Competition and trade law: Motor vehicle dealership contracts - ECJ interpretative ruling in Case C-230/96

A useful interpretative ruling has been handed down by the European Court of Justice in Luxembourg on 30 April, in Case C-230/96, on the Commission regulations establishing block exemptions from the normal EU competition rules for certain categories of motor vehicle distribution and servicing agreements.

The French court referred a number of questions to the Court of Justice for a preliminary ruling regarding the compatibility of certain exclusive Peugeot and Citroën dealership contracts with EU law.

The ECJ found that on a proper construction of the Regulation, the exemption can be applied to a clause in an exclusive dealership agreement which merely provides that the parties may put forward objectively valid reasons for releasing themselves from the obligation not to compete, without indicating specifically what those reasons are. However, the exemption granted by the regulation does not apply to a clause in a contract, unless there are objectively valid reasons, which prevents the seller from selling new vehicles of any other make, even at commercial premises separate from those where contract goods are offered for sale.

The Court reiterated that any clauses in a motor vehicle dealership contract which are not covered by the block exemption (the object or effect of which is to restrict competition within the common market and which are capable of affecting trade between Member States) are subject to the prohibition set out in Article 85. Nevertheless, the Court found that the block exemption allows a clause in a contract which imposes on a dealer a fixed sales target and provides a penalty if the target is not met. This may extend to termination of the contract, provided that the sales target represents simply an obligation to use best endeavours and is determined by common agreement between the parties or, where they disagree, by an expert third party.