Brussels, 06 July 2000
Commission decision of January 1998 against Volkswagen is confirmed by the European Court of First Instance
In a judgement given today, the European Court of First Instance has upheld the Commission Decision of 28/1/19981 against Volkswagen establishing a very serious infringement of EU Competition rules. Volkswagen AG had prevented, together with its subsidiaries Audi AG and Autogerma SpA, their common Italian importer, its dealers in Italy to sell new cars to non-residents, in particular German and Austrians consumers. The fine of € 102 million imposed by the Commission on Volkswagen was slightly revised to € 90 million by the Court. Volkswagen AG had appealed in April 1998 against this decision with the Court of First Instance, by rejecting the Commission's findings and considering the amount of the fine as totally inadequate. "This ruling is good news for European consumers" Competition Commissioner Mario Monti said. "The possibility to buy goods at better prices in other Member States is indeed one of the key advantages of the Single Market. Carmakers have some latitude in the way they choose to organise their distribution networks, but the rules also give consumers the unalterable right to buy, either directly or through an authorised intermediary, a car in the Member State of their choice. By upholding such rights, competition policy directly serves citizens".
"The decision adopted by the Commission against Volkswagen indicated that it does not hesitate to take the necessary measures against motor manufacturers who do not comply with the rules on motor vehicle distribution" Mr. Monti said. "Today's judgement of the Court encourages us to pursue vigorously in this endeavour. The conduct of manufacturers also plays a role in the evaluation of the current Regulation on car distribution".
It is worth pointing out that, on the basis of the decision and this judgement, consumers who feel that they have been the victim of similar practices can take their case directly to the national competition authorities and/or national courts. Those authorities and/or courts will usually have jurisdiction to establish whether there has been an infringement of European competition law and to order the manufacturer or the importer to bring the infringement to an end.
Short outline of the history of the case
The decision of January 1998 is the most important Commission decision to date concerning obstacles to re-imports of new motor vehicles. The size of the fine is an indication that the Commission will not tolerate practices of this kind, and will act with similar determination against other manufacturers who set out to partition the market for new cars 2. In its decision, the Commission had found that the conduct of Volkswagen and Audi, which are part of the largest car manufacturing group in Europe, is a threat to the proper operation of the Single Market, and a very serious infringement of Community competition law.
In setting the fine, the Commission took account not only of the nature of the infringement but also of its duration and of the fact that the companies concerned of the Volkswagen group had set up the system of restrictive practices by exploiting the economic strength they enjoy in their relationship with their network of authorised dealers in Italy. An aggravating factor was that Volkswagen had not taken appropriate action, when told by the Commission, already before the inspections carried out in 1995, that its behaviour was not in line with the European competition rules and with Regulation No 1475/95 applicable to motor vehicle distribution.3
Some details of the case
By its decision, the Commission had fined Volkswagen for systematically forcing its authorised dealers in Italy to refuse to sell Volkswagen and Audi cars to foreign buyers. In 1995, the Commission had received a large number of complaints from consumers who had had difficulty buying new cars in Italy. In its decision, the Commission found that Volkswagen, Audi and Volkswagen’s Italian subsidiary Autogerma had devised, in concert with their Italian dealers, a strategy aimed at preventing, or at least substantially restricting, sales from Italy to other Member States, especially Germany and Austria. This strategy was aimed at sales to final consumers but also at sales to intermediaries acting on behalf of the buyer and to Volkswagen or Audi dealers in other Member States.
In October 1995, the Commission had carried out inspections at Volkswagen’s offices in Wolfsburg, at Audi’s offices in Ingolstadt, at Autogerma’s offices in Verona (Autogerma is a wholly owned subsidiary of Volkswagen, and the official importer for both makes in Italy) and at the offices of a number of VAG dealers in the north of Italy. Documents found in the course of those inspections provided clear evidence of a market partitioning policy pursued by Volkswagen, Audi and Autogerma.
Some of the illegal practices identified were the following:
about fifty authorised dealers were threatened that their dealership contracts would be terminated if they sold to foreign customers, and some twelve dealerships were actually terminated;
the profit margins and bonuses of authorised dealers who sold outside their allotted territories were systematically reduced;
deliveries to Italian dealers were rationed; in 1995 alone, Audi refused to supply some 8.000 cars which Autogerma had promised them;
Autogerma kept the Italian dealers under supervision and gave clear warnings to those who sold to non Italian customers; it also monitored lists of foreign customers;
Volkswagen and Audi recommended to their Italian dealers that they should not tell their foreign customers the real reasons for the refusal to sell but should instead try to discourage them by speaking of different specifications and difficulties with the guarantee; they were not to let them know that they had instructions to this effect from the Volkswagen group.
The documents found clearly indicate that Volkswagen and Audi were well aware that these practices were unlawful.
The fine, even if reduced to € 90 million, is the highest fine ever imposed on a single European enterprise for infringement of competition law.
Key provisions of consumer interest of the Block Exemption Regulation
Regulation 1475/95 contains a so-called "black list" of clauses and practices which are not allowed under this Regulation. This "black list" is of specific importance for European consumers. It reinforces their right to purchase a new car, either directly or via an authorised intermediary, wherever they wish to do so in the European Union.
Therefore, the Regulation forbids any direct or indirect hindrance of parallel trade, i.e.:
the refusal of dealers to supply a consumer simply because this consumer is a resident of another Member State;
charging foreign consumers higher prices or imposing longer delivery periods than for native consumers;
refusing to grant guarantee services or other free-of-charge services for cars imported from another Member State;
hindering the activities of intermediaries authorised by consumers by applying excessive criteria concerning their mandate;
restriction of supplies by manufacturers to dealers who sell cars to consumers resident in another Member State;
threats by manufacturers to terminate contracts with dealers who sell cars to consumers resident in another Member State.
any interference by manufacturers with the freedom of consumers to resell new cars, provided that the sale is not effected for commercial purposes
Additional measures to ensure the consumer's freedom of choice for the maintenance and repair of his car are:
safeguarding of the freedom of dealers to sell to consumers spare-parts offered by independent suppliers which match the quality of those spare-parts offered by the manufacturer;
the manufacturer has to make accessible to independent repairers the technical knowledge required for the repair or maintenance of his brand of cars.
Any infringement of the provisions of the "black list" renders essential parts of manufacturers’ distribution agreements void. This legal consequence improves the possibility for any injured party to bring such infringements to the attention of the competent national courts. They can - in contrast to the Commission - grant injunctions and award damages.