Germany: Higher Regional Court Of Frankfurt Dismisses Action Of Automotive Repair Shop To Be Admitted To The Authorised Repair Network Of A Passenger Vehicle Manufacturer

Last Updated: 10 October 2014
Article by Tim Kasten

In a judgment of 29 July 2014, the Higher Regional Court of Frankfurt ("Court") upheld the decision of the Regional Court of Frankfurt dismissing the action brought by an automotive repair shop to be admitted to the authorised repair network of a passenger vehicle manufacturer.

The automotive repair shop had acted as an authorised repairer for the manufacturer concerned for several years before the manufacturer decided to rearrange its service network and to not offer a new contract to the repair shop. In its complaint, the repair shop argued that it met the standards for admission to the selective distribution system of the car manufacturer and the refusal therefore constituted unjustified discrimination in breach of the German and EU competition rules.

The Court found that the refusal to grant access to its repair network did not amount to either an abuse of a dominant position under Article 102 TFEU and German law, an anti-competitive agreement under Article 101 TFEU and German law, or an abuse of a position of economic dependence under German law.

According to the Court, the manufacturer concerned did not hold a dominant position on the relevant market. The Court confirmed the market definition of the Regional Court of Frankfurt, which defined the product market very broadly as an upstream market for repairers of passenger cars entailing all products, services and rights which facilitate the access to a downstream market for repair and maintenance services of passenger cars. The Court referred to the distinction between the upstream and downstream market established by the German Federal Court of Justice in a judgment from 2011 concerning the commercial vehicle sector, which was also followed by the Regional Court of Düsseldorf (see VBB on Competition Law, Volume 2011, No. 4 and Volume 2012 No. 2, available at www.vbb.com), in applying the same market definition to passenger cars. In this decision, the Federal Court of Justice had emphasised that the admission to a repair network of a specific vehicle brand generally does not constitute a relevant market on its own, but is part of the wider (upstream) market on which resources for the provision of repair and maintenance services are offered. It noted however that there could be a dominant position of the manufacturer on the upstream market if admission to the repair network was indispensable to access and to successfully compete on the market for the provision of repair and maintenance services to end-customers. Based on this reasoning, the Court acknowledged that circumstances on the downstream market may affect the definition of the upstream market, but concluded that not being admitted to the authorised network did not make it impossible for the claimant to provide repair and maintenance services.

The Court acknowledged that its view deviates from the brand-specific market definition that the EU Commission proclaims in its Motor Vehicle Guidelines, but considered Germany to be the relevant geographic market and took the somewhat unusual view that the market definition therefore should be carried out under national law even if they might deviate from EU law.

Due to the lack of dominance on the national market, the existence of a dominant position within the EU common market or in a substantial part thereof had been denied a fortiori. As a result, the Court also rejected the applicant's plea alleging an infringement of Article 102 TFEU.

Moreover, the Court rejected the repair shops' action for admission to the manufacturer's repair network based on a claim under the German competition rules relating to abuse of economic dependence. Economic dependence was found not to exist in such a case where the repair shop is able to perform many repair and maintenance services as an independent repairer, including services for vehicles of the specific brand to which it seeks to be admitted.

The Court also dismissed the claimant's third plea alleging infringement of Article 101 TFEU and the equivalent German provision. The Court pointed out that these provisions prohibit agreements between undertakings restricting competition, while the refusal to admit the claimant to the authorised repair network is a unilateral act by the manufacturer. This reasoning seems to be in conflict with the jurisdiction of the Court of Justice of the EU, which has held that refusals to approve distributors who satisfy the qualitative criteria are acts performed in the context of contractual relations with the authorised distributors and therefore do not constitute unilateral conduct which would be exempt from the prohibition contained in Article 101 (1) of the Treaty.

The decision of the Court is under appeal before the Federal Court of Justice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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