Legal Week 16 February 2006
24
EU AND COMPETITION
2005 was an eventful year for the automotive industry, with a number of new directives introduced by the European Commission
impacting on trade regulations and companies’ environmental responsibilities. Neil Baylis rounds up a year of change
Driving development
The European Commission: new directives for automotive industry in 2005
Competition law and the free
movement of goods
€49.5m (£33m). The company was found to
Certain manufacturers are continuing to
take risks by implementing anti-competitive agreements which impose restrictions on
their appointed dealers’ ability to sell to conLBU1520 EC Merger
Control
10/2/06
4:28
sumers coming
from outside
their territory.
In October 2005, the European Commission
European Commission Audiovisual Library
To recount all the European Union (EU) legal
developments in 2005 would merit a book,
but taking a perspective from one particular
industry (in this case the automotive industry)
allows for a more manageable insight into
recent regulatory and compliance issues
deriving from Brussels.
Thirty-four percent of the world’s vehicles
are currently manufactured in the EU, and the
total market size of the industry amounts to several hundred billion euros each year. New laws
in this area, therefore, carry great economic
significance. Developments can be broadly categorised into two areas; those affecting competition and the free movement of goods and those
relating to the environment and safety.
(EC) announced that it had fined Peugeot
have sought to prevent its cars being exported
from the Netherlands to other member states.
Peugeot had controlled its dealers using two
methods: firstly, by withdrawing performance
pm
1
bonusesPage
from dealers
who had been identified
as setting up substantial export businesses; and
secondly, by threatening to reduce supplies to
such dealers.
In September, Daimler-Chrysler (DC) succeeded in persuading the Court of First Instance
to reduce a fine of more than €71m (£48m)
to less than €10m (£6.8m). The EC found
that DC had infringed Article 81 by instructing
its dealers in Germany to sell cars only to cus-
tomers in Germany, and to demand a deposit of
15% from foreign buyers. It had also restricted
the granting of discounts of more than 3% by
its Belgian dealers. DC successfully argued that
since its German dealers were DC subsidiaries,
there had been no “agreement between two or
more undertakings” for the purposes of Article
81. The fine of €10m related to the arrangements with the Belgian dealers who were independent and, therefore, constituted separate
undertakings from DC.
One of the controversial provisions included
in the Automotive Block Exemption (Regulation 1400/2002/EC), which came into force on
1 October, 2003, was the ‘location clause’, which
prohibited restrictions on selective distributors
from opening additional outlets within the EU.
A number of manufacturers were uncomfortable with the possible effect of this clause on
the structure of their distribution networks and
lobbied the EC, with the effect that the location
clause was held in abeyance for two years. It
finally came into force in October 2005.
In practice, the market has not yet seen a
rush by dealers to open new branches in over-
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ISBN:
Price:
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Jurisdiction:
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£149 / c. €222
November 2005
EU
13/2/06 1:07:58 pm
Legal Week 16 February 2006
European Commission Audiovisual Library
million vehicles in use every day in the EU, the
EC’s environmental laws continue to impose
more stringent measures on the industry.
In December 2005, the Commission proposed
the Directive on the Promotion Of Clean Road
Transport Vehicles. This proposal aims to promote a market for ‘clean’ vehicles, by requiring
public bodies to procure ‘environmentally friendly vehicles’ as a minimum of 25% of all
heavy-duty vehicles used (such as buses and
utility vehicles). Examples of environmentally-friendly vehicles include those using high
blends of biofuels, natural gas, liquid petroleum
gas, hydrogen, electric and hybrid motors.
The EC will consider extending the obligation
at a later stage to include other vehicle categories. The hope is that the Directive will create a
demand which will give manufacturers of environmentally friendly vehicles the incentive and
means to develop the technology for public as
well as private users.
In December, the EC also published its proposals for the ‘Euro 5’ emissions targets for
passenger cars and light commercial vehicles.
The proposals will require particulate filters to
be fitted to diesel cars, and for petrol cars to cut
nitrogen oxide and hydrocarbon emissions by a
further 25%. These requirements will come into
force in mid-2008 at the earliest.
The End of Life Vehicles (ELV) Directive,
which was required to have been implemented
by all member states by April 2002, continued
its slow progress into national law. The Directive intends to prevent, or minimise, the waste
arising from the 10 million-plus vehicles
reaching the end of their lives each year in the
Environment and safety
EU. The UK’s implementing regulations came
To
avoid the environmental
from 11:27
into forcePage
on 3 November,
2003, although the
Britannia
- Manchesharm
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17/1/06
1
the manufacture, use and disposal of the 200 Government announced that it would not
transfer full responsibility to producers for
taking back vehicles until 2007. Prior to that
date, all manufacturers and/or importers have
been required to register themselves as responsible under the ELV Regulations and describe
how they intend to comply with the regulations.
The remaining provisions of the Directive
are expected to be enforced through voluntary
arrangements between producers and government — these discussions will continue
throughout 2006. The targets for recycling and
re-use set out in the Directive are forcing manufacturers to consider carefully the materials they
will be using for constructing the next generation of vehicles.
Another important environmental law devel-
opment was Directive 2004/42/EC on the limitation of emissions of volatile organic compounds.
The implementing legislation came into force
in the UK in November 2005. The Directive aims
to reduce the quantity of dangerous solvents in
paints and varnishes. The rules will be applied
in two phases, the first in 2006, and with tighter
limits coming into force on 1 January, 2010.
These rules will not only impact on manufacturers, but also on the UK’s 6,000 body repair
shops that will have to invest significant sums
in new equipment — many are expected to
cease trading as a result.
Neil Baylis is a partner in the antitrust and
competition group at Kirkpatrick & Lockhart
Nicholson Graham.
MANCHESCUP2006
seas territories, although many are apparently
looking at opportunities in Eastern Europe.
The EC is also continuing to study potentially unreasonable car price differentials across
the EU. Differentials of up to 51.6% have been
recorded in past years, but recent reports (the
latest being issued on 1 August, 2005) show a
steady convergence of prices due to market
forces and EC action. The EC’s reports have two
principal aims: to put pressure on manufacturers by highlighting their differential pricing
policies and to encourage consumers to purchase their cars in ‘low cost’ countries.
As more EU citizens travel and work in foreign countries across the EU, so the issue of
national laws governing the registration of
foreign vehicles has come to the fore. In 2005,
the EC addressed a number of requests for information to member states whose legislation
appeared to breach the free movement of goods
provisions of the EC Treaty by imposing additional obstacles on the registration of foreign
vehicles. Specifically, the EC has approached the
Czech Republic, Austria, Poland and France.
Further developments are likely in 2006.
The EC estimates that about 20% of the price
differences for cars in different member states
relate to local tax. In July 2005, it presented a
proposal for a directive which would require
member states to restructure their passenger
car taxation systems. The proposals include the
phasing out of registration tax and the incorporation into annual car taxes of an element
based on carbon dioxide and other emissions to
reflect the environmental cost of motoring.
25
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LW 16 Feb p24-25 Euro Round-up.indd 25
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