Court rules in Jaguar Land Rover's favour over quantitative selective distribution criteria

Court rules in Jaguar Land Rover's favour over quantitative selective distribution criteria

Published:

Author: Jaime Moore

The European Court of Justice (ECJ) has upheld Jaguar Land Rover's right to refuse dealers entry to its quantitative selective distribution system (operated under the Motor Vehicle Block Exemption (MVBE)), without publishing its entry criteria.

Although the case relates to distribution arrangements under the MVBE, it will apply by analogy to similar arrangements under the more general Vertical Restraints Block Exemption.

So, this case is relevant to suppliers using (or considering using) quantitative selective distribution systems, and buyers interested in applying to become authorised distributors.

Auto 24 SARL, which brought the case against Jaguar Land Rover's (JLR) French operation, had failed to secure admittance to JLR's quantitative selective distribution scheme since 2004, when its previous arrangement with JLR came to an end.

Auto 24 argued that all quantitative criteria under the MVBE must satisfy 'objective economic justifications, of which the supplier must provide evidence, and must be applied in a uniform and non-discriminatory manner in all of the catchment areas and to all of the potential candidates for the distribution system'.

The French court referred the case up to the ECJ, asking what the ECJ understood by the words 'specified criteria' in the MVBE in the context of selective distribution.

The ECJ ruled that it understood the phrase to mean that below the block exemption threshold, where a manufacturer is setting a numerical cap on the number of people it will deal with, it must do so by applying set criteria. But the set criteria do not need to be objectively justified, related to quality issues or published, particularly at the risk of compromising business secrets or even facilitating collusive behaviour.

Although the case did not deal with the point, it goes without saying that under general competition law principles, a manufacturer's specified criteria would be illegal if it related to 'hardcore' issues, such as excluding a dealer on the basis of its discounting strategy.

The case has been billed as important for other manufacturers of luxury goods, such as LVMH Moet Hennessy Louis Vuitton SA (MC) and Chanel SA, who are keen to find ways of limiting sales to some distributors in order to protect their brand. But in reality, the case is not about luxury goods, so could be used just as much by a brick manufacturer as it could by Chanel.

And although this case is likely to generate some excitement, in reality it does not add much to what we already know.

It does, though, reinforce the Commission's view that a manufacturer operating 'quantitative' selective distribution below the market share cap can turn away a pure-play e-tailer on those grounds alone.

If you are interested in reading the case, a link can be found here.