which it had done. Only then did the money became due, and until then all that was due from Mr Hart was the outstanding instalments.

The agreement said that service of the notice was deemed to take effect two days after it was sent, which meant the key date was 28 August 1999. The claim form had been issued (just) within the limitation period.

Wednesday, 3 October 2012

New National Minimum Wage rates

From 1 October 2012, the national minimum wage will be (previous rates shown for comparison):   
1 October 2011 to 30 September 20121 October 2012 to 30 September 2013
Standard Adult Hourly Rate (workers aged 21 and over)£6.08£6.19
Development Hourly Rate
(workers aged between 18 and 20 inclusive)
Young Workers Hourly Rate
(workers aged under 18 but above the compulsory school age who are not apprentices)
Apprentices Hourly Rate£2.60£2.65
Accommodation Daily Offset£4.73£4.82

Sunday, 16 September 2012

Mahindra victory in dispute with Global

Mahindra has claimed victory in its dispute with would-be US distributor, Global Vehicles, according to The Times of India (and many other sources). The action, brought in the English courts, concerned an arbitration award made in London which now becomes enforceable as a court judgment. The court's judgment is not yet available on BAILII.

Penalties for competition infringements rocket

The Office of Fair Trading has published new guidance on penalties (press release here) under which the amount of a financial penalty for breaching the prohibitions in the Competition Act 1998 goes up from a hefty maximum 10 per cent of "relevant turnover" to 30 per cent. When the Act first came into operation, which to me still seems quite recently, the then Director General of Fair Trading, John Bridgman, told a seminar I attended that the penalties would be "eye-watering". The new maximum sounds as if it would cause blood to flow ... The redeeming feature remains that the penalty has to be proportionate to the seriousness of the breach and the damage it causes, and it is rare for a penalty to come anywhere near the maximum, and then only in flagrant cases of price-fixing, market sharing or predatory pricing.

Proposed streamlining of employment law

The government has revealed its proposals to streamline employment law, a euphemism for removing some of the rights given to workers which industry often finds overly restrictive and which arguably impede job creation.

Tuesday, 11 September 2012

Muscle cars confusingly similar

My good friend from the USA, John Welch, in his The TTABlog®, draws attention to a decision on three trade mark applications for the shape of what are commonly referred to as "muscle cars". The case goes under the name of In re Carroll Hall Shelby Trust, which tells you a lot about what's going on here. The applications were rejected on the grounds that they were too similar to a couple of existing trade mark registrations (which to my eye look utterly different: no possibility of confusion). The Board rejected the refusal based on the roofline of the car in the earlier trade mark, but upheld the refusal based on the "C-scoop" - which is surely such common currency in cars of this type that it cannot be considered distinctive? Anyway, read all about it on John's blog and, as he invites readers to do, make up your own mind (but under US trademark law, of course).

Friday, 7 September 2012

The Removal and Disposal of Vehicles (Amendment) (England) Regulations 2012

These regulations were laid before Parliament yesterday and come into operation on 1 October. They amend regulations that date back to 1986 (S.I. 1986/183), and give power to constables to deal with vehicles which have been broken down or abandoned. As originally made, the 1986 regulations apply to vehicles broken down on roads, and to vehicles unlawfully abandoned on a road or "on any land in the open air". The amendment will extend the powers to cover any other land, too.

Restoration of company to register kick-starts proceedings

Does an order restoring a company to the register, made under section 1032(1) of the Companies Act 2006, retrospectively validate proceedings brought against it while it was dissolved? In Peaktone Ltd v Joddrell [2012] EWCA Civ 1035 (26 July 2012), the Court of Appeal decided that it did. This should be very helpful to creditors trying to secure payment of debts from disposable companies ...

Monday, 27 August 2012

Commission publishes Frequently Asked Questions

The long-awaited FAQs on the block exemption have been published today, perhaps as a late birthday present for me: the press release is at

I'll post a commentary on them as soon as I have a chance to get my head round them. Only 12 pages, 18 questions, not including the most frequently-asked question of all ("When will the FAQs be published?") which they nevertheless answer ... There must be a lot of questions that have not been asked sufficiently often, as I'm sure there are more than 18 questions calling for answers.

Thursday, 16 August 2012

Scania says no to NEVS

JustAuto reports that Scania has refused to allow the new owner of SAAB to use the griffin logo trade mark. Scania's position on the use of its trade mark was heralded in this press release a few weeks back, and now they say that it is fear of finding the logo applied to Chinese trucks that has prompted the refusal. That does seem to me to be based on a rather atavistic view of Chinese intellectual property law and practice, but it's their choice even if the explanation isn't a particularly attractive one.

Tuesday, 14 August 2012

Car rental industry faces patent problems

Auto Rental News reports that patent infringement actions are hampering the activities of car rental companies. At present this is confined, it seems, to the US, but the phenomenon could spread, given that if a company is prevented from using patented technology in the US they might well decide not to bother with it elsewhere.

The problem arises from the - er - liberal way in which patents are handed out in the US for software and business methods. Although there is some patenting of such subject-matter in Europe, it is relatively contained though still controversial. In the US, it is like an epidemic. Many businesses have found their operations threatened by patents covering things that, to a European, ought to be nothing to do with the patent system, and now it seems the car rental industry is suffering as new ways of completing rental agreements without human intervention, and other automated business methods, become more and more common.

Sunday, 12 August 2012

Commission investigating possible wiring harness cartel

There are investigations going on in several parts of the world (the US and Japan, for two) into cartels in the automotive parts sector. Now the European Commission has opened an investigation into suspected cartels for the supply of wiring harnesses in the European Economic Area. The Commission will, it says, now "treat this case as a matter of priority, without prejudging the outcome of the investigation". The full press release is here.

New requirements will affect trailer retailers

The SMMT has alerted trailer retailers to new requirements that they will have to meet from October, here. They will have to record certain details, keep them for six years, and provide them on demand to an authorised official of the Vehicle Certification Agency.

Service of notice must be in accordance with contract

In Ener-G Holdings Plc v Hormell [2012] EWCA Civ 1059 (31 July 2012) the Court of Appeal had to consider whether notice had been given according to the terms of the contract. The argument arose because the outcome would determine whether subsequent proceedings had been issued in time or not. The facts of the case are interesting, but need not detain us here: the point is that the case clearly illustrates the importance of getting the "notices" clause, tucked away among the boilerplate clauses (and usually dismissed as such), right. Whatever the parties agree, they need to stick to, and both must make sure they understand clearly what the clause requires them to do.

Restoring dissolved company validates proceedings against it

So said the Court of Appeal in Peaktone Ltd v Joddrell [2012] EWCA Civ 1035 (26 July 2012) in what could be a very important decision for anyone trying to recover money from a broke company.

South Africa: the BMW spares case

Reading a case about protection of designs for car spares takes me back to the days of my youth. There haven't  been enough since BL v Armstrong. But you have to go quite a long way to find them these days: this one comes from South Africa, whose Designs Act no 195 of 1993 (available here, from the Japan Patent Office, oddly enough) is another exercise in nostalgia: there are many phrases that bring back fond memories of the original version of the Registered Designs Act 1949, on which presumably it was based. One important thing about the South African Act, though, is that it protects both aesthetic and functional designs, with different criteria for protection of the two categories. The requirements for protection of functional designs will also ring bells for readers familiar with Part III of the Copyright, Designs and Patents Act 1988 (and who isn't?). It's a real trip down memory lane. The most significant thing is that there is an exclusion from protection for functional designs where the article is a spare part (section 14(6)).

Like us, the South Africans have been wrestling with the problem of intellectual property protection for spare parts for some time: three decades, according to the AfroIP blog, starting with a boat-building case called Schultz v Butt 1986 (3) SA 667 (A) in which the defendant used a hull made by the complainant to make a mould from which to make hulls which it then sold in competition with the design owner, a case which might be considered to be rather clear-cut. The most recent case dates from 25th ultimo.

That case is BMW AG v Grandmark International (Pty) Ltd and another [2012] ZAGPPHC 139 and the judgment of the North Gauteng High Court, Pretoria, should you wish to read it in all its glory, is available from the South African Legal Information Institution, the equivalent of BAILII, here. There's a claim that the defendant was in contempt of an earlier court order, plus claims of registered design infringement and trade mark infringement. It's the design claim that's interesting, as the contempt case seems to have gone off at half cock and the trade mark case was defeated, ironically, by earlier cases in which BMW was the claimant.

Four registered design for the model known by its BMW code as the E46 but better known as the 3 Series (fourth generation, 1998-2005) were involved. This model was assembled in eight places around the world in addition to Munich, including a site in South Africa, where BMW has been the favourite premium brand of car for some time: in 2012 it held 7.9 per cent of the overall market, 33.9 per cent of the premium segment, so there's a significant parc of BMWs needing spares.

The registrations were for aesthetic designs, namely a bonnet, headlight, grill and fender [sic]. Surprisingly, the court took the view that the designs were in fact functional, and that they had been craftily registered as aesthetic designs just to circumvent section 14(6). How could that be? The court applied what a scholar of our 1988 Act would recognise as a "must-fit" and "must-match" analysis, and concluded that the designs all served a specific purpose – they had to look and fit a certain way to serve their purpose. The Act defines a functional design as one ""having features which are necessitated by the function which the article to which the design is applied, is to perform" - language more related to the concept in our law of "dictated solely by function" than the "must-fit" and "must-match" exceptions. I don't find it very convincing - but not being a South African lawyer, what I think probably doesn't count for a lot.

Moreover, the court decided that the designs failed the novelty test applicable to aesthetic designs, because they were anticipated by previous designs for BMW body parts. They were nothing more than developments of previous BMW body part shapes. That approach could deprive the vast majority of designs for spare parts, especially visible ones, of protection. But it sounds as if there will be an appeal - there almost has to be, given what's at stake - so perhaps we'll learn in due course that this is not in fact what the law means. Still, a very interesting case for design enthusiasts!

PS: a great article about the case, by Lodewyk Cilliers of Spoor and Fisher, here

Monday, 6 August 2012

US: Land-Rover Sues "British Northwest Rover" Restoration and Repair Company

My friend Mike Atkins, a trade mark attorney in Seattle, reports on his blog that Land-Rover are taking action against a repairer which calls itself British Northwest Rover (and apparently, or rather allegedly, used to call itself "British Northwest Land-Rover). Why the manufacturer might consider these uses to be infringements of its trade marks hardly needs explaining. But in the USA the doctrine of "nominative fair use" is rather wider, and more flexible, than the equivelant in the UK (section 11 of the Trade Marks Act 1994), and there is at least a chance that the repairer will be able to establish that it is merely using the trade mark to indicate the sort of vehicle for which it offers services.

In this country, I think we could safely say that including the trade mark in your business name is never going to satisfy the test in section 11, which (as far as this defence is concerned) demands that the use be in accordance with honest practices in industrial and commercial matters. Although that phrase, taken as it is from the European Community directive, is far from clear (and seems to cover only a situation in which the defendant's use of the trade mark is in some way dishonest, which imports a degree of subjectivity not usually found in trade mark law), it is almost inconceivable that it might permit a repairer to use the name of a vehicle maker in its corporate or business name. That would surely imply a connection with the manufacturer, a relationship going beyond whatever relationship might exist, which would rule out the use of the name. See AB Volvo v Heritage (Leicester) Ltd [2000] FSR 253, and Case C-63/97, BMW v Deenik. So the moral is, whatever the courts in the States might say, don't try that here.

Tuesday, 10 July 2012

Beware complicated website terms and conditions!

Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm) (18 May 2012) looks at first sight as if it couldn't be of any interest to the motor industry: the claimant is an on-line spread-betting bookmaker. Moreover, it is not a long judgment, the legal principles are not novel, and the defendant acted in person. But the dispute is, in its basic features, one that any business trading on-line could run into.

The company's terms and conditions for the use of its website stated (inter alia) that the client would be "deemed to have authorised all trading under your account number...". Mr Cochrane's account was used, without his knowledge, by his girlfriend's son, who racked up significant losses. The boy's age is not mentioned in the judgment, but it does indicate that he thought he was playing games on the computer, after Mr Cochrane had explained the trading process to him in such terms.

When the claimant tried to enforce the user agreement, however, the deputy judge made several findings that could cause big problems for on-line traders. First, he considered that, largely, the terms and conditions did not form a contract but rather created a framework in which contracts would be made - which, given the nature of the claimant's business, makes sense. Was there, then, a binding contract that pre-existed the contracts for the individual trades? The claimant could not point to one. There was no consideration. The claimant argued that making the on-line trading platform available amounted to consideration, but the judge decided that this was in fact nothing more than the modern equivalent of being ready and willing to enter into a contract by telephone.

Moreover, the Unfair Terms in Consumer Contracts Regulations 1998 would make the pre-trade contract for which the claimant contended unenforceable. The regulation applies to terms which are contrary to the requirement of good faith and cause a significant imbalance in the party's rights and obligations, to the detriment of the consumer. If the pre-trade contract existed, the claimant would have no obligations and the customer would have no rights: but the customer would be liable for any trade on his account, even if it were neither made nor authorised by him. This amounted to a significant imbalance and was contrary to good faith. The judge thought that "a more appealing case" might have been made if the offending term had only applied where the customer's negligence led to the unauthorised trades, but he expressed no view about whether such a term would have been fair.

Finally, the fact that there were four documents which could be viewed by clicking the link to the terms and conditions compounded the matter. The judge thought, surely correctly, that most customers would have proceeded directly to click "agree", even though by doing so they indicated that they had read and understood the documents. Even if a customer chose to look at the documents, the customer agreement alone had 49 closely printed pages of complex legal terms. "It would have come close to a miracle if he had read the second sentence of clause 10(3), let alone appreciated its purport or implications", said the judge.  "This was an entirely inadequate way to seek to make the customer liable for any potential trades which he did not authorise, and is a further factor rendering the second sentence of Clause 10(3) an unfair term."

Website terms and conditions are a trader's one chance to create legal relations with visitors to the site. There is never a guarantee that they might work, but clearly any temptation to include everything but the kitchen sink, not to mention complex legal language, might make them completely worthless. The terms and conditions are intended to manage legal risk, but if they aren't enforceable you might as well not have bothered.

Acceptance certificate defeats claim

Acceptance of goods will often mean that the buyer has lost the right to reject, whether the goods concerned are a tin of beans, a truck, or a Boeing 737. In consumer contracts other factors come into play, but in the general law of contract once you have accepted something you are stuck with it.

In ACG Acquisition XX LLC v Olympic Airlines [2012] EWHC 1070 (Comm) (30 April 2012) the airline leased a new plane and signed an acceptance certificate. Later it turned out to have defects, and the airline served termination and redelivery notices. The lessor argued that the aircraft was airworthy when it was delivered, but  in any case the airline was estopped from asserting that it did not comply with the certificate of airworthiness because of the acceptance. The Commercial Court, unsurprisingly, held that this was indeed the position. The airline had a chance before delivery to inspect the aircraft and have any defects remedied, and it would be inequitable to allow them to argue later that the plane did not comply at the time of delivery.

The case does not make new law, but it does serve to show that you should not sign an acceptance certificate (or anything to the same effect, whatever it's called) unless you are absolutely sure the goods are OK. If you have a chance to inspect the goods, you must take it before you accept the goods and sign to say that you have done so.

Wednesday, 4 July 2012

German authorities put GM and Peugeot under microscope

Reuters reports that the Bundeskartellamt, the German Federal Cartel Office, is going to look more closely at the proposed link-up between GM and Peugeot. It will undertake a Phase II investigation, which can take three months, as the initial investigation did not allow long enough. The Office is particularly concerned about the effect of the alliance on car parts suppliers.

Thursday, 28 June 2012

Brussels conference final session

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

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

Brussels conference session 3

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

OFT issues statement of objections in CV competition case

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

Brussels conference session 2

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

Brussels conference session one

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

Wednesday, 20 June 2012

Competition Law Challenges in the Motor Sector

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

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

Tuesday, 19 June 2012

Insurer's own repairer's charges may be reasonable

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

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

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

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

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