Büchl and Peugeot maintain a contractual relationship in the area of new car distribution and garage services, giving Büchl the non-exclusive right to sell Peugeot passenger cars and light commercial vehicles of up to 3.5 tonnes including original equipment, to service and repair these Peugeot products and to provide customer service.
AFCA opinion in Cartel Court proceedings
The Austrian Federal Competition Authority (AFCA) gave its opinion on the dominant market position, specifically on the existing relative market power (§ 4 para. 3 of the Federal Cartel Act - KartG) as well as on the potentially abusive conduct.
After having previously received complaints on a regular basis, the AFCA had published a position paper (available in German) evaluating the facts of the case in relation to motor vehicles in 2016. The aim of the paper was to give an overview of illegal abusive practices and to explain the statutory provisions applying to these recurring, problematic cases to the companies engaged in the automotive industry.
In May 2020, the Cartel Court ruled that Peugeot had breached the ban on the abuse of a dominant position in relation to several points, ordering Peugeot to end such practices and conduct.
Peugeot lodged an appeal against the decision before the Supreme Court sitting as the Supreme Cartel Court.
Supreme Cartel Court ruling
In February 202, the Supreme Cartel Court ruled on the appeal, upholding it in part and confirming the main points of the Cartel Court’s earlier decision.
The final part of the ruling obliges Peugeot to end its abuse of a dominant position within three months in relation to the following issues:
In relation to new car distribution, by terminating:
- The linking of premium payments to the existing and actually practised system of customer satisfaction surveys
- The reduction of margins by deliberating setting excessive sales targets by increasing the target value to an extent that exceeds generally estimated sales development despite having lowered the sales targets for previous years in contractually agreed arbitration proceedings with experts
- The practice of abusively low sales prices for the end consumer market by dealerships in which the respondent holds a majority share, particularly if those dealerships’ losses are covered by the respondent, while at the same time the respondent charges the petitioner prices and grants discounts that make it impossible for the petitioner to set these low end consumer prices.
In relation to garage services, by terminating:
- The obligation to carry out statutory guarantee and warranty work under the respondent’s terms, particularly by requiring the use of an onerous control system making this work economically unprofitable for the petitioner
- The requirement to carry out statutory guarantee and warranty work at hourly rates below cost as well as to provide refunds for spare parts below cost.
In relation to new car distribution and garage services, by terminating:
- The passing on of costs for mystery shopping, mystery leads and standard criteria audits to the petitioner, particularly by including these costs in the calculation of the flat rate for training seminars.
The Cartel Court dismissed the additional application for the cessation of market abuse in relation to the following points:
- Demanding inappropriate corporate identity investments in new car distribution at the petitioner’s expense
- The practice of disproportionately high prices for testing and diagnosis devices required for performing statutory guarantee and warranty work, and the imposition of an annual fee for granting access to technical documentation related to garage services
- The disadvantaging of the petitioner by exerting economic pressure to handle as few guarantee cases as possible
- The general demand for purchase or sales prices or other business terms that deviate from those that would most likely result from effective competition
- The charging of a disproportionately high training fee in relation to new car distribution and garage services.
The key issues and their legal interpretation
Relative market power
The Supreme Cartel Court upheld the Cartel Court’s assumption that Peugeot held relative market power. In this context, the key factor is whether other options are available under economically justifiable conditions. It is not decisive in this case whether new vehicles and services are to be viewed as a single market or as separate markets since Büchl is economically dependent on maintaining its business relationship with Peugeot in both areas of business.
Abusive contract terms
In relation to abusive contract terms, the Supreme Cartel Court agreed with the established case law, according to which they exist in the case of blatantly unfair terms or if they are obviously disproportionate to the costs of service provision. The Court also emphasises the need to weigh up the interests applying the principle of proportionality. The pursuit of legitimate objectives by unfair means is prohibited, as is excessive interference in the contractual partner’s freedom of action. Excessive restraint also exists where such ties are solely or overwhelmingly in the unilateral interest of the dominant player.
Restriction of freedom to set prices
In relation to the restriction of the freedom to set prices effected by forcing dealerships to take part in the manufacturer’s price promotions, which the Cartel Court established, the Supreme Cartel Court considered the underlying facts of the case to be insufficient to finally determine its abusive quality, and reversed this part of the decision while also referring it back for a supplementary assessment of the facts.
Reference code: Supreme Court 17 February 2021, 16Ok4/20d