Recommendations to distributors and manufacturers of automotive products in the Russian Federation

15.10.2012

In September this year, the Federal Antimonopoly Service published recommendations for car manufacturers and distributors in the Russian Federation.1 The antitrust service thus demonstrated yet again that it is consistently taking steps to modify the rules of the game on the car sales market and to create what it sees as a transparent system of relations between all its participants.

The recommendations were prepared by the antitrust body after protracted analysis of the contractual practice followed by most car manufacturers (importers, distributors) and their dealers, as well as discussions in a variety of formats of problems of the market with its participants, including within the scope of a working group under the expert council of the FAS of Russia for developing competition in car sales and maintenance. By publishing the recommendations below, the antitrust service largely summed up the claims it has lodged previously against car manufacturers, ignoring most of the arguments put forward by the manufacturers themselves.

It should be noted that the format in which the antitrust body set out is proposals for market players, i.e., “recommendations”, is not expressly envisaged by the law on protection of competition and is not binding on its targets. What is more, it is obvious that the overwhelming majority of the published antitrust body recommendations derive from the assumption that all car manufacturers are dominant players on some commodity markets. In our opinion, this is a dubious thesis. The question of possible dominance by car manufacturers on the relevant commodity market should be decided separately in each individual case on the basis of market analysis.

The recommendations themselves are set out below:

1. To sign dealership agreements for at least 5 years or an unlimited term for official dealers investing substantially in developing the dealership business, given the long pay-back period;

2. If dealership agreements are cancelled, the party initiating the cancellation should give detailed reasons in writing;

3. Actions establishing car resale prices for an official dealer should be avoided, apart from a maximum resale price;

4. To avoid establishing discriminatory conditions for certain dealers within a single dealership network (under-deliveries of cars, supply of only unpopular models, unilateral amendment of the supply conditions, demand for additional investment in equipment or premises, establishment of a 100% prepayment, etc.);

5. To avoid unjustifiably refusing to supply independent car service companies with original spare parts, accessories and consumables and to allow them access to information databases (electronic catalogues of spare parts, consumables and accessories) for the purpose of performing quality repairs and maintenance to cars; not to establish discriminatory sales prices for original parts, accessories and consumables and access to databases, unless establishment of different prices is economically justified;

6. Not to impede organisation of service centres according to the car-manufacturers’ standards without sale of cars or organisation of sale of cars according to the car-manufacturers standards without construction of a service centre (separation of sales from servicing);

7. To develop a document regulating interaction with potential counterparties, including requirements on potential counterparties, the procedure for counterparties to submit documents, the procedures and timeframe for decision-making on concluding dealership agreements or refusing to do so.

Let us note once more that the fact of publication of these recommendations does not mean that market players must immediately change the existing rules of the game. At the same time, the given recommendations might become yet another argument in favour of introducing certain changes into the business practice of car-manufacturers and their distributors in order to promote greater openness on the given market and mitigate the risk of claims being lodged by the antitrust authority.

 The FAS of Russia recommendations that have been published should serve as grounds for continuing the discussion between car market players and the antitrust service. 

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