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.
