The Competition Protection Agency has put the automotive industry in the limelight by initiating proceedings against Hyundai Avto Trade doo – the authorised Slovenian importer and distributor for Hyundai (Hyundai Avto Trade) – and its authorised mechanics.(1) The agency has reason to believe that the companies were concluding agreements on selective qualitative distribution which led to the foreclosure of independent mechanics and alternative distribution channels for spare parts.
Agreements between undertakings and concerted practices between undertakings that seek to prevent, restrict or distort competition on Slovenian market are prohibited and considered null and void under Article 6 of the Prevention of Restriction of Competition Act. The wording of the prohibition clause corresponds to the prohibition on restrictive agreements under EU competition law, as set out in Article 101 of the Treaty on the Functioning of the European Union (TFEU).
As there is no secondary legislation regarding the application of Article 101, and because the agency has issued no enforcement guidelines, it is likely that the agency will follow the European Commission's regulatory framework in relation to the automotive industry – in particular:
- EU Regulation 451/2010, in which the commission has revised the fundamental rules for agreements between vehicle manufacturers and their authorised dealers, spare parts distributers and repairers; and
- the adjacent supplementary guidelines on vertical restraints in agreements for the sale and repair of automobiles and for the distribution of spare parts for automobiles.(2)
Following a complaint, the agency initiated formal proceedings against Hyundai Avto Trade and several of its authorised mechanics, examining their qualitative selective distribution agreements, which allegedly conditioned the validity of the manufacturer's warranty on:
- end consumers carrying out repair and maintenance work which is not covered by the warranty within the authorised repair network; and
- all spare parts not replaced under the warranty being original Hyundai parts distributed by Hyundai Avto Trade.
According to the agency, these clauses may infringe Article 6 of the Prevention of Restriction of Competition Act and Article 101 of the TFEU.
The agency is collecting relevant information and has made a public appeal for additional insight which could influence its final decision.
The European Commission Supplementary Guidelines provide that, for qualitative selective distribution agreements to be exempt under EU competition law, vehicle manufacturer warranties cannot require end users to carry out repair and maintenance work that is not covered by the warranty within the vehicle manufacturer's authorised repair networks. Similarly, warranty conditions cannot require the use of the vehicle manufacturer's spare parts for replacements that are not covered by the warranty terms.
The reasoning behind this general principle is that this behaviour may foreclose independent repairers or alternative channels for the production and distribution of spare parts, which ultimately may affect the prices that consumers pay for repair and maintenance services.
While the agency conducted proceedings to investigage the foreclosure of independent repairers in 2008, this did not apply to the automotive industry. At the time, the parties to the proceedings were allegedly rejecting free repairs under Samsung's pan-EU warranty in cases where Samsung phones were purchased from unauthorised dealers. The proceedings were halted when Samsung agreed to provide effective commitments to guarantee the re-establishment a fair and competitive market.
It remains to be seen whether the proceedings will have broader implications for the Slovenian automotive industry. In its appeal to the public for further information, the agency explicitly stated that it has not "excluded that similar practices are also present at other automotive brands".
As this is the agency's first venture into the automotive industry and the nature and scope of the complaints are unknown, players in the automotive market should exercise additional scrutiny and caution.
For further information on this topic please contact Eva Škufca at Schoenherr by telephone (+386 1 200 09 80) or email ([email protected]). The Schoenherr website can be accessed at www.schoenherr.eu.
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