Big Bang in automotive distribution contracts? The order of the Higher Regional Court in Vienna dated May 2, 2020 on the invalidity of certain conditions and practices in the automotive industry under antitrust law

The order results from a dispute between the general importer and an authorised dealer and service partner who had concluded both an agreement relating to the sale of new cars and a workshop agreement with the general importer.

The authorised dealer alleges that some conditions in these agreements as well as practices implemented by the general importer are illegal under antitrust law. According to the authorised dealer the general importer holds a dominant position towards him, since he depends on the ongoing business relationship with the general importer in order to avoid serious economic adverse effects. The contested conditions or practices are allegedly applied or enforced abusively within the meaning of the relevant Austrian antitrust laws. He, the authorised dealer, claims to have consented – if at all – to these conditions only facing the economic pressure of the dominant general importer.

The authorised dealer contests, inter alia, various aspects of the general importer's variable remuneration system (inter alia the entry criteria for performance bonuses and the determination of annual sales targets), of the remuneration of warranty work and the costs occurring for corporate identity investments in the authorised dealer’s premises, trainings, test and diagnostic equipment as well as workshop information. Furthermore, he complains that his freedom to set prices was impaired because he is economically forced to participate in the low-price campaigns initiated by the general importer.

In its order, the Higher Regional Court only partially ruled in favour of the authorised dealer. It ordered the general importer to stop, inter alia, the following practices:

• Certain practices relating to the general importer's variable remuneration system (including the setting of sales targets, which the authorised dealer describes as arbitrary, and the linking of performance bonuses to the results of customer satisfaction surveys, which the authorised dealer finds unfair in the specific form established);
• the implementation of low-price campaigns with dealer participation, in which the authorized dealer has to participate due to economic reasons;
• the obligation to carry out guarantee and warranty work if the remuneration does not cover the costs of the authorised dealer;
• the imposition of the costs for mystery shopping, mystery leads and audits concerning compliance with the standards upon the authorised dealer by including these costs in the lump sum training fee charged by the general importer.

However, the Higher Regional Court did not find any fault in the application of the following practices, also attacked by the authorised dealer:

• The corporate identity specifications established by the general importer;
• the pricing charged by the general importer with regard to test and diagnostic equipment;
• the fee charged by the general importer for access to technical documentation;
• the remainder of the training fee charged by the general importer.

The order of the Higher Regional Court interferes quite deeply with the contractual structure agreed upon between the parties who are after all autonomous business subjects. This applies for example to the structuring of the variable bonus system and the special offer campaigns.

In terms of content, the order deals on almost 75 pages in great detail with the facts, the submissions and the collection of evidence. However, the reasons and the findings are at best partially convincing. The factual details as listed in the order are then often not taken up in the actual reasoning, which is largely at the expense of the general importer’s position. Despite recognizing the general importer’s legitimate interest in regulating the various situations, the Higher Regional Court in many instances merely undertakes an "overall assessment" failing to show how the conditions or practices complained of would have to be changed in order to remedy what the court considers to be an infringement of antitrust law.

Overall, the order, which has been referred to in the daily press as a "big bang" (“Paukenschlag”), is neither suitable as a precedent nor as a guideline for other jurisdictions. Apart from the fact that the decision is not yet legally binding, this applies even if the antitrust law framework of these legal systems provides for comparable regulations on abusive behaviour below the level of dominance (e.g. in German antitrust law § 20 GWB).