Amazon plan to disrupt the car market

So, as reported in Auto Retail Network and lots of other places, Amazon are planning to enter the car market using the UK as a guinea pig (or, perhaps, proof of concept). Maybe the time is ripe with the country set to distance itself from the system of competition law that allows vehicle manufacturers and importers to restrict supplies to authorised dealers. The block exemption has not been popular in the UK, initially because it enabled suppliers to charge higher prices here than on the continent (something tells me that the sort of mindset that caused car buyers to head off to Belgium or The Netherlands back in the eighties might well have led them to vote leave in 2016 - but it's no more than a feeling). Maybe Brexit will be an opportunity to shake up what is seen by many as an unjustifiably privileged sector, insulated from normal competitive pressures.

Amazon have tried in a small way to sell cars before (Fiats in Italy: how could that go wrong?). Tesco have tried online car sales for a short time, and there have been other attempts to use ecommerce to cut out the middleman. Further back in history, there was Asdadrive, which emerged in the mid-eighties and made scarcely a ripple - and has disappeared so comprehensively that there's almost nothing to be found on the Internet save for some Companies House records.

It is trite to remark that selling cars is not like selling baked beans. You don't trade in your previous beans when you buy a new can, for a start. There is no continuing servicing and repair requirement, no market for spare parts, no way of adding accessories, no opportunity to sell financial services ("products", as they are weirdly called) as well. (Or, to put it another way, these days the cars are often ancillary to the financial services). For these reasons selective distribution remains the optimal way to service a complicated market, although those complications change over time as service intervals become longer, cars become more reliable, and the chances of effecting an economic repair when a prang occurs tend towards zero. (The bumper is supposed to save the car from damage, but the sensors now mounted in it make replacement prohibitively expensive.) So Amazon might find that they have bitten off more than they can chew, though with sales and service being separated by the block exemption the landscape is different from that which faced Asdadrive. Maybe, as Brexit approaches, this will be seen as an excuse to dispense with the block exemption - a  move that could be dressed up as consumer benefit, potentially a popularist aspect of leaving the EU. And another chicken that would come home to roost a few years later, I suspect.

'via Blog this'

US: California jury clears FCA of price discrimination between dealers

Law360 reports that a jury in a federal court in California has found that Chrysler (as was) did not violate federal antitrust laws by offering better incentives to some dealers. The case, in which it claimed $1.7 million, had been brought by a dealer in San Jose, and some three years of litigation was disposed of by the jury in just a day.

The remarkable thing about this, to my mind, isn't so much the outcome as the fact that a dealer would even bring a claim in the first place. It's not something you see very often in Europe. Also interesting to note that it was a federal antitrust law case, not a claim under the often very protective laws governing dealer-manufacturer relations at state level.

Court: Fiat contract termination invalid

Gericht: Fiat-Vertragskündigung unwirksam reports the KFZ-Betrieb website (which evidently does not limit itself to trucks). Google Translate has provided me with this (tidied up a little) and I think I can safely say that its use falls within section 30(2). FIAT had cancelled all 550 dealer agreements and 900 authorised repairer agreements in Germany.

The Regional Court (Landgericht) Frankfurt has declared the termination of all FIAT's dealers' contracts  invalid (AZ: 3-08 O 113/14). ... A board member of the Association had filed a fundamental lawsuit against the dismissals of the Alfa dealer contract and the Fiat, Alfa and Jeep service contracts.

Fiat had terminated nationwide every dealer and service contract in February 2014, after it had come into force on 1 January 2014. Originally, the importer had promised the partners long-term planning security with these contracts. Among other things, this circumstance, the General Court now considered to be relevant that the dismissal was contrary to good faith, according to the association. Especially also because Fiat had insufficient grounds to recite that dismissal is only a few weeks after the introduction of the contracts was necessary due to changed circumstances.

Already in December a different chamber of the LG Frankfurt had declared invalid clauses from the Letter of Intent from Fiat Germany to selected Fiat partner, because traders should therefore continue without any review of new contracts. Therefore, the judgment regarding the dismissals have far-reaching consequences, according to the association.

The intention of Fiat to reduce margins drastically redefine the margins at its discretion in model changes was, just questioned how the envisaged by the importer subject to the changes to the standards, according to the release. Both schemes make the new contracts for the incalculable dealer trade body. They would therefore rejected by the vast majority of its members in any case.

'via Blog this'

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.

Tesla and the Car Dealers’ Lobby

This is the title of an article by Daniel A Crane of the University of Michigan Law School, available via the Antitrust & Competition Policy Blog.  It should be of interest to anyone with an unhealthy fascination for distribution law.

France: CNPA takes Chevrolet to court

The Conseil National des Professions de l'Automobile states on its website (and the story is also in L'Argus) that it has responded to the 'brutal' termination of Chevrolet dealers' contracts by instituting proceedings before the Tribunal de Commerce de Paris (having originally sued in the Tribunal de Grande Instance de Pontoise but found that it would take too long to come to court). A hearing took place on 2 May, and a second hearing was fixed for 30 May, but there's no news that I can find about that.

The grounds for the complaint (translated from the French using Google Translate, with a little editing thereafter) are:

• The brutality of the announcement of the withdrawal.

- The last contract was entered into in June 2013. This is obviously accompanied by investment requirements, a few weeks before the announcement of the withdrawal.

- Contractual loyalty would demand that the network be informed earlier (and at least before the press)!

- This is especially true since the registrations were continuously growing in France. Nobody expected this to happen!

• Chevrolet's disloyalty.

The CNPA will provide the Tribunal with evidence that GM's decision is the outcome of a long reflection, intended to favour its other brand OPEL.

• The notice was mortgaged before its notification [or might we say in English that it was a fait accompli?].

- Advertising campaigns about destocking until the exhaustion of stocks showed it to be true.

- Moreover, the delivery time for customers is at least 5 months (and the price of vehicles has increased, officially "among others due to the increase in VAT").

• Breach of contract by Chevrolet, comprising:

- Lack of stock.
- The removal of demonstration vehicles.
- The removal of the budget estimate tool.
- The reduction and disappearance of the communication plan.
- The elimination of sales targets and action plans.

Another case to watch. 

Greece: Fiat dealers asked to waive rights

The transition from one block exemption to the next has always been troublesome, although we seem to have got past the technique of terminating the entire network and offering reappointment to some or all of them. However, this time round Fiat Group Automobiles Hellas S.A. (FGAH) seem to have excelled themselves. Determined, it seems, to enter fully into the spirit of the new regulation, which of course contains nothing in the way of dealer protection, they are requiring their dealers to waive any accrued rights that they might have under the old Regulation.

They have sent out a letter of intent, in English as well as in Greek, which requires dealers to waive their rights against FGAH in relation to their existing agreements and the termination of those agreements. On 31 January next year, dealers will be required to declare that they have no claims against Fiat arising from the existing agreements and their termination, and irrevocably to waive any claims they do have.

Greek FIAT dealers are not amused. They consider the importer's and the manufacturer's actions unacceptable. The Greek car market, in common with much of the Greek economy, is in crisis, and dealers fear that FGAH is intending sometime probably next year (hence the date mentioned in the letter) to transfer the import contract to a third party. Waiving claims to protection from termination with that in prospect is not an attractive proposition for the dealers (though for the importer, in anticipation of handing over the franchise, it makes commercial sense to clear the decks).

Moreover, under Greek law I am told that a dealer may very possibly have a claim for a goodwill indemnity on termination based on the commercial agents directive (Directive 86/653 EC) and the Greek law which implements it, Presidential Decree 219/91. Recent Greek Supreme Court judgments (139/2006 and more recently 15/2013 and 16/2013, although I am not convinced that the first of those links is to the right case) indicate that dealers are more likely than not entitled to a goodwill indemnity. The Fiat letter seems to be designed to ensure no such claims will be possible, notwithstanding that Article 19 of the Directive specifies that the parties may not derogate from the indemnity and compensation provisions (Articles 17 and 18) before the contract is terminated. It would also rule out claims for sunk costs.

The commercial agents directive has been mooted by CECRA and the European Distribution Lawyers as an alternative source of protection for dealers, given the removal of their protection in the latest block exemption. But it could never serve such a purpose directly, for the simple reason that dealers are not and never have been commercial agents. At best, the directive could provide a model to be used to create a European equivalent, perhaps, of the dealers day in court acts found throughout the United States. What the Greek Presidential Decree says I do not know, but if it extends commercial-agents-style protection to dealers, it goes beyond what the directive requires, and I cannot see that a EU point involving Article 19 can arise - which is not to say that the Decree itself contains no such provision, just that if it does it's a home-grown Greek thing.

Fiat's action makes the conclusion of the new contract conditional upon the acceptance of unrelated terms and obligations, and takes undue advantage of the situation in which dealers who have significant sunk investments find themselves, especially in a crisis market with no alternatives. Lawyers acting for dealers contend that this approach is illegal under Greek law, so we might find ourselves watching this for quite long time.

Auto 24 case: final decision from the French courts

The Auto 24 case, which I wrote about here, came back to the French courts from its short trip to Luxembourg and on 15 January 2013 the Cour de Cassation ruled that Jaguar Land Rover France was entitled to limit the number of dealers appointed to its selective distribution network in France.

The Cour de Cassation followed the Court of Justice's ruling, rejecting Auto 24's argument that JLR's limit on the number of its distributors restricted competition. The court stated that no legislation or regulation, national or EU, requires a manufacturer to justify its decision to draw up a numerus clausus as a criterion for quantitative selection. The clause in suit expressly limited the netwok to 72 dealership contracts for 109 sites, so it constituted a specified criterion whose content could be verified - which is what the Court of Justice said was needed. The supplier's freedom to define the scope and composition of its network therefore seems to be safe.

More details from Van Bael and Bellis via Mondaq (for which you might need a free subscription) here.

US: Tesla licensed in Massachusets

Tesla wins license to sell cars near Boston, says Automotive World. Not a matter of direct concern to us in Europe, but another illustration of the way dealers are protected in the United States. Tesla's approach to selling cars, which has been compared to Apple's retail operation, cuts right across dealer protection and licensing legislation, and is proving highly contentious (though I can't help feeling that the dealers are trying to stop an incoming tide). Hard to imagine having to obtain a licence to sell cars - hard also for Americans to imagine a manufacturer getting such a licence, as they are supposed to be there to protect dealers ...

Challenge to Tesla's "Apple Store"-style distribution model in US

Dealers call Tesla factory stores illegal, says Automotive News: the gist of the story is this:

Dealer associations in a handful of states, and state regulators in at least one case, say Tesla's stores violate state franchise laws that prohibit factory ownership of dealerships. 

From a legal perspective, that explains a lot - and also serves to show that it could never happen in the same way over here.

Volvo Group to reorganise EMEA dealer networks

Automotive World (subscription required) reports Volvo Group has announced its intention to introduce a new organisation for its truck dealer network in Europe, the Middle East and Africa. It often surprises me to see those three areas being lumped together - but it is pretty common these days. Dealer agreements that comply with the block exemption might seem pretty odd in the middle of the dark continent ...

Dealing with dealer disputes: the Canadian way

How dealers will be protected from the arbitrary exercise of manufacturers' market power is, of course, a key topic whenever one talks about the block exemption (and who doesn't?). Here's an interesting piece (and here's another) by Irvin Schein, a commercial litigator at Minden Gross LLP, about how such disputes are handled in Canada, where National Automobile Dealer Arbitration Program exists to deal with precisely that sort of thing.

It sets out rules which bind both parties once they adopt them by signing an implementation agreement, usually at the same time as signing the dealer agreement. Where there is a conflict between the program and the dealer agreement, the program explicitly takes precedence. Very similar in many ways to the much-vaunted code of good practice to be operated as a supplement to the block exemption. Make that codes of good practice, as it is unlikely that there'll be one agreed code.

The Canadian program is more than just procedural rules: it also contains substantive provisions. There's a long list of the sorts of disputes that will be covered, including refusals to renew a dealer agreement. So manufacturers and importers are obliged to renew, unless they have cause not to do so. Just as US dealers have their Day in Court Act, so Canadian ones have their day in arbitration.

Just what we need over here - some would say.

US dealer awarded damages for negative publicity

Not something we are likely to see here. The story is in Automotive News and involves a Suzuki dealer in Missouri. The manufacturer was ordered to pay $18.5 million, not a trifling sum by any standards. The case arose from a "no payments for life" promotion run by a neighbouring Suzuki dealer (both in Kansas City), which, perhaps on the well-known principle that if something looks too good to be true it probably is, collapsed. Unfortunately, the dealerships belonged to brothers so the family name featured in both, and the fallout from the one stuck to the other.

So why should the manufacturer be liable? Because it had approved and funded some of the ads through co-op programmes. Mind, this is one of those jury awards that you get in the States - an English judge, even if liability were shown, might make a much more modest award. And of course jury verdicts can be challenged - as the AN report says,

American Suzuki spokesman Jeff Holland said the company is "disappointed" by the verdict and intends to appeal.

"Disappointed" might be in the running for an award for understatement of the year.

Selling franchised dealerships

In addition to motor industry legal news here, I maintain a blog on the Block Exemption - not as frequently as I would like, but today I have posted a piece about the rules on transferring franchised dealerships and posting it on this blog as well seems unnecessary when a link will do just as well. I'll continue to use The Blog Exemption for block exemption news and comments.

US: Lincoln dealers asked to invest

It's a story very reminiscent of what happens over here too. Ford has told Lincoln dealers to put their hands in their pockets and come up with an average of $1 million to remodel their dealerships. For those dealers fortunate enough to represent Ford too, the average is $1.9 million, Automotive News reports. But maybe some British dealers (or  manufacturers) would regard that as small beer? All in the name of "dealer standards", "brand values" and "customer experience."