On 1 October 2014, the Belgium Court of Appeal held that requirements that spare parts providers also had to be authorised dealers infringed Article 102 of the TFEU, the abuse of a dominant position.
This judgement is a timely reminder that product manufacturers need to be particularly careful if they want to impose similar restrictions on their distribution network and be prepared to justify their use if challenged. Careful structuring of distribution systems is therefore advised
The case stemmed from a request by an authorised dealer and repairer in Belgium to become just an authorised repairer and spare parts supplier, therefore abandoning the motorbike sales part of their business. This request was refused by Ducati and the disagreement was taken by the dealer to the Commercial Court. Of utmost importance in this case was the categorisation of the market by the Commercial Court. The Court considered that the market for the selling of bikes and the market for repairing them were separate. The bikes benefitted from a two year warranty that was breached unless an authorised Ducati repairer was used. This meant that the repair side of the business was separate from the sale where customers could choose to purchase bikes from other brands.
The Commercial Court held that Ducati were in a dominant position on the market for the repair of their own bikes under warranty and had breached Article 102 by abusing that dominant position in requiring authorised repairers to also be authorised dealers. The Commercial Court also then held that the selective distribution system which required authorised repairers to also be authorised dealers breached Article 101 of the TFEU as an anti-competitive agreement. The court held there was no objective justification for such a stipulation and that it foreclosed competition in the repair market by not extending the protection of the warranty to non-authorised repairers. Ducati appealed the ruling to the Belgium Court of Appeal.
The Court of Appeal narrowed the Commercial Court’s judgment to just the issue of a possible abuse of a dominant position, it did not consider that there was an anti-competitive agreement in place but rather that Ducati had made the decision independently of any agreement. It was therefore correct to determine the issue in the context of a possible abuse of a dominant position. The Court then further narrowed the ambit of the possible offence by deciding that as the dealer in question did not operate outside Belgium, the case should be considered within the ambit of domestic Belgium competition law and not as an issue effecting trade between EU Member States.
The Court of Appeal decided that on this basis, Ducati had abused their dominant position in the repair and supply of spare parts in their own bikes by refusing to grant the repairer official Ducati status. By differentiating the repairer and by not selling them the necessary spare parts, tools, software and status, Ducati had effectively stopped the repairer from being able to compete effectively on the market, that market being the warrantied repair of Ducati bikes. They had also failed to justify the refusal to supply by showing that the quality of service that was carried out by the repairer was lower.
Ducati were ordered to supply the repairer under competitive conditions or face fines.