China levies first fines in auto industry pricing probe - FT.com

FT.com reports that the Chinese authorities have levied the first fines on automotive industry companies - component makers NSK and NTN, which have been fined Rmb174.9m (£17m) and Rmb119.2m (£11.7m) respectively.

US: Santander Consumer receives subpoena over subprime auto loans

Automotive News for 7 August

BMW cuts spare-part prices in China amid antitrust investigation

The title tells you all you need to know about this report in Automotive News, from 7 August.

European companies slam Chinese antitrust probes - FT.com

This report on FT.com  explains how European businesses - not only car  makers, but they are probably the worst affected - are unhappy about the treatment they are receiving at the hands of China's antitrust authorities. They (the manufacturers) argue that there is more to high car and spare parts prices than monopolistic behaviour. All that practice that they got in the eighties and nineties in the UK, explaining car prices, must be coming in useful. Whether the Chinese authorities will believe them any more than the UK press and public remains to be seen.

Postscript: Automotove News reports that Audi will accept their punishment. Bowing to the inevitable, I suppose. The same source also tells us that GM have been brought into the investigation too, including this paragraph which is of much wider interest:

For Buick, Chevrolet and Cadillac vehicles, the average sum of replacing all the parts relative to the price of a new vehicle is close to 300 percent, the average level in the U.S. and European markets, GM said.

Manufacturers warned over leasing ‘discrimination’ - Fleet News

Manufacturers warned over leasing ‘discrimination’: "13/08/2014"



'via Blog this'

Changing dealer margins does not breach EU competition rules

Our friends at Van Bael and Bellis in Brussels report in their newsletter, VBB on Competition Law (2014 no 6) that the Commission has rejected a rather optimistic-looking complaint from the Italian dealer association, Federauto, alleging that Volkswagen Group Italia's SEAT dealer agreements violated EU competition rules by reducing dealers' margins from 15.85 to 12.85 per cent, and converting part of the margin from fixed to variable. Typically the wholesale price is calculated by subtracting the dealer margin from the recommended retail price.

Federauto argued that this violated the rationale behind the dealer protection provisions of Regulation 1400 and of Regulation 330. It seems that they did not say that the letter of the regulation had been violated, but its spirit: and invoking dealer protection measures in Regulation 330 looks like a triumph of hope over experience. The Commission rejected the complaint, not apparently by reference to the block exemption but by reference to Article 101, which it thought had not been infringed - there was no evidence that competition was restricted, the clauses in the agreements complained of were not hardcore restrictions, and the application of the new margins was not resale price maintenance.

Perhaps more interesting is the complaint that the manufacturer did not have a code of conduct for relations with dealers. Of course, the Supplemental Guidelines say that having a code of conduct is a relevant factor in assessing a supplier's conduct in individual cases concerning pressure on dealers to achieve anti-competitive outcomes, and the lack of an agreed code of conduct remains a highly contentious issue. Here, though, it cut no ice, because there was no suggestion that the manufacturer had been applying pressure for such outcomes on the dealers - just because there is no code of conduct does not mean that there is a breach of the rules.

VBB opine that this is an important case, showing that dealer protection, eliminated with the expiry of Regulation 1400, is dead and buried. Indeed it is, as far as the block exemption is concerned: it remains possible that a dealer protection issue could have effects prohibited by the competition rules and not exempted by Regulation 330, and it also remains possible that some other legislation will fill the gap one day, even if the block exemption continues to maintain its laissez-faire approach.

Automotive News

Freeze! It's the Honda ad police

 

US: Szakaly: CAFE Targets Will Curb US Auto Sales Beyond 2018

The Truth About Cars  website reports NADA economist Steven Szakaly as saying that after 2018, as the focus moves to the post-2025 CAFE rules, consumers will become disinclined to buy new cars -

Unless gasoline prices rise significantly, or we see consumers
becoming irrational and everyone buying an electric car, it’s tough to
think of consumers willing to pay $3,000 to $7,000 more for the exact
same car, just because someone in Washington, D.C., or California says
they need to buy it.

So he told Automotive News's  2014 Management Briefing. There's a lot could change between now and then ... For one thing, US petrol prices could become aligned with Europe's.

Suzuki goes public with Motor Codes

Our friends at Auto Retail Network reveal that Suzuki, having come out top in this year’s Motor Codes
report on aftersales customer service, will make customer
feedback on its retailer network public through the Motor Codes web site.

USDOJ: G.S. Electech Inc. Executive Pleads Guilty to Bid Rigging and Price Fixing on Automobile Parts Installed in U.S. Cars

The US Department of Justice (press release) reports that an executive of Japanese parts-maker G.S. Electech Inc. has pleaded guilty to bid-rigging and price-fixing charges relating to parts installed in the anti-lock braking systems in US cars. Shingo Okuda, the company's former Engineering and Sales Division Manager, pleaded guilty on 31 July in the U.S. District Court for the
Eastern District of Kentucky in Covington. He will serve 13 months in a
U.S. prison and pay a $20,000 criminal
fine.

US: Owners of 8 N.J. dealerships settle claims of deceptive practices for $1.8 million

Automotive News reports  that eight dealerships in New Jersey have reached a settlement with the state's Division of Consumer Affairs over 45 consumer complaints of deceptive sales tactics, including
failing to inform customers of previous damage or defects, adding
after-sale costs without prior customer approval and failing to
implement advertised or negotiated prices.

Chinese antitrust probe prompts more price reductions

The price of parts for Audi and Mercedes cars has already been cut, after antitrust authorities in China criticised them. Now Bloomberg  reports that Toyota and Honda have followed suit. Moreover, the authorities say that they are going to punish Chrysler and Audi for monopolistic practices, they claim. No more details at present: it will be interesting to see what this means.

US: GM fail to have revived claim struck out

I just wrote in the latest Motor Law that GM faced revived claims that they thought were history, arising from the infamous ignition problem. Settlements could be overturned if it were shown that GM had concealed the problem. Now Automotive News reports that GM has failed to convince a Georgia judge to dismiss a revived lawsuit over the death of a 29-year-old woman that helped trigger the automaker's ignition-switch recall crisis. Cobb County State Court Judge Kathryn Tanksley set a trial date for April 2016, making the pace of English litigation look positively frantic.See the complaint here if you are interested.

SMMT plans to cut government red tape to save bodybuilders millions

The SMMT is working with the DfT to develop a streamlined type approval process for bodybuilding, known as the National Small Series Type Approval process. The press release is here.

Russia bans state purchase of foreign-made cars

There's a joke going the rounds in Russia that the West has thought for months about the best way to use sanctions to hurt the Russian middle classes. Then President Putin banned imports of food from the West, and did it for them. There's also the Russian man who smashed his Apple iPad and iPhone, and poured away a bottle of Coca Cola, to demonstrate his feelings about the United States (does he realise it isn't necessary to be Russian to feel that way, sometimes?). And the leading Russian watchmaker has stopped exporting its products to the West, too.


In a protectionist move unrelated to (and predating) the current sanctions the Russian government has also cut off its nose to spite its face and banned state purchase of foreign-made cars,  according to Automotive News. The avowed aim is to help local manufacturers. That includes locally-produced foreign brands. What is the likely effect of this? Only a drop in sales of the big cars that the nomenklatura like to be seen in. Oligarchs are unlikely to change their preferences. Given that Mr Putin is reported to be unhappy with the latest Zil limousine (and who wouldn't be, if it looks like that?), he too might be reluctant to give up the Man and the Merc, as Irish politicians' transport used to be referred to. Does Mr Putin have a Merc? Who knows? But last time I was in Moscow, crossing Balotnaya Square, a huge convoy of assorted dark-coloured limos and SUVs shot past from the direction of the Kremlin. My Russian companion observed that someone important was on the move. 'Mr Putin?' I enquired. No, it seemed that the convoy wasn't nearly big enough for him. Perhaps as the effects of this rule are felt he'll content himself with a less ostentatious presence on the roads. Or flag down a Lada gypsy cab.

BMW open to sharing battery technology with rivals

Automotive News Europe reports that BMW is open to sharing battery technology with rivals. Following Tesla's strangely-worded and qualified (though the qualification is hard to spot) announcement that it was giving up the exclusive rights that patents confer in the interest of increasing the electric vehicle parc, BMW are hoping that sharing battery cell technology will bring down the unit costs of making the things. The story doesn't mention dropping its exclusive arrangement with Samsung, though: and depending on which way the exclusivity runs, that means either that BMW won't be able to shop around or that other carmakers won't be able to buy from Samsung, so sacrificing economies of scale; or perhaps both. Either way, it all seems just a bit odd.

US: Dealer sues JLR and dealership group over failed acquisition

Automotive News reports a lawsuit  over a failed acquisition of five Long Island dealerships (three of them Jaguar Land Rover ones). The plaintiff, Napleton Dealership Group, claims that it had an agreement to buy them before JLR announced that it was going to exercise its right of first refusal. The agreement was not made conditional on the manufacturers' approval, and the seller did not disclose that JLR had the right to block it.


There are also allegations that some sort of impropriety was involved, as Napleton had spent six months on due diligence investigations and the eventual buyer completed in a single month. No-one in Europe would be surprised at a manufacturer having a favoured buyer in mind, but as we know they do things differently in the States. Whether that allegation holds water or not depends on the evidence, and is surely not the interesting aspect for Motor Law readers.


Of course, dealer agreements here commonly preserve the manufacturer's right to decide who is admitted to the network, at least to the extent permitted by the block exemption. Napleton's lawyer is quoted as saying that some manufacturers do the same in the US, and he describes it as having a 'chilling effect' on the dealer's ability to attract a buyer. Exactly! But whether such restrictions are universal or just common, it's surprising that six months of due diligence didn't pick it up. Would a dealer here be expected to disclose the existence of such a provision? Unlikely: the general rule is 'caveat emptor', which is why we do due diligence investigations.

US: Hyundai Agrees to Pay $17.35 Million Fine in Brake Defect Case

It might seem insignificant beside the GM ignition problem, but a fine of $17.35 million on Hyundai announced by NHTSA on 7 August would, other things being equal, be big news. According to the press release (first para):

The U.S. Department of Transportation's National Highway Traffic SafetyAdministration (NHTSA) today announced that Hyundai has agreed to pay a $17.35 million civil penalty and comply with NHTSA oversight requirements outlined in a Consent Order as a result of the manufacturer failing to report in a timely manner a safety-related defect affecting 2009-2012 Hyundai Genesis vehicles. The defect involves corrosion in critical brake system components that can result in reduced braking effectiveness and increase the risk of a crash.

An arbitration clause means arbitrate

Warwick Rothnie's blog, ipwars.com, although it might seem to state the obvious, provides a cautionary tale for everyone involved in commercial contracts, not limited to Australia which is the jurisdiction in which the case arose.

The Road Vehicles (Construction and Use) (Amendment No. 2) Regulations 2014

The Road Vehicles (Construction and Use) (Amendment No. 2) Regulations 2014  amend the definition of “the emissions publication” in Schedule 7B by referring to the most recent (eighteenth) edition of the Department for Transport publication entitled “In Service Exhaust Emission Standards for Road Vehicles” (ISBN 978-0-9549352-8-3). The publication contains in-use emissions limits that petrol-engined cars and light vans are required to meet for the purpose of MoT and roadside emissions tests. The publication updates information on new models of such vehicles which have come onto the market since the previous amending Regulations (S.I. 2012/1404) came into force on 25th June 2012. It also revises a small amount of data on existing models. (From the Explanatory Note attached to the Regulations.)

Tesla settles trade mark squatting problem in China

World Intellectual Property Review reports Tesla settles row with Zhan Baosheng over trademark in China (but at what cost?).
The case reinforces what we probably all know - leaving your trade mark unprotected, enabling an opportunist to get in first and register it, can be an expensive mistake. Unfortunately, registering all the trade marks you might need is also expensive. Interesting, however, to note that the squatting problem has moved from the field of domain names (a few pence each) to trade marks (several hundreds of pounds each, at least). And while trade mark laws commonly contain use and good faith requirements, they are not cheap and easy to invoke.

Mercedes-Benz questioned in China pricing probe - FT.com

Mercedes-Benz questioned in China pricing probe - FT.com

GM unit gets subpoena over subprime auto loans | Reuters

GM unit gets subpoena over subprime auto loans | Reuters

EU: Tighter control of anti-competitive agreements

The European Commission has tightened up on small agreements that restrict competition. For years various iterations of its Notice on agreements of minor importance (referred to by recalcitrant legal Latin-speakers as the de minimis exception) condoned agreements between parties so small as to have, effectively, no market power. Their activities would rarely have an appreciable effect on competition, although the exception never allowed the cardinal sins of price fixing and market sharing, the effect of which is always deemed to be appreciable.

The Notice has to be renewed from time to time, like much competition legislation, because markets evolve over time. The latest Notice (25 June), or more precisely the Guidance that comes with it, gives a free pass to agreements between competitors (actual or potential) whose market share does not exceed 10 per cent, and between non-competitors whose share does not exceed 15 per cent. Nothing new there. How to measure market share remains a bit of a mystery, explained in further guidance from the Commission: franchised dealers will always be considered to have a high market share, because broadly speaking (and of course it is not quite what the block exemption says) they enjoy fairly exclusive rights in their locality.

Importantly, though, the new Notice (and the Guidance) extend the non-exception for hardcore restrictions to cover all restrictions which have the object of restricting competition. It will still avail agreements which have that effect but which were not created with a view to achieving it, a distinction which might be difficult to draw in practice.

This change makes good sense, as focusing only on price fixing and market sharing was always a rather narrow approach. It will still be possible to gain exemption from the prohibition (a different matter from exception), but the Commission does make clear in its guidance that it is very unlikely that an agreement aimed at restricting competition (as opposed to that merely being an ancilliary effect) will qualify for exemption – it is unlikely to produce a benefit for consumers, and will inevitably impose restrictions which are not indispensable to the achievement of its objectives. Businesses which might previously have thought they were safe might have to think again.

The Notice applies only to the application of EU competition rules: but national competition laws form a seamless part of the EU-wide regulation of anticompetitive conduct, and the Guidance is expressly aimed at national competition authorities and courts as well. We have our own, slightly different, de minimis rule in the UK, but it should no longer be relied upon for “restrictions by object”.

US: Legal action over warranty reimbursement law dropped

The Alliance of Automobile Manufacturers has dropped a legal action in Florida in which it challenged a dealer-friendly law which required them to pay the same rates for warranty work as retail customers. The suit, filed six years ago, was in the discovery phase when the court ordered the Alliance to disclose what it insisted was confidential business information. It was withdrawn on 2 July, according to Automotive News.

The trade association promised to continue to oppose state legislation “that is anti-consumer … [and] anti-competitive and could result in higher process for vehicles and repairs” - words the meaning of which, as we know, can differ greatly from one person to the next. In any event, the Alliance went on, after it filed the suit the legislature had made a couple of important changes to the law (unspecified in the reports I have read) so when they were removed from the legal claim what remained was narrow and confined to interstate commerce – the Alliance’s implication being that withdrawing the whole suit really isn’t a big deal. Perhaps the big deal in the story is that any lawmakers anywhere could pass legislation so generous to dealers!

This earlier story is also of interest: http://politics.heraldtribune.com/2014/04/19/suit-car-repairs-move-bill-public/

 

ASA Adjudication on Tesco's Hobgoblin beer offer

The Advertising Standards Authority has upheld a complaint about an offer on Hobgoblin beer (an excellent product from the Wychwood brewery). It indicated that the normal price was £4.99 for four cans, and the reduced price was £4.50: in fact it had been offered for more time at £4.00, making the special offer far from special. The £4.50 price also remained after the offer was supposed to have closed: it was not in fact an extension of the offer period but a repricing, but the ASA still didn't like it - consumers would have bought by the advertised date in the expectation that the price would go up again thereafter.


Not a case with specific motor industry connotations - but an interesting indication of the ASA's approach to the problem of dodgy bargain offers, on which the law has been very much relaxed since the days of the Bargain Offers Order.