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Austria: Austrian Cartel Court Finds Abuse of Dominant Position by Peugeot Vis-A-Vis its Independent Dealer

Austria: Austrian Cartel Court Finds Abuse of Dominant Position by Peugeot Vis-A-Vis its Independent Dealer

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On May 12, 2020 after a long-lasting proceeding between the general importer Peugeot Austria and Austrian Peugeot dealer Buechl, the Austrian Cartel Court decided in first instance that Peugeot Austria had abused its market power vis-à-vis Buechl. The dispute revolved around the imposition of contractual conditions by Peugeot which, in the opinion of the court, put dealers at a substantial economic disadvantage. Peugeot Austria has expressed its surprise at the court’s decision and has announced that it will file an appeal.

Inadmissible Terms Applied by Peugeot

The parties used a common business and contract model which confers upon the dealer the non-exclusive right to distribute and provide after-sales service for new and light commercial Peugeot vehicles. Buechl claimed that the conditions imposed on it by Peugeot Austria were abusive and excessive. The Austrian Cartel Court ruled partly on behalf of the plaintiff, holding that certain clauses were inappropriate and in violation of EU and Austrian law.

The court found that the mandatory participation of the dealer in Peugeot Austria’s pricing campaigns and promotions disproportionately restricted the dealer’s economic activities. In addition to such predetermined pricing campaigns the payments of dealer bonuses were linked to customer satisfaction surveys. The court reasoned that such surveys did not reflect the quality of the dealer’s services or the customer’s experience, thus again unduly limiting the dealer in its daily business. These and other practices of Peugeot were found by the cartel court to be abuses of Peugeot’s market power. Other practices included the setting of clearly exaggerated sales targets and the passing on the costs of “mystery shoppers” and audits to the dealer by disguising them as training costs.

Even though the Court prevented Peugeot Austria from applying numerous trading conditions, it did not fully decide in favor of the plaintiff. For example, claims regarding provisions imposed by Peugeot Austria stipulating flat-charges for mandatory trainings of the plaintiff’s employees and investments to ensure corporate identity were rejected by the court.

The Austrian Principle of Relative Dominance

In its ruling, the Court applied European competition law in parallel to Austrian competition law. The distinction is particularly important for the decision’s trans-border significance. While European competition law only prohibits the abuse of absolute market dominance, Austrian competition law also recognizes the principle of relative market dominance and prohibits its abuse. This means that a market players’ dominance is not only determined by comparing market positions between competitors but also by considering a company’s (strong) vertical relationships to its trading partners – both dealers and suppliers.

In the Peugeot case the Court concluded that the plaintiff, Buechl, is in a dependent relationship with the defendant since the absence of the business relations would lead to a severe loss of revenue. This reliance on Peugeot Austria provides it with relative dominance. By making certain business terms compulsory (such as described above), while being in a position of relative dominance, Peugeot Austria violated competition laws by abusing its market power.

Future Relevance of the Decision for Dealers Outside Austria

It can be assumed that the Court’s decision is relevant not only for Austrian dealers, but rather for dealer networks throughout Europe. Nevertheless, it must be noted that Austrian competition law differs from European competition law, so that the decision’s ultimate significance outside Austria is unclear. Nonetheless, the decision marks a milestone in identifying and clarifying abusive trading provisions, and its significance is not to be underestimated as it will ultimately affect other brand dealers as they deal with similar issues.

Although the decision’s ultimate legal impact is uncertain, its key elements have been welcomed by industry representatives. Automotive dealers have been complaining about unfair business practices and predominance of manufacturers. The findings and reasonings of the Austrian Cartel Court therefore contribute substantially to restoring the original negotiation stances between dealers and suppliers by evening out the power imbalance between them.

Regardless of the appeal’s outcome, it is imperative to monitor the situation closely, since it will affect the industry significantly with regards to operating in compliance with competition laws.

By Martin Eckel, Partner, and Julia Lorincz, Associate, Taylor Wessing Vienna

This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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