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Wednesday, 10 February 2016

IAAF calls guilty verdict against Kia a 'major victory' for IAM | Professional Motor Mechanic

Professional Motor Mechanic reports an appeal decision in Sweden which IAAF has hailed as a major victory for the independent sector. In December 2012, the Market Court in Sweden had ruled (MD 2012:13) that exclusivity clauses in Kia's 7-year warranty contracts breached competition rules. If the customer breached the terms, the warranty was not void - it was reduced to three years (although whether the terms remained the same is not clear). The company was ordered to allow its customers to choose independent repairers as well as authorised ones, and was fined SEK 5 million. Three years later the Supreme Court in Stockholm dismissed Kia's application for leave to appeal and for a retrial.

Manufacturers are generally prohibited from refusing to honour a vehicle's warranty on grounds only that it has been serviced by a non-authorised repairer or non-original parts have been fitted. Kia's warranty required servicing to be carried out by an authorised workshop. The Association of Swedish Car Parts Wholesalers (SBF), the Swedish member of FIGIEFA, reported the matter to the Competition Authority, which declined to take action. The SBF then took legal action against the manufacturer in the Market Court, which granted an injunction against Kia under Chapter 3, section 2 of the Competition Act - a provision which enables a party to obtain an injunction to bring an infringement to an end, when the Competition Authority has decided not to proceed. (Of course, that's a different matter from the Competition Authority deciding that no infringement has been committed: it might well decide not to proceed for other reasons, perhaps - I'm guessing here - because there is insufficient public interest, although this shouldn't have been a case where that was a good reason for not devoting resources to it.) In essence, it allows a private interest to take action where the public body hasn't.

Section 2 does not enable the party bringing the action to claim damages, but it does deal directly with the problem - and there remains the possibility of a follow-on action for damages anyway. The Market Court has decided a number of cases - 14, according to the CELEC report, which is now three years old: and the petitioner has been successful in "several" of them.

The Market Court took the view - unsurprisingly, I think - that the relevant market for servicing and repairs was a brand-specific one. It decided that the condition in the warranty had serious foreclosing effects because independents were excluded from competing: one of the objects of the condition was to restrict competition. It would be prohibited under Article 101 TFEU and the equivalent provision in the Swedish competition law.

Prof Henriksson of the Center [sic] for European Law and Economics (CELEC) questions whether it is correct to view the agreement between Kia and its authorised repairers as restricting competition because of the condition imposed on customers. It's an interesting point, although it might be answered by scrutinising the authorised repairer agreement. If Kia have been clever, though, I guess the agreement will be silent on the matter and the restriction will be imposed through the back door, by deterring consumers from going elsewhere. Perhaps the AR agreement says that dealers will not honour warranties in the prescribed circumstances - or in practice they will be prevented from doing so, within the framework of the AR agreement, by the fact that they won't get paid for their work.

Prof Henriksson also asks whether this is indicative of a difference of opinion between the competition authority and the court about what amounts to a breach of the prohibition. That seems unlikely: Christer Liljenberg, Chairman of SBF, is quoted by FIGIEFA as saying that the competition authority had indicated that it did seem to be a breach.

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