Authors
Ján Lazur

Ján Lazur, LL.M.

Partner

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Juraj Sýrny

Juraj Sýrny, LL.M.

Associate

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Authors
Ján Lazur

Ján Lazur, LL.M.

Partner

Read More
Juraj Sýrny

Juraj Sýrny, LL.M.

Associate

Read More

3 November 2020

Franchise and Distribution - NOVEMBER 2020 – 8 of 9 Insights

Slovakia - Franchise and Distribution newsletter #23

  • Briefing

Slovak competition authority imposes a fine on distributors of Volkswagen cars for cartel agreement in Slovakia

BAA/65000.09

Background

On 3 February 2020 the Division of Cartels of the Slovak Competition Authority (the “Authority”) imposed a fine on 18 undertakings active in the market for the sale of Volkswagen vehicles (car dealers) for participating in a cartel. The Authority has granted two undertakings an immunity from the fine and reduced the fine imposed on other two following their successful applications for leniency program. Furthermore, one undertaking acknowledged its involvement in the anti-competitive behaviour and agreed to settle the case. The Authority has also imposed a ban on participation in public tenders concerning one of the cartel members.

The case was initiated upon the leniency applications submitted by one of the car dealers and the car importer which distributed Volkswagen cars affected by the cartel to the dealers in question. Both undertakings belonged to the same economic group.

The aim of the car dealers involved in the cartel was to eliminate competition among themselves, to retain their customers and maintain the selling prices. To achieve this goal, they set maximum discounts provided to the customers, allocated customers and markets, coordinated their replies to tenders and exchanged commercially sensitive information. The Authority established that the agreement had as its object the restriction of competition within the territory of Slovakia.

Facts

The anticompetitive practice worked in a way that the car dealers allocated the markets and customers based on the region where they had the place of operation. This meant that a customer from one region seeking a discount from the car dealer located in another region had usually been offered a lower discount compared to the offer from the dealer located in the same region. In other words, when the customer being resident or located in one region was interested in buying new Volkswagen car and asked the dealers from the same region as well as several other regions for price offers, the dealers’ offers from other regions were usually less favourable. Thus, the customer was left with no choice but to buy the car from the dealer located in the same region with seemingly the best offer. This applied especially to customers already assigned to particular dealer because of the past deals between them.

Furthermore, the Authority found that the anti-competitive agreement had been implemented and the compliance with its agreed terms monitored via e-mail communication. When one of the dealers learned of the deviation by another dealer, the former either informed other dealers about it or asked the latter to put forward reasons for such deviation.

Another means by which the car dealers shared the markets and customers was through collusive tendering concerning the Volkswagen cars. The collusion was aimed at ensuring that the contract would be awarded to the winner designated ahead of the tender and it took the form of cover bidding, ie the dealers submitted a bid that was higher than the bit of the designated winner and bid suppression, ie the dealers refrained from bidding. When the invitation to tender was made by the customer that had already been allocated to a particular dealer, such a dealer was supposed to be the designated winner.

Moreover, the cartel participants exchanged commercially sensitive information to make the cartel agreement work in practice.

Legal assessment

In their defence, the perpetrators argued that the Authority had erred in law when considering the agreement in question as horizontal because their anti-competitive behaviour was the result of unreasonable pressure exerted by the car importer and that they acted under the threat of being sanctioned and their contracts with the importer being terminated unless they resort to illicit behaviour. Furthermore, the dealers claimed that the leniency application submitted by the car importer should not have been accepted by the Authority because, among others, the agreement in question was of a vertical nature and the car importer acted as a coercer towards the dealers.

When assessing the anti-competitive agreement in question and the role of the car importer, the Authority pursued the case in light of AC-Treuhand case concerning the liability of cartel facilitator. In this regard, the Authority held that there was no doubt the car importer knew about the anti-competitive agreement in question, the fact conceded by the importer itself and contributed to its implementation. The importer participated in some meetings where various aspects of the cartel were discussed and in sometimes it was even contacted by the car dealers to solve disputes arising from or in relation to the cartel. However, according to the Authority, the importer did not play a key role, nor did it coerce the car dealers to conclude and implement the agreement or sanctioned them when they failed to do so.

The Authority considered the agreement in question as a horizontal one not only because it lacked any evidence showing anti-competitive aspects of vertical arrangements or exertion of pressure by the importer on the dealers when selling the Volkswagen cars but also because the car dealers failed to submit any conclusive evidence showing the leading anti-competitive role of the importer. Accordingly, the Authority found that the anti-competitive agreement had been implemented only by the car dealers with an aim to eliminate competition in the relevant market. The cartel thus concerned competition at the horizontal level without any impact on relations between the importer and the dealers at the vertical level. However, the Authority held the importer liable for its participation in cartel and established that its role was more subsidiary and accessory due to the fact that the importer was well aware of anti-competitive behaviour of its dealers, tacitly approved of it and helped them with pursuing such behaviour without reporting it to the competent administrative authorities.

Given that the anti-competitive agreement was of a horizontal nature and due to the same reasons as stated above, ie the car importer being held liable for its participation in the horizontal cartel and not acting as a coercer, the Authority concluded that it was allowed to accept the leniency applications submitted by the car importer.

The appellate body of the Authority changed the decision in so far as it concerned the amount of fine imposed on the undertakings in question due to errors when calculating the fine but upheld the findings of the Authority on the issues of facts and law.

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