Air con cartel fined a cool €155 million

Six car air conditioning and engine cooling suppliers have been fined €155 million by the European Commission for taking part in one or more of four cartels in the European Economic Area. 

Commissioner Margrethe Vestager, in charge of competition policy said:“Even though air conditioning and cooling components are not something you see as products, they are very much something you feel. In this case you might also have felt it in your wallet even though temperatures would still be regulated in your car. Today's decision underlines that we do not accept cartels that affect the European market, wherever and however they may be organised."

The six car component suppliers addressed in this decision coordinated prices or markets, and exchanged sensitive information, for the supply of climate control components and engine cooling components to certain car manufacturers in the EEA. These suppliers are Behr (Germany), Calsonic (Japan), Denso (Japan), Panasonic (Japan), Sanden (Japan) and Valeo (France). The coordination took place at meetings, notably through trilateral meetings in Europe in one of the cartels, and through other collusive contacts in Europe and Japan through bilateral meetings, by email or phone. The Commission's investigation revealed the existence of four separate infringements. All six suppliers acknowledged their involvement in the cartels and agreed to settle the case. Denso was not fined for three of the cartels as it revealed their existence to the Commission. Panasonic was not fined for one of the cartels as it revealed its existence to the Commission.

The fines were set on the basis of the Commission's 2006 Guidelines on fines (see also MEMO).

In setting the level of fines, the Commission took into account, in particular, the sales value in the EEA achieved by the cartel participants for the products in question, the serious nature of the infringement, its geographic scope and its duration.

Under the Commission's 2006 Leniency Notice:

• Denso received full immunity for revealing three of the cartels (thereby avoiding an aggregate fine of ca. € 287 million).
• Panasonic received full immunity for revealing one of the cartels (thereby avoiding an aggregate fine of ca. € 200 000).
• Behr, Calsonic, Denso, Sanden and Valeo benefited from reductions of their fines for their cooperation with the Commission investigation. The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the existence of the cartels in which they were involved.

In addition, under the Commission's 2008 Settlement Notice, the Commission applied a reduction of 10% to the fines imposed on the companies in view of their acknowledgment of the participation in the cartel and of the liability in this respect.

Details are set out in the Commission Press Release.

Spain: €6 million fine for Nissan price-fixing

Spain's competition authority, la Comisión Nacional de los Mercados y la Competencia (CNMC), has fined Nissan's local distributor, a number of its dealers and two consultancy firms €6.03 million after an investigation into the exchange of commercially sensitive information leading to agreements over discounts and conditions of supply. The consultancy firms monitored the cartel-members' compliance and reviewed the dealers' monthly sales figures.

According to the story on the Law 360 website, the distributor will pay €1.9 million and two of the dealers over €1 million each. I had hoped to provide a link to material on the CNMC's website (www.cnmc.es) but I am unable to find anything relevant - I can order a coffee in Spanish but drilling down into the competition authority's website is another matter altogether. I will ask a friend for help.

Spain: CNMC penalises price-fixing cartel (with more still to come)

La CNMC multa con 41,1 millones de euros a 95 concesionarios de automóviles Audi, Volkswagen y Seat, dos empresas consultoras y dos asociaciones del sector, is the title of the press release announcing the imposition of substantial penalties following investigations that Motor Law reported in Spetember 2013. This forms part of a wider investigation into the car market, involving six sets of proceedings against distributors and one against a number of manufacturers.

In the present decision, the CNMC identified seven different geographical cartels involving the three marques. Their illegal conduct included  fixing maximum rebates and commercial conditions, and exchanging sensitive information. There were also enforcement mechanisms, imposing sanctions on dealers who failed to stick to the cartel rules: two firms of consultants who were involved in imposing sanctions and collecting 'fines' were also penalised.

SEAT and 11 dealers benefited from the authority's leniency programme and were not penalised. Four companies were investigated but not found to have broken the law.

The companies involved have two months in which to file an appeal.

'via Blog this'

Commission's statement of objections in truck cartel case

The European Commission has been investigating a cartel in the truck industry since at least 2011, when it carried out a series of dawn raids. It has indicated before that the cartel was a very old one. Now the Financial Times has come into possession of leaked documents (reported here) which tell us rather more about the investigation. Apparently the cartelists made agreements about the introduction of emissions technology, dating back to 1997. It involved DAF, Daimler, Iveco, Scania, Volvo (which also owns Renault Trucks) and MAN. It was the last-named of these which blew the whistle in the case.

No point in repeating what the FT reported, and anyway hard to do without risking an infringement of copyright. More in the next Motor Law newsletter, if I find more!

Spain: competition authority launches proceedings concerning price-fixing in car market

Following an investigation in July (see this press release), the CNC, Spain's national competition authority, has initiated proceedings against several car manufacturers and their dealers for price-fixing and exchanging commercially sensitive information, and against some others for exchanging information only. Auditors and data processing companies also seem to be in the frame. The press release (in Spanish) is here, and there is also a report from Reuters.

Running the press release through Google Translate reveals little more information, other than a list of vehicle manufacturers and dealers who are under investigation, and that the authorities have 18 months in which to complete the exercise.

Commission brings wire harness cartelists to book

Alex Haffner, of Dentons as the firm is now, spoke at the Motor Law conference this year about the world-wide action being taken against cartels in the car parts industry. In this guest post, he brings us up-to-date with recent developments ...

On 10 July, the European Commission announced that it had imposed fines totalling €141 million on four Japanese car parts suppliers. The fines relate to the operation of five separate price-fixing and bid-rigging cartels for the supply of wire harnesses to Toyota, Honda, Nissan and Renault.

Wire harnesses are the "central nervous system" of a car and transmit electrical power throughout a vehicle. The Commision's investigation, which began with unannounced "dawn raid" inspections of the cartelists in February 2010, found that the companies concerned had coordinated the prices and allocation of supplies of wire harnesses. Contacts between the cartelists took place in both Japan and the EEA. Some of those contacts were designed to rig the tenders carried out by the car manufacturers over a significant period (in the case of Toyota, for more than nine years).

One parts supplier, Sumitomo, received full immunity as it was the first company to confess to its participation in the cartels to the Commission - it otherwise would have received a €291 million fine. The other companies also received reductions in their fines of between 20 and 50 per cent because they too subsequently acknowledged their participation in the cartels and their liability for them. This so-called "settlement procedure" helped to speed up the Commission's investigation significantly.

Somewhat surprisingly, this is the Commission's first cartel decision of 2013. Of greater interest to the automotive industry, though, is that it represents the first of what are likely to be a number of European decisions concerning cartel activity in car parts supply. Investigations are already ongoing into allegations of similar practices in respect of occupant safety systems, ball bearings, thermal systems and lighting.

The Commission's full decision will be published in due course. In the meantime, those affected by the cartelists' actions are likely to be considering how they might be able to obtain damages from them. Last month, the Commission adopted proposals for a Directive which aims to make it easier for such "follow-on" actions to get off the ground in Europe, where take-up has been slow compared to other countries such as the US and Canada. Several follow-on claims have already been launched in those jurisdictions following fining decisions issued by the local competition authorities.

Commission proposes legislation to facilitate damage claims by victims of antitrust violations

The Commission has adopted a proposal for a directive on compensation for victims of antitrust violations, such as cartels. The press release, and links to further information, is here.

OFT issues five infringement decisions in the distribution of Mercedes-Benz commercial vehicles investigation

The OFT has issued the decisions that we have been expecting. Press release no 30/13 of 27 March 2013  says:

The OFT today issued decisions finding that Mercedes-Benz and five of its commercial vehicles dealers infringed competition law and has imposed fines totalling over £2.8 million.
Each of the five decisions relates to separate infringements that took place over different periods between March 2007 and January 2010, involving different parties. The nature of the infringements varies but all contain at least some element of market sharing, price co-ordination or the exchange of commercially sensitive information.
These decisions follow settlements with Ciceley, Enza, Mercedes-Benz and Road Range announced in February under which these parties admitted breaching the law and agreed to pay a fine and co-operate with the OFT. Northside, which also admitted infringing competition law, has avoided a fine under the OFT's leniency policy. The remaining dealer, H&L Garages, did not settle with the OFT and the two infringements it was involved in were not therefore part of settlement.
Today's announcement brings the OFT's investigation to a conclusion. The full decisions will be published on the OFT website later this year.

So we still don't get to see the details: this is merely a formality, as far as the outside world is concerned.

Motor Law conference report

We are greatly obliged to Motor Law's good friend Steve Hamilton of Auto Retail Manager for writing this report of proceedings at Motor Law's 2013 conference, and to Frank Dumbleton for the photos ...

 

Block Exemption and the car market

Joseph Vogel, a French avocat specialising in competition and distribution law, said most manufacturers appeared to be sticking with the qualitative and quantitative system that has been dominant under the existing regime – at least for now, and partly due to the fragile nature of the economy. “Manufacturers recognise that now is not the time to be making major changes,” he said.

Looking at the new clauses and obligations that were likely to feature in new dealer agreements, he said that overall there was generally less protection for retailers. For example, he said, most agreements have retained the two-year notice period, but the need to give good reasons for termination has gone.

Obligations around the transfer of contract business (i.e. if a dealer wants to sell to another dealer) have gone from most contracts – and that is a good thing, Mr Vogel said. Similarly, the possibility of opening a secondary outlet no longer exists in most contracts.

The requirement for referring to arbitrators or independent experts is no longer a condition, but remains in most contracts – albeit often limited to disputes about objectives.

Brand exclusivity can be enforced if a network has less than a 30% market share, usually for a period of up to five years.

Many networks are currently in the transition phase towards setting up a new distribution system and one way of doing that, according to Mr Vogel, is to terminate all contracts with two years’ notice, simply on the grounds of the need to adapt. Alternatively, a manufacturer could propose a new contract, or an amendment to distributors, and only terminate if there is a refusal to accept the changes.

Block Exemption and the aftermarket

Should spare parts be treated as brand-specific? That was the question posed by Marjorie Holmes of Reed Smith, and the answer will determine the nature of the contract that manufacturers can write with their dealers and repairers.

If you take the brand-specific view, she said, you have automatically defined a narrow market and inevitably the vehicle manufacturer will be deemed to have a dominant position – which automatically gives rise to competition law problems.

However, if you take a more generous view of spare parts and include all the generic manufacturers in the market as well, then the vehicle manufacturer’s position is much smaller.

Block Exemption FAQs

Barrister Jonathan Turner looked at the EC’s FAQ document on Block Exemption, noting where they go further than the competition regulations (such as the supply of parts to independent repairers), and where they are perhaps more lenient (for example on making bonuses or rebates for captive parts conditional on the sourcing of captive parts).

On the subject of supplying technical data to tool manufacturers, he said he would be nervous about restricting the supply of information about a new multi-brand tool on the market. And while the FAQs say a requirement to use specified electronic tools or equipment for servicing or repairs would be unlikely to lead to a breach of EU competition rules, Mr Turner said he was unsure about this – if it is more than five years it is probably anti-competitive, he said.

However he warned that the courts could take a different view on some issues, given that judges tend to operate based on the merits of the parties involved and not necessarily on the best interests of consumers.

Cartel investigations in the parts market

The world’s biggest ever competition law investigation is focused on the parts industry right now, Alex Haffner of SNR Denton said, involving a co-ordinated approach across different jurisdictions.  Australia is the latest country to come on board with regard to the supply of wire harnesses, and others are expected to join.

Ultimately, Mr Haffner said, it could lead to lower Original Equipment prices.

Japanese executives have already admitted that procurement processes have been rigged for more than the past ten years. Most manufacturers will have been affected, and follow-on actions for damages have already started.

In the USA for example, total fines of more than $800 million have been levied (including $471m against Yazaki) against suppliers of wire harnesses, thermal system controls, instrument panels and automotive bearings, and a number of executives have been jailed. There are also various investigations pending, in the areas of safety equipment, brakes, bearings and fuel systems.

Within the EU, no formal sanctions have yet been imposed, but formal proceedings have been instigated against some wire harness makers. There have also been some ‘dawn raids’ in relation to other car parts, including safety systems, ball bearings and thermal systems. Leon AG, for example, has confirmed that it is under investigation.

Mr Haffner suggested that, within Europe, the UK could become the forum of choice for would-be complainants – and that while the big losers in all this have been the car makers, because their procurement processes were rigged, potentially anyone who has bought a car in the past ten years could be in line for damages.

Summing up, he highlighted the risks involved in exchanging information, for example in collaborative ventures. Even bilaterally exchanged information between two suppliers could be enough for the authorities to take an interest, he said, adding that car makers would have to look at how they run their procurement processes. We could see non-price comparators like quality and innovation playing a larger role.

The return of copyright protection for car parts?

Patent attorney David Musker (Jenkins), a long-standing conference favourite, took as the title of his talk "Section 52 and all that", reviewing the history of copyright protection in designs for car parts from the Morris Marina to the recent Star Wars case in the Supreme Court (Lucasfilms v Ainsworth). Section 52 of the Copyright, Designs and Patents Act 1988 would be repealed when the Enterprise and Regulatory Reform Bill becomes law - a reform required by EU designs law. It would not mean the return of copyright to the car spares industry, because section 51 is the provision that prevents BL v Armstrong coming back to haunt us - but there is no guarantee that it will not fall victim to some similar tidying-up exercise. Meanwhile, the so-called "repair clause" (Article 110 of the Community Designs Regulation) has been considered by the courts, in BMW v Round, and found wanting, leaving the UK's "must match" clause still governing designs for replacement parts and the old Ford case still good law.

The connected car

IHS Automotive recently predicted that by the end of next year, for some of the bigger brands, “every vehicle they sell will offer some sort of connectivity” via internet screens installed on the dashboard, and looking further ahead several companies are working on driverless vehicles.

Adam Aldred of Addleshaw Goddard predicted that not only will we soon be able to stream movies from the web to the car, but that car promotions would start focusing on the apps that are available to go with certain models, for instance to aid the driver or to keep other passengers entertained. 

Given that today’s smartphones, for example, are out of date within a few months, marrying what’s happening technologically with the lifespan of the typical car will be a big challenge for manufacturers, Mr Aldred said. But rather than create an environment in which the technology could be updated for subsequent owners, he said it might be in the manufacturers’ interest for their products to become obsolete within a few years – potentially eliminating the used vehicle market.

He also said that, because of concerns about hacking, manufacturers would have to ensure that the multi-media element was separate from the vehicle’s critical systems, and that the issue of driver errors due to distractions would have to be addressed. It is a criminal offence to use a mobile phone while driving (unless it is hands-free) so where, he mused, will the law draw the line with in-vehicle infotainment?

On the subject of location-based services such as remote diagnostics/repairs provided in future by OEMs and roadside assistance operators, Mr Aldred said that data protection could be a sensitive issue.

The changing face of motor finance

Responsibility for the regulation of consumer credit will move from the OFT to a new regulator, the Financial Conduct Authority, from April 2014, although there will be a transition period that runs into 2016. The initial consultation runs from April to June this year.

The licensing regime will change and businesses will need to re-apply, Stephen Dawson of Shoosmiths said, adding that although there was very little detail at present the deadlines are set in stone and that the Treating Customers Fairly guidelines give a good indication of the regulator’s expectations.

He said retailers needed to look at the aspects of their business that might be affected, and at the relationship with their captive finance house. Are your policies and procedures up to date, for example?

The FCA will be a very pro-active body and will be able to move much more quickly than the OFT has in the past, Mr Dawson stressed.

He also had some good news for the industry with regard to electronic signatures on finance documents. “By 2014, every captive will be doing it,” he said. “From a legal point of view, they need to be no less effective than a handwritten signature and I am certain they pose no issue or risk.”

He said the best method of capture would be software solutions based around an electronic pad with a stylus in the showroom. Not only is it quicker and more convenient for customers, it also means a faster payout and lower costs for retailers. “It’s the future for sure,” he said.

Consumer law update

Adrian Watts of WattsLegal brought the conference to a close with an overview of some significant trends and cases in consumer law over the past 12 months.

These included FSA v Digital Satellite Warranty Co, where the Supreme Court affirmed that FSMA authorisation was required for contracts assuming ‘risk of loss attributable to insured person’ (regardless of whether it is an obligation to repair/replace or reimbursing the cost of doing so); and R v Derby Car & Van Contracts, concerning the sale of pre-registered vehicles. A car was initially registered in the name of a third party to obtain a fleet discount, but was not registered in the customer’s name until up to six months later. Because this information was not disclosed, it left the customer exposed to offences under the Vehicle Excise Act and could also prejudice any insurance claim they made.

A delegate asked whether there would be any scope in writing conditional contracts, but according to the DVLA, Mr Watts said, “de-registration is not an option”.

He also addressed the log-awaited implementation of the Consumer Rights Directive, and the Consumer Bill of Rights which will introduce individual recourse and refunds for misleading statements and high-pressure sales tactics. 

Referring to the creation of a new raft of enforcement bodies this year and next, he said a lot more people would start representing themselves in person but that they would be given less leeway in court than perhaps they are today.

Mercedes-Benz and three dealers to pay £2.6 million for competition law breaches

The OFT announced today that Mercedes-Benz and three of its commercial vehicle dealers, Ciceley, Road Range and Enza, have admitted infringing competition law and agreed to pay fines totalling £2.6 million. Another dealer, Northside, will benefit from the leniency policy that encourages whistle-blowing without which cartels would be difficult to detect. The infringements involve classic cartel activity: market sharing, price coordination and exchange of commercially sensitive information, not necessarily all at the same time. However, there is no mention of criminal charges, which are a possibility where cartels are involved: a Mercedes executive was arrested when the investigation into the cartel was started, but never charged (see earlier post here).

You can read the full press release issued by the OFT here.

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.

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.

No criminal prosecutions for truck cartel (but that's not the end of the story)

Some months ago (in volume 12 number 5, to be precise) we reported that the OFT had launched an investigation into allegations of price-fixing in the truck market, and as part of that exercise an individual had  been arrested. In December the OFT announced that it was not going to charge him:

The OFT commenced a criminal cartel investigation under the Enterprise Act 2002 into suspected cartel activity in the UK involving commercial vehicle manufacturers in September 2010. Following a thorough investigation it has been determined that there is insufficient evidence for any individual to be charged with the cartel offence. Accordingly, that case has been closed. 

The OFT then - ominously? - adds:

The OFT's Competition Act investigation is continuing.

US: penalties imposed for price-fixing by electrical components suppliers

We have reported the increasingly widespread investigations by competition authorities into price-fixing in the components industry in recent months. Now the U.S. Department of Justice, which was quoted recently as saying that this investigation was the biggest it had undertaken, has announced that Yazaki and Denso, two Japanese automotive electrical components suppliers, have agreed to plead guilty to charges of  multiple price-fixing and bid-rigging conspiracies in the sale of parts to automobile manufacturers in the US.
They will pay a total of $548m in criminal fines (including the second-largest ever criminal fine under the Sherman Act), and a number of executives will serve time in prison.

More antitrust trouble ahead for parts makers in US

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

Turkey: Competition Board fines car and CV businesses over cartel

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

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

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