New motor vehicle regulation - effective control of competition in the motor vehicle sector?
The new Motor Vehicle Ordinance came into force on January 1, 2024. It promises more effective competition law control of vertical agreements in the motor vehicle sector. This article explains who can benefit from this regulation and what conditions must be met for this to happen. A particular focus is placed on the treatment of guarantee agreements under competition law.
Initial situation
As a central economic sector in Switzerland, the automotive industry is characterized by a number of special features. Due to the increasing electrification and digitalization of vehicles, the importance of access to technically necessary data for repairs has greatly increased. Control over this data, and all other export goods, lies with a small number of importers, which are generally international corporations. The customers or affected parties are thousands of (SME) garages and associations, which in turn are the point of contact for car owners.
The treatment of vertical agreements in the motor vehicle sector under competition law has been the subject of the so-called Motor Vehicle Notice of the Competition Commission (COMCO) since 2002. However, due to a lack of resources, COMCO has so far been unable to enforce this notice and has referred complaints from affected market participants to the competent civil court. However, the civil courts did not implement the motor vehicle notice, as they are not bound by COMCO notices. In practice, the affected market participants therefore failed in court.
Motion 18.3898 Pfister of March 14, 2022 aimed to change this and bring about effective legal protection and stricter enforcement of the Cartel Act in the motor vehicle trade. It called on the Federal Council to make the motor vehicle notice binding. This request was met with the adoption of the 'Ordinance on the Treatment of Vertical Agreements in the Motor Vehicle Sector under Competition Law'. The Motor Vehicle Notice was brought into the form of an ordinance without any significant changes, but with some adjustments to reflect the increasing digitalization of vehicles. The explanatory notes on the Motor Vehicle Ordinance published by the COMCO serve to interpret the Motor Vehicle Ordinance. These will enter into force together with the ordinance on January 1, 2024.
Civil law claims
The possibility of asserting antitrust claims in civil proceedings arises from Chapter 3 of the Cartel Act. Art. 12 of the Cartel Act specifies who is entitled to civil antitrust claims and which claims exist, and Art. 13 of the Cartel Act adds legal consequences specific to antitrust law for enforcement.
Art. 12 para. 1 CartA states that "any person who is hindered in entering into or exercising competition by an unlawful restriction of competition shall be entitled to:
a. Removal or omission of the obstruction;
b. Compensation and satisfaction in accordance with the Code of Obligations21;
c. surrender of any unlawfully obtained profit in accordance with the provisions on management without authority."
Art. 13 KG provides for the corresponding legal consequences for the enforcement of the right to removal and injunctive relief. The court can "[...] at the request of the plaintiff, order in particular that:
a. Contracts are invalid in whole or in part;
b. the party or parties causing the impediment to competition must conclude contracts with the disabled person that are in line with the market or customary in the industry. [...]"
The substantive provisions of the Cartel Act to be applied by the civil courts are the same as those applied by COMCO in administrative proceedings. This is partly due to the aim of ensuring uniform application of the law. The obligation of the civil courts to submit certain decisions to COMCO for review is also a consequence of this objective.
According to Art. 15 CartA, the civil courts must obtain an expert opinion from the Competition Commission if "the admissibility of a restriction of competition is in question in civil law proceedings".
It should be noted that the distribution of the burden of proof and the determination of the relevant facts in civil proceedings differs significantly from that in (COMCO) administrative proceedings. Civil courts base their decisions on what the party obliged to provide evidence presents. COMCO, on the other hand, determines the facts of the case ex officio and actively carries out investigations.
This also means that COMCO is not bound by decisions of civil courts, as the relevant (ascertained) facts on which a decision is based may differ significantly from those presented in civil proceedings. However, if parties first go through administrative proceedings and then reach a civil court, they can use lawfully obtained evidence in civil proceedings without further ado.
Legal remedy
The civil law route is therefore open in accordance with Art. 12 Cartel Act if market participants are affected or restricted by a restriction of competition in the commencement or exercise of competition. In substantive terms, the civil courts apply the Cartel Act and the corresponding ordinances based on the Cartel Act. With the entry into force of the Motor Vehicle Ordinance, the question arises as to how it will be enforced in practice. On the one hand, the legal remedies and their basic requirements for affected market participants must be clarified, and on the other hand, it must be shown whether associations would also be legitimized to take legal action.
Violation of antitrust law
According to Art. 12 para. 1 CartA, claims arising from the restriction of competition initially require an unlawful restriction of competition. It follows from this wording that only infringements in the area of agreements to restrict competition (Art. 5 CartA) and abuse of dominant market positions (Art. 7 CartA) can give rise to claims under civil antitrust law. By contrast, infringements in the area of merger control (Art. 9 et seq. CartA) cannot lead to claims under civil law, but fall solely within the remit of COMCO.
The conditions under which an infringement of Art. 5 or Art. 7 CartA is deemed to have occurred are a question of substantive antitrust law. In particular, the newly issued Motor Vehicle Ordinance also serves to define when an impairment of competition is deemed to be significant.
Art. 3 para. 1 of the Motor Vehicle Ordinance contains the principle that vertical agreements which are not already covered by Art. 5 para. 4 CartA are deemed to be qualitatively serious restrictions of competition if they have as their object a restriction listed in
Articles 4-8 of the Ordinance.
These articles contain restrictions on the following topics:
concerning the destination of the motor vehicle and the warranty (Art. 4 Motor Vehicle Ordinance)
concerning the sale of spare parts, repair and maintenance services (Art. 5 of the Motor Vehicle Ordinance)
regarding access to technical information, tools and technical instruction (Art. 6 Motor Vehicle Ordinance)
concerning multi-brand distribution (Art. 7 of the Motor Vehicle Ordinance)
concerning the termination of the contract (Art. 8 Motor Vehicle Ordinance)
If a vertical agreement falls within the scope of Art. 5 Para. 4 KG or is covered by Art. 4-8 of the Motor Vehicle Ordinance, the civil law route is open and an action can in principle be brought before a civil court.
Art. 4 Motor Vehicle Ordinance in particular
Article 4 of the Motor Vehicle Regulation deals with restrictions on the destination of motor vehicles and the warranty, which is particularly relevant for independent dealers. The Regulation distinguishes between "authorized dealers/repairers", which are part of the distribution system of a motor vehicle supplier, and "independent repairers", which are not part of the distribution system of the specific motor vehicle supplier from which the motor vehicle intended for servicing/repair/repair originates.
Art. 4 of the Motor Vehicle Regulation initially states that the geographical location of the purchase of a motor vehicle (in the EEA or in Switzerland) must not play a primary role: If agreements between motor vehicle suppliers and authorized repairers provide for different conditions for the validity of manufacturer's warranties in the European Economic Area and in Switzerland, this is considered, according to Art. 4 lit. b of the Motor Vehicle Regulation, to be a qualitatively serious restriction of competition, subject to treatment in accordance with Art. 5 para. 4 CartA. This must be distinguished from contractually guaranteed services (so-called warranties), which must be asserted against the seller.
Art. 4 of the Motor Vehicle Regulation does not cover as a serious restriction of competition agreements by which the vehicle supplier limits the manufacturer's warranty within the framework of a selective distribution system to vehicles purchased by end consumers from authorized dealers.
The article therefore offers no protection for independent workshops that want to carry out work that would be covered by the manufacturer's warranty at authorized workshops. Although the existence of the manufacturer's warranty is not affected, the manufacturer does not have to bear the corresponding costs for the warranty work if he has not placed the order with the garage. A manufacturer or importer can also work together with independent garages and have the corresponding warranty work carried out, but is not obliged to do so, but can basically choose the garages in accordance with the freedom of contract.
Conclusion
The assertion of claims under civil antitrust law is similar in principle to the assertion of other claims under civil law. One major difference is that the possible claims are limited to the extent that only infringements in the area of agreements to restrict competition (Art. 5 CartA) and abuses of dominant market positions (Art. 7 CartA) trigger civil antitrust claims. The Motor Vehicle Ordinance must be consulted in order to determine when impairments of competition are considered significant and therefore relevant under antitrust law. Otherwise, the same claim requirements apply as in civil proceedings.
Art. 4 of the Motor Vehicle Regulation is likely to have only limited significance for independent workshops, as the restriction of warranty services by manufacturers to authorized workshops still does not constitute a qualitatively serious restriction of competition. Nevertheless, it is stated that the commissioning of independent workshops (as well as the use of non-branded spare parts) has no influence on the manufacturer's warranty, provided that the work is carried out correctly.
Nevertheless, the enactment of the Motor Vehicle Ordinance has simplified access to civil antitrust remedies, clarified and reaffirmed the legislator's position with regard to market abuse and interference and made the provisions already sought by COMCO for the protection of competition effective.
However, it remains to be seen to what extent the Motor Vehicle Regulation will actually mean increased legal certainty for dealers and independent garages.
Distributors are also facing exciting new challenges in connection with the rapid developments currently taking place in this sector. Particularly with regard to distribution activities, companies operating in the automotive sector are advised to review their dealer agreements from the perspective of these changes and the new enforceability of the Motor Vehicle Regulation. It should be noted that the requirements of the Motor Vehicle Regulation are more stringent than those of EU antitrust law.
Balthasar Wicki will be happy to answer any questions you may have about the new Motor Vehicle Ordinance and competition law in general.