The European Court of Justice (ECJ) has issued a ruling confirming that an automotive dealer may
refuse dealers entry to its quantitative selective distribution
system without publishing its entry criteria, nor need such
criteria be objective or implemented in a non-discriminatory
manner, although the precise content of such criteria must be
verifiable.
Whilst the decision concerns a specific case in the context of the
EU Motor Vehicle Block Exemption (MVBE), the case is of relevance
to all selective distribution systems.
The principal feature of any selective distribution system is that
distributors are selected on the basis of 'specified
criteria'.
Competition law distinguishes between selective distribution
systems that are either quantitiative (based on criteria which
directly limit the number of distributors) or qualitative (based on
purely qualitative criteria which are laid down uniformly for all
distributors, applied in a non-discriminatory manner, and do not
directly limit the number of distributors). Both types of system
are permissible under the MVBE provided that certain conditions are
satisfied. These conditions include market share thresholds which
differ for the two types of selective distribution system.
The ECJ's ruling effectively confirms the above definition of
a quantitative selective distribution, noting that:
- it is not necessary for the criteria underpinning such a system to be published;
- nor is it necessary that the system be based on criteria that are objectively justified and applied in a uniform and non-differentiated way with regard to all applicants for authorisation.
The ECJ added that publication of criteria for a quantitative selective distribution system could compromise business secrets or even facilitate possible collusive behaviour.
Factual background
The case concerned a selective distribution system put in place
by Jaguar Land Rover France SAS (JLR) in 2005.
Auto 24 had been the exclusive distributor of JLR in Perigueux
(France) since 1994. This distribution agreement terminated in 2004
and Auto 24 made several applications to JLR for a renewed
distribution agreement. However, the then current quantitative
selective distribution system which provided for the possibility of
72 dealership agreements for 109 sites in France, did not include
Perigueux. Consequently, JLR refused to appoint Auto 24 as one of
its distributors.
Auto 24 appealed to the French courts and the case came before the
ECJ for a ruling on the meaning of 'specified criteria' in
the MVBE. Auto 24 appears to have accepted that JLR's selective
distribution system was quantitative in nature but argued that the
criteria should satisfy objective economic justifications, of which
the supplier must provide evidence, and must be applied in a
uniform and non-discriminatory manner in all of the catchment areas
and to all of the potential candidates for the distribution
system.
The ECJ dismissed these arguments and noted that it was never
intended that the MVBE would apply the same conditions of exemption
on the two systems of distribution (qualitative and
quantitative).
Application of this ruling
As noted above, while this ruling considered the MVBE, it
applies beyond the automotive sector as it relates to selective
distribution more generally. Therefore it serves as a reminder to
anyone involved in selective distribution (or considering its use)
of the freedom to choose contractual partners in a quantitative
system.
It is also important to remember that the MVBE considered in this
case will expire on 31 May 2013 in relation to new vehicles (rather
than spare parts/the provision of repair and maintenance services)
and from that point, assessment will take place under the terms of
the general vertical agreements block exemption. While the vertical
agreements block exemption also refers to the concept of
"specified criteria" in relation to selective
distribution it takes a stricter line on permissible market shares
that the MVBE.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 25/06/2012.