Peugeot denies accusations of impeding competition

Publication date: 19 March 2009

The Peugeot Group disputed the European Commission’s accusation that it had hindered competition, at a hearing before the EU Court of First
Instance, on 11 March.

After receiving complaints from customers who wanted to buy cars in the Netherlands at lower prices exclusive of taxes than in their home state, the Commission found that the Peugeot Group and its Dutch subsidiary had committed a serious infringement of Article 81(1) of the EC Treaty, in agreement
with their dealers in the Netherlands, through the use of anti-competitive commercial practices.

On 5 October 2005, it imposed a fine of €49.5 million for the implementation of measures from January 1997 to September 2003 aimed at hindering parallel exports of cars from the Netherlands for non-resident buyers.

The EU executive alleged that Peugeot Nederland had set up two restrictive measures consisting on the one hand of establishing a bonus system for Dutch Peugeot dealers, which discriminated against export sales of vehicles, and on the other of putting direct pressure on distributors who had developed
significant export activities by threatening for example to reduce their supply of the best selling cars.

The Commission found that these measures were not unilateral on the part of Peugeot but that they had been built into contractual relations with dealers and approved by the latter at least tacitly.

Peugeot Nederland applied to the Court of First Instance for annulment of the Commission’s decision (Case T-450/05).

First, it argued that the bonus system for dealers had been imposed unilaterally and that the Commission failed to prove the existence of an agreement on such a practice: the mere fact that dealers continued to buy cars could not be likened to an agreement. The high volume of exports, moreover, is the best evidence of dealers’ refusal to give in to the alleged pressure.

Second, Peugeot maintained that the only objective of the bonus system for dealers was to develop its market share in the Netherlands and not to impede competition.

After 1997, internal circulars no longer referred to bonuses only for vehicles sold to residents; the duration of the alleged infringement should therefore be reduced to the year 1997.

Peugeot noted that the effects of this bonus system are insignificant on exports, moreover, and cannot constitute a serious infringement.

It therefore asked the court to annul the Commission’s decision and/or reduce the amount of the fine.

Background

This case brings to mind a ruling handed down by the Court of First Instance (CFI), on 21 October 2003 (Case T- 368/00) in which General Motors and Opel Nederland challenged the Commission’s accusations of impeding competition. The EU executive argued that Opel Nederland had concluded agreements with its dealers in the Netherlands to restrict or prohibit the export of vehicles to non-residents and dealers in other member states.

This strategy restricted both the delivery of cars to dealers and the bonuses paid to agents for vehicles bought by nonresidents.

The Commission’s decision was matched with a fine of 43 million euro. The court nonetheless held that the Commission had not sufficiently proved restrictions on the delivery of vehicles to dealers and even less so that the measure was part of contractual relations between Opel Nederland and its dealers.

As a result, it reduced the fine to 35.475 million euro. The ruling provided an opportunity for the court to review and give a practical interpretation of the fine calculation guidelines adopted by the Commission in 1998.

The Court of Justice, to which an appeal was submitted, confirmed the ruling of the Court of First Instance (Case C-55/03P).

In another important case related to vehicle distribution, the CFI found in favour of the manufacturer against the Commission: the case of Volkswagen AG vs the European Commission (T-208/01). The Court of First Instance annulled the Commission’s 2001 decision prohibiting Volkswagen’s business practices with its German dealers meant to impose the sale price of a given model through a ban on discounts.

The Commission alleged that an agreement existed between Volkswagen AG and its German dealers that was incompatible with competition rules because it eliminated the competition between dealers based on the use of discounts. The CFI held that the Commission had failed to prove the existence of an agreement between the manufacturer and its German dealers since it did not provide evidence of express or tacit assent by the dealers.

It pointed out that a concession contract in conformity with competition law could not be considered tacit prior acceptance of the manufacturer’s anti-competitive initiatives. The appeal lodged by the Commission was found to be inadmissible by the Court of Justice (Case C-74/04P).

Source: Europolitics