In a judgment from last October, the General Court has confirmed that suppliers may restrict aftermarket access to spare parts to authorised repairers. But before you get too excited, the case was about watches and the court specifically said that it did not apply to the motor sector. The fact that the motor sector has its own block exemption was one (fairly compelling) reason why the court excluded it from the scope of the judgement: it would have been surprising had the court applied the same principles to luxury watches and cars, although it begs the question whether perhaps luxury cars should be treated differently from volume ones.
The upshot of the judgment is that an authorised repairers can be refused access to spare parts, even if the supplier has a dominant position in the market for those parts. The case concerned a complaint, first made in 2004, by the European Confederation of Watch Repairer Associations (CEAHR). Initially the commission rejected the complaint on the grounds of the was insufficient interest the European Union level. On appeal, the General Court held that the Commission had failed to consider all the relevant facts and arguments and annulled the decision (Case T-427/08). In 2011 the Commission launched a new investigation which it closed in 2014 on the grounds that the cost was disproportionate to the likelihood of finding an infringement. (Surely it is equally important to make decisions that show where an infringement is not taking place?) Once again CEAHR appealed and once again the court sided with the commission.
It is of course quite common for the commission to identify separate product markets the primary products and secondary products – spares and replacement parts. Manufacturers have often been found to be dominant in the spares market, which is frequently brand specific - it is certainly taken to be in the motor sector. In this case, the Commission recognised a separate product market for the sale of primary products, namely luxury watches, and another market the maintenance and repair services as well as a market for the supply of spare parts. The Commission found that the secondary markets were brand-specific: Swiss watchmakers could be dominant, so was their refusal to supply an abuse of their dominant position?
The court, going beyond what should have been necessary for the purposes of deciding whether the Commission had been right to drop the investigation, took the view that selective repair systems were analogous to selective distribution systems. They are permissible under competition rules, provided the restrictions are objectively justified to preserve the quality of the products and to ensure their product use, and that admission to the network is based on objective criteria of a qualitative nature which are applied in a non-discriminatory fashion. Those criteria must also be proportionate.
If the manufacturer is dominant, the refusal to supply dependent repairers will only be an abuse where all effective competition in the parts will be eliminated. If there is still competition between authorised repairers and the network remains open to new authorised repairers, the petition will not be eliminated and there will be no abuse. Excluding repairers who do not meet criteria sept double. Preserving an distorted competition does not necessarily mean protecting independent repairers as such.
The court thought that the use of selective repair networks was probably justified the luxury watches, to prevent counterfeiting of the watches themselves and of spare parts. Significantly, it would not be justified to protect the brand image. CEAHR appealed to the Court of Justice, but later withdrew, so there the law stands.
Case T-712/14 CEAHR v Commission (27 October 2017) reported here by Baker & Mckenzie.
The upshot of the judgment is that an authorised repairers can be refused access to spare parts, even if the supplier has a dominant position in the market for those parts. The case concerned a complaint, first made in 2004, by the European Confederation of Watch Repairer Associations (CEAHR). Initially the commission rejected the complaint on the grounds of the was insufficient interest the European Union level. On appeal, the General Court held that the Commission had failed to consider all the relevant facts and arguments and annulled the decision (Case T-427/08). In 2011 the Commission launched a new investigation which it closed in 2014 on the grounds that the cost was disproportionate to the likelihood of finding an infringement. (Surely it is equally important to make decisions that show where an infringement is not taking place?) Once again CEAHR appealed and once again the court sided with the commission.
It is of course quite common for the commission to identify separate product markets the primary products and secondary products – spares and replacement parts. Manufacturers have often been found to be dominant in the spares market, which is frequently brand specific - it is certainly taken to be in the motor sector. In this case, the Commission recognised a separate product market for the sale of primary products, namely luxury watches, and another market the maintenance and repair services as well as a market for the supply of spare parts. The Commission found that the secondary markets were brand-specific: Swiss watchmakers could be dominant, so was their refusal to supply an abuse of their dominant position?
The court, going beyond what should have been necessary for the purposes of deciding whether the Commission had been right to drop the investigation, took the view that selective repair systems were analogous to selective distribution systems. They are permissible under competition rules, provided the restrictions are objectively justified to preserve the quality of the products and to ensure their product use, and that admission to the network is based on objective criteria of a qualitative nature which are applied in a non-discriminatory fashion. Those criteria must also be proportionate.
If the manufacturer is dominant, the refusal to supply dependent repairers will only be an abuse where all effective competition in the parts will be eliminated. If there is still competition between authorised repairers and the network remains open to new authorised repairers, the petition will not be eliminated and there will be no abuse. Excluding repairers who do not meet criteria sept double. Preserving an distorted competition does not necessarily mean protecting independent repairers as such.
The court thought that the use of selective repair networks was probably justified the luxury watches, to prevent counterfeiting of the watches themselves and of spare parts. Significantly, it would not be justified to protect the brand image. CEAHR appealed to the Court of Justice, but later withdrew, so there the law stands.
Case T-712/14 CEAHR v Commission (27 October 2017) reported here by Baker & Mckenzie.
