European Commission Rejects Complaint Lodged By Federauto Against VW

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The European Commission rejected the complaint lodged by an association representing Italian car dealers, concerning the SEAT dealership contracts of Volkswagen Group Italia.
European Union Antitrust/Competition Law
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On 26 May 2014, the European Commission rejected the complaint lodged by an association representing Italian car dealers, Federauto, concerning the SEAT dealership contracts of Volkswagen Group Italia ("VWGI"). Federauto argued that VWGI violated EU competition law by unilaterally: (i) reducing by 3% the dealers' margin from 15.85% to 12.85%; and (ii) converting a part of the margin from fixed to variable. Consistent with normal practice in the motor vehicle sector, VWGI presumably applied these margins in determining the wholesale price charged to dealers (as the wholesale price typically equals the recommended retail price minus the dealer margin set by the supplier).

Federauto argued that such a modification violated the rationale behind the dealer protection provisions (Art. 3) of the Motor Vehicle Block Exemption Regulation 1400/2002 and also of the Vertical Restraints Block Exemption Regulation 330/2010.

The Commission disagreed. In rejecting the complaint, the Commission held that an infringement of Art. 101 was unlikely because: (i) no evidence of a restriction of competition was provided by Federauto; (ii) the clauses in the dealership contracts concerning margins were not hardcore restrictions; and (iii) the application of the new margins did not amount to retail price maintenance as dealers were free to fund their own discounts on sales to consumers. The Commission also noted that VWGI's quantitative selective distribution system would have been block exempted based on the market share data provided by Federauto in its complaint.

Federauto also pointed to the fact that VWGI did not have a code of conduct regulating relationships with dealers. According to the Commission's Supplemental Guidelines on Vertical Restraints in Agreements for the Sale and Repair of Motor Vehicles, the existence of a code of conduct (aimed at ensuring greater transparency in relationships between a manufacturer and its dealers) is a relevant factor in assessing a supplier's conduct in individual cases concerning pressure on dealers to achieve anti-competitive outcomes. The Commission noted, however, that Federauto did not present any evidence of such pressure by VWGI. The Commission held that the absence of a code of conduct does not itself indicate an infringement of the EU competition rules.

The outcome of this case is significant as it represents the rejection of an attempt to re-establish dealer protection as a singular goal of EU competition policy, which is generally considered to have been eliminated with the expiry of Regulation 1400/2002.

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