CARS 21 WG 4 Vertical agreements

Transcription

1 CARS 21 WG 4 Vertical agreements 15 February 2012 Bernard Lycke Director General 1

2 Vertical agreements Art 2-6 Commission s decision re-launching CARS 21: the group s tasks shall be (...) : To develop principles of good conduct in order to promote transparency in commercial and contractual relations between the parties to vertical agreements in the motor vehicle sector. 2

3 Introduction MVBER - EC FAQ MVBER - New rules Solutions Code of Conduct EC Initiative about unfair practices Extension agent directive to the distributors 3

4 MVBER - EC FAQ Aim: clarify aspects which are unclear in the guidelines The provisions of the former MVBER 1400/2002 regarding the purchase, sale and resale of new motor vehicles remain applicable until 31 May 2013 From 1 June 2013 onwards the General BER 330/2010 and specific guidelines of BER 461/2010 will apply to vertical agreements covering the purchase, sale and resale of new motor vehicles The European Commission will not publish an explanatory brochure this time as they did with the previous regulation but will elaborate a FAQ document Content: questions on warranty, spare parts and access to the network of authorized repairers max. 12 questions Apparently no FAQ related to sales. Why? FAQ document delayed for publication until February 2012? 4

5 MVBER - New rules Regulation MVBER 1400/2002 Article 3 gave a good balance between the interests of all parties Agreements concluded For a period of at least 5 years 6 months termination period For an indefinite period 2 years termination period which can be reduced to at least 1 year for re-organisation of the network Notice of termination must include detailed, objective and transparent reasons Supplier agrees to the transfer to another distributor within the same network and chosen by the former distributor (Transfer of business) Each of the parties has to right to refer disputes to an independent arbitrator Monti proposed Article 3 to achieve a balance between all parties THIS HAS ALL BEEN LOST 5

6 Introduction of new MVBER 1/6/2010 1/6/ /5/ /5/ /5/2023 New vehicle distribution ABE Evaluation 1400/2002 General Block Exemption 330/2010 Automotive Block Exemption 461/2010 (guidelines) Service, repair, spare parts General Block Exemption 330/2010 Automotive Block Exemption 461/2010 Source: ICDP 6

7 Code of Conduct What are the developments and why CECRA is opting today for a fair code of conduct? Consumer!!! Since 2003, consumers have gained valuable benefits from the commercially independent competitive practices of motor retailers, first made possible by Commission Regulation (EC) N 1400/2002. These benefits are under threat and will be lost unless preserved by decisive, effective action now through an agreed Code of Conduct which properly supports fair, transparent and objective dealings within franchised motor retailing and which may complement future regulation as well as safeguarding such benefits in the shorter term. Without this Code of Conduct, there is a real threat to the greater choice and convenience, lower prices and higher quality service enjoyed by consumers / end users. 7

8 Code of Conduct What are the developments and why CECRA is opting today for a fair code of conduct? No continued dealer protection as no prolongation of the specific MVBER 1400/2002 regarding Sales as from 1 st June 2013 (for after-sales, Reg. 1400/2002 expired on June 2010) (the balance is destroyed) EC - DG COMP decided not to maintain a specific regulation for the automotive sector after 2013 and made a distinction between contractual/civil issues and those related to competition Transparent relationships between contracting parties would normally reduce the risk of manufacturers being held responsible for using ( ) indirect forms of pressure aimed at achieving anticompetitive outcomes. Adhering to a Code of Conduct is one means of achieving greater transparency in commercial relationships between parties ( 7 EC s Supplementary Guidelines on vertical restraints regulations N 461/2010 and N 330/2010) 8

9 Code of Conduct Such codes may inter alia provide for : - notice periods for contract termination - compensation to be given for outstanding relationship-specific investments made by the dealer in case of early termination without just cause, - right of transfer of the business within the brand network - arbitration as an alternative mechanism for dispute resolution Code of Conduct supporting fair and transparent business practices = normal feature of all other franchise models Adoption of such a Code of Conduct would be consistent with repeated European Commission observations that the automotive sector should not be treated differently to other similar distribution channels As a result, CECRA proposes its code of conduct. It integrates necessary clauses to safeguard dealers high investments to meet manufacturers standards 9

10 Code of Conduct A code of conduct would determine contractual relationships that would be fair The Retail Market Monitoring Report from the European Commission of Towards more efficient and fairer retail services in the internal market for 2020 highlights that only Retail services that are smart, sustainable and inclusive, henceforth defined as fair, can contribute directly to the success of the Europe 2020 Strategy ; 10

11 Code of Conduct By Resolution of , the European Parliament, considering that the relationship between manufacturers, on the one hand, and dealers, service providers and other relevant economic actors in the automotive supply chain, on the other hand, has to be carefully analyzed, taking into consideration their unequal economic power as trading partners (paragraph 8), recalled "the need to simplify the conditions for business transfers" as well as "the risk represented by a single branding obligation for consumer choice and dealers' independence" (paragraph 10) and called for a careful assessment of the competition conditions in the motor vehicle primary market ( ), focusing on the impact of certain contractual clauses such as multi-branding, business transfer and the threshold for spare parts, as well as on the provisions of the proposed Code of Conduct (paragraph 21); 11

12 Code of Conduct What is the content of CECRA s Code of Conduct? Fair contract terms and equal treatment If a manufacturer applies measurement criteria to reward and/or penalise the members of its network or in any way influence their status as members of its network (for example, in the context of auditing or otherwise verifying the performance of dealers/authorised repairers and their compliance with standards), it shall ensure that the process, the measurement criteria and the way in which the results are compiled and used are set out clearly and in writing, are published in a uniform and timely manner to its relevant network (and kept up to date), are objective, transparent, proportionate and non-discriminatory. Conditions applying to transfers Parties agree that the Distribution Agreement concluded with a dealer or authorised repairer shall, subject to certain transparent and proportionate conditions, provide that the manufacturer agrees to the transfer of the rights and obligations resulting from the Distribution Agreement to a purchaser chosen by the dealer or authorised repairer within the existing network. 12

13 Code of Conduct What is the content of CECRA s Code of Conduct? Multi-branding Parties agree that a manufacturer shall not impose or seek to implement terms, conditions or programs (including, without limitation, the application of financial disincentives) on its dealers, authorised repairers or parts distributors, which require or have the effect of requiring or pressurising such representatives to cease: a)representing or selling any competing brand of motor vehicle or parts (which reference shall include any other brands within the manufacturer's group); or b)providing authorised repairer or other after-sales services in respect of any competing brand of motor vehicle. 13

14 Code of Conduct What is the content of CECRA s Code of Conduct? Minimum contract / notice periods and reasons for termination Parties agree that each Distribution Agreement concluded between a manufacturer and each of its dealers and authorised repairers shall provide that a manufacturer who wishes to give notice of termination must give such notice in writing and must include detailed, objective and transparent reasons for the termination. Parties agree that each Distribution Agreement concluded by a manufacturer and each of its dealers and authorised repairer shall provide: that the Distribution Agreement is concluded for a period of at least five years; in this case each party has to undertake to give the other party at least six months' prior notice of its intention not to renew the Distribution Agreement; or that the Distribution Agreement is concluded for an indefinite period; in this case the period of notice for regular termination of the Distribution Agreement has to be at least two years for both parties; this period is reduced to at least one year in case of reorganisation of the distribution network. 14

15 Code of Conduct What is the content of CECRA s Code of Conduct? Arbitration Parties agree that each Distribution Agreement shall provide for each of the parties the right to refer disputes concerning the fulfilment of their contractual obligations to an independent expert or arbitrator. 15

16 Code of Conduct Why is ACEA s Code of Conduct insufficient? Until now, there is no agreed Code of Conduct, just a proposal (never negotiated with CECRA) from the manufacturers association ACEA. ACEA s code of conduct doesn t integrate 2 important provisions of article 3 MVBER 1400/2002 (notice of termination and transfer of business), nor multi-branding. 16

17 Conclusion GAPS IN THE NEW BLOCK EXEMPTION REGIME WILL LEAD TO CONSUMER DETRIMENT REAL RISK THAT MANUFACTURERS WILL REVERT TO ANTI-COMPETITIVE PRACTICES GENERAL COMPETITION RULES WILL NOT HELP RETAILERS CHALLENGE EXCESSIVE RESTRICTIONS PROPER CODE SHOULD FILL THE GAP THAT PURE COMPETITION RULES CANNOT EASILY ADDRESS 17

18 Code of Conduct AN APPROPRIATE CODE OF CONDUCT IS NECESSARY IN THE CURRENT SITUATION BUT NOT SUFFICIENT (SOFT LAW) IN ANY EVENT, PROGRESS TOWARDS AND THE ADOPTION OF SUCH A CODE OF CONDUCT DOES NOT PRECLUDE AND, IN FACT, MAY WELL COMPLEMENT OTHER REGULATORY INITIATIVES AND MEASURES SUPPORTING FAIRER COMMERCIAL PRACTICES WE NEED A LAW (DIRECTIVE OR REGULATION) AS SOON AS POSSIBLE AFTER 1 ST JUNE

19 Survey unfair practices European Commission's Communication of on the Single Market Act "Working together to create new growth : an initiative will be launched in 2012 "to combat unfair business-to-business commercial practices, in order to identify the nature and scale of the problems associated with unfair commercial practices between professional operators throughout the supply chain, list current regulations within the Member States, to assess their implementation and, finally, identify the various possible options. The goal will be to put an end to unfair practices which jeopardize the viability of businesses and stimulate competitiveness of the various operators in the supply chains in the context of a fairer and more effective single market in the retail and wholesale sectors The EC launched an on-line questionnaire on the 14 th of July. Professionals were invited to provide concrete examples of unfair commercial practices. CECRA urged their members to provide the EC with concrete examples. 217 enterprises of our sector in different Member States had registered themselves in order to fill in the questionnaire. Outcome of the study is still awaited. 19

20 Survey unfair practices Concrete examples of unfair commercial practices in the automotive sector: The right which the majority of contracts reserve to the manufacturers to develop one-sidedly the margins of dealers in the course of execution of contracts. The abuses frequently observed in fixation of the sales targets, while these objectives determine the access to the bonuses (essential today considering the incapacity of the basic margins and the discounts which must be granted to the customers). They also fixe annual objectives of purchase of spare parts in an arbitrary way, without bringing any justification. The objective being fixed by halfyear, the manufacturer reserves the right to increase in the second half-year the objective what brings dealers very often to be penalized. The amounts fixed one-sidedly by the manufacturers on loads of functioning: they impose the level of stocks, or the advertising contributions by V.N. / objective. The right which the majority of contracts reserve to the suppliers to develop onesidedly the standards which determine the expenses of structure and functioning of companies, under the only reserve to respect advance notices of adaptation from which the duration does not guarantee the amortization of the investments realized to conform to the previous standards. 20

21 Survey unfair practices Concrete examples of unfair commercial practices: The multiple "secondary" obligations which the manufacturers impose on their network: obligation to be equipped with computer systems bought with recommended suppliers; obligations to be equipped with acquired expensive signalling system also with recommended suppliers. The extended control of the manufacturers on several topics like warranty, second-hand cars, etc which undermines independent competitive behaviour of the dealer. In the vertical regulation, the obligation of motivation of the terminations does not exist. As a result, in the motor sector, the threats of termination are less a penalty of the performance than the obligation made for the distributors to answer the requisitions of the manufacturers (investments, overstocking, forced deliveries). For the business of new trucks: Considering a re-launching of the trucks market manufacturers oblige dealers to order vehicles in advance to reach an objective of production in his factories that he settled himself. Overextending the opportunity to combine service contract and dealer contract for 5 years- the initial intention was in case of market entry 21

22 Survey unfair practices Quotes from dealers: No respect of the spirit of the contract. All changes are decided by the brand without any consultations and discussion with the network. Increase of all standards and procedures with a very negative effects on costs. 22

23 Survey unfair practices Some consequences Freedom to sell more than one brand will be restricted New market entry / growth will be constrained & more costly Market entrants with new technologies may find it difficult to establish a distribution footprint Pro-competitive retailer behaviour will be curtailed due to: greater discretions for manufacturers to terminate at will; removal of obligations on manufacturers to explain terminations; & ability of manufacturers to block dealership transfers arbitrarily Will harm retailer confidence & ability to invest Impact on aftermarket as retailers' ability to source competing spare parts is threatened Retailer / repairer networks are likely to shrink forcing consumers to accept less competitive terms 23

24 Evidence? See new dealer agreements issued since 2010 (13 brands): Comprise the same old quantitative/qualitative selective distribution model (with extra restrictions) - No innovation Allow manufacturers to restrict multi-branding Removes choice / increases prices Grant manufacturers more rights to audit, penalise and control retailers Undermines independent competitive behaviour Re-impose territorial restrictions (location clause) Extend manufacturer control to other areas (eg used sales/ warranties) that, in some cases, might restrict resale pricing Prohibit dealership transfers Confers absolute manufacturer control / undermines investment 24

25 Agent Directive / Status of the distributor 25

26 Agent Directive Discussions about extension of the Agent s Directive 86/653: Parallels between commercial agents and authorised dealers are to be taken into account The Agent s Directive (86/653) is an EU Directive governing the legal relationship between manufacturers and self-employed commercial agents. It also contains protection provisions in favour of the agent such as for example provisions regarding minimum periods of notice. In view of the objective to firmly fix European-wide certain protection provisions for authorised dealers, the Agent s Directive could be a particularly suitable basis. In Germany - Mercedes-Benz contracts denominated agent contracts and in several countries denominated as dealer contracts. This demonstrates that in most cases the status of an agent is comparable to the status of a distributor CECRA Aim: Integration of the dealer protection clauses through extension & adaptation of the existing Agent Directive 26

27 Agent Directive Just as commercial agents, authorised dealers enter close relationships with their manufacturer on a regular basis. In this respect they are quite similar. This similarity becomes especially obvious in the automobile distribution: There are manufacturers working together with commercial agents in some countries and working together with authorised dealers in other countries. This difference is hardly recognisable for the final consumer. While commercial agents are already sufficiently protected by the help of the Agent s Directive, authorised dealers have to cope with a certain deficit in this respect. And this deficit is especially problematic since authorised dealers bear higher risks e.g. when it comes to investments. In order to correspond to the need for protection resulting from these investments, the scope of application of the Agent s Directive shall partly be extended to authorised dealers and an additional provision should be included in the Directive. 27

28 Agent Directive Support from the European Parliament : In its resolution of 6th. May 2010 on the Motor Vehicle Block Exemption Regulation (RSP/2010/2636), the EP calls on the Commission to ensure that distributors, including those from the motor vehicle sector, benefit from the same level of contractual protection throughout the EU as commercial agents currently do. Several meetings with DG Internal Market and Services : to be followed ; quid other DGs? 28

29 Agent Directive WHAT WOULD BE THE BENEFITS FOR AUTOMOBILE DEALERS? Until now : protection regulations exist in some EU member states but with different solutions (not in accordance with Single Market Act) European-wide standardized regulations in terms of a minimum period of notice of two years, a claim for adjustment in case of termination and a protection of investments and thus legally binding regulations That means: regulations on Minimum period of notice of two years; Compensation claims after the expiry of the contract; Compensation claims in case of unamortized investments 29

30 Conclusion Without a proper solution to supplement the new competition rules, retailers risk losing key commercial freedoms as well as the greater choice, lower prices and other benefits experienced by consumers/end users over the last decade Without appropriate regulation, new rules will allow manufacturers to distort pro-competitive retailer behaviour 30

31 Conclusion RETAILERS CONSUMERS Loss of commercial independence Less innovation Less brand diversity Less scope to challenge anticompetitive restrictions Less choice Less convenience Higher prices 31