May 2012 – On 18 April 2012, the Competition Council published its findings in a detailed report regarding its sector inquiry aiming at a better understanding of the auto vehicle spare parts market. The report contains certain recommendations made in order to address concerns regarding competition which have been identified. Special attention was paid to the impact on competition of IP rights on the market for visible spare parts.
In February 2009, a sector inquiry was initiated by the Romanian Competition Council (the “Competition Council”) aiming at a better understanding of the auto vehicle spare parts market.
On 18 April 2012, the Competition Council published its findings in a detailed report (the “Report”). The Report is based on data collected at that national level from companies active in the sector (i.e. motor vehicle producers, parts manufacturers, parts dealers, motor vehicle sellers/dealers, service units/repairers). Also, insurance companies and consumers (via polls) were asked for their opinions.
The Report also contains certain recommendations of the Competition Council in order to correct concerns regarding competition which have been identified.
Special attention was paid to the impact on competition of IP rights on the market for visible spare parts.
The relevant product and geographic market
The Competition Council assessed the market concentration and concluded that the Romanian spare parts market is a market with a low degree of concentration (HHI index = 463 in 2010), meaning that many smaller companies compete on the market as a whole.
Further, the Report confirmed the relevant product market and relevant geographic market definitions established by the European Commission and Competition Council in previous cases.
As regards the relevant product market, the Competition Council invoked the decision issued in the merger control case BUTLER CAPITAL/CDC/AXA/FINAUTO/ AUTODISTRIBUTION/FINELISN[1] and defined the product market as the market for the manufacturing and reconditioning of spare parts and the market for the distribution of spare parts for the wholesale and retail market.
The Report also confirmed the European Commission’s assessment that a distinction must be made between the supply of tyres for new vehicles and the supply of replacement tyres.[2]
Further to the case law of the European Commission, the Competition Council noted that there are six separate distinct markets within the market for the distribution of replacement tyres: (i) car and van tyres; (ii) truck and bus tyres; (iii) agricultural tyres; (iv) earthmoving vehicle tyres, (v) motorised and (iv) non-motorised two-wheel vehicles tyres.
The relevant geographic market for the manufacturing and supply of tyres was considered to be EEA-wide, the reasons being (among others) that there are no significant tariff or non-tariff barriers and there are only a few plants assuring the supply of tyres.
In the Report, the Competition Council observed that, in line with previous European Commission case law, the geographical market for the replacement of tyres is national in scope.
The Competition Council further pointed out the fact that according to European case law, repair and maintenance services for automotive vehicles were considered as a national (or in a narrower definition, even regional) market. As for the market for the distribution of replacement tyres, the Competition Council considers it a national market.
The Competition Council further made a distinction between the market for the wholesale supply of replacement tyres and the market for the wholesale supply of vehicle spare parts. The market for the wholesale supply of spare parts can be seg mented into (i) the aftermarket for spare parts sold by independent wholesalers, and (ii) the aftermarket for original spare parts sold by vehicle manufacturers.
In addition, in a previous Competition Council merger case decision[3] it was concluded that the wholesale distribution of automotive spare parts and accessories (as distinct form the sale of new vehicles) has a general character that depends on brand, justifying in some cases a narrower seg mentation of this market based on brand.
Proposed liberalisation of the motor vehicle spare parts
The Report of the Competition Council highlighted the fact that the design of visible car components and visible motor vehicles spare parts (body panels, windscreens, lights, mirrors, etc.) is protected by industrial design rights. Consequently, in the aftermarket every manufacturer permanently holds a legal monopoly in relation to particular visible spare parts (body panels, windscreens, lights, mirrors, etc.), since these can only be produced by or with the permission of the supplier holding the respective IP rights.
Therefore, competition is completely excluded and the consumer has no access to spare parts other than those supplied by the manufacturer who is holder of the IP rights.
The Competition Council aims at fixing this issue by introducing a “repair clause”. This clause is contained in a Competition Council proposal for amending the respective competition legislation[4] that was recently addressed to the Ministry of Economy, Trade and Business Environment.
The “repair clause” stipulates that the “legal protection of designs shall not apply to a design which constitutes a component part of a complex product for the purpose of the repair of that product that aims at restoring its original appearance” (applicable only to visible spare parts).
By this clause, it is intended that the design of the parts will be protected by IP law for new vehicles intended for sale, but will not be protected for the repair market. In theory, as the Report suggests, this will basically allow the consumer to shop freely for the best deal and the original manufacturer will no longer retain a monopoly right over the spare parts.
Amending the current applicable legislation is the solution indicated in the Report, as the transitional provisions of Directive 98/71/CE allow member states to amend their national legislation if this results in the liberalisation of the trade of spare parts.
Spain, the UK, Italy, Belgium, Holland, Luxembourg, Ireland, Hungary, Latvia, Poland (and to a certain extent Germany and Greece) have already enacted a “repair clause”[5] and liberalised their aftermarket.
Conclusion
The main finding of the Report is that the consumer has no choice when it comes to visible spare parts and is forced to buy them exclusively from car manufacturers at prices fixed at their discretion due to a lack of effective competition.
By offering a greater number of operators the ability to distribute visible parts, the implementation of a repair clause would allow repairers and consumers to benefit from the advantages of competition. Therefore, the Competition Council proposes the implementation of a “repair clause” in Romanian legislation without delay.
For further information please contact Iustinian Captariu, Counsel, at .
[1] COMP M.1893 of 10 April 2000.
[2] Michelin/Viborg case, COMP M.3081 of 7 March 2003.
[3] Decision no. 54/22.12.2010 New Kopel Romania and Opel Southeast Europe Kft / Union Motors Car Sales (http://www.consiliulconcurentei.ro/uploads/docs/items/id2590/decizie_site_54.pdf)
[4] Directive 98/71/EC has been transposed into Romanian legislation through Law no. 129/1992, as further amended.
[5] The French competition authority has submitted for public consultation the same proposal regarding the repair clause.
Source: e-Competitions, No45578, www.concurrences.com