The European Commission has decided to fine the German car maker
Volkswagen ECU 102 million for persistent infringement of EU
competition rules. The fine is the largest ever financial penalty
inflicted by the Commission on an individual company and is
equivalent to 10% of Volkswagen's profits in the territories
It is alleged that Volkswagen's practices have
sought to partition the single market, contrary to EU competition
The company prevented its Italian dealerships
supplying Volkswagen and Audi Motors for export to German and
Austrian final customers. The company penalised dealers who sold
models outside their territory, for example by threatening
termination of the dealer's contracts, actual termination of such
contracts, reduction of profit margins and bonuses for dealers, and
rationing deliveries to Italian dealers. All sales by Italian
dealerships were monitored to check up on the Italian dealers and
Volkswagen/Audi advised their dealers in Italy not to give the real
reason for the refusal to sell to foreign customers.
The effect of the decision for VW is an automatic
loss of the protection of the EU block exemption for vehicle
distribution networks. This block exemption allows car makers'
exclusive or restricted distribution arrangements with dealers
subject to specified criteria, but bans practices to prevent tied
dealerships selling to non-national dealers or foreign individual
purchasers. VW/Audi dealers' contracts may therefore now be open to
challenge before national courts of the Member States, at least in
the territories affected by the decision.
If the Commission uncovers similar practices on the
part of other producers in the industry, this will put into
question the possibility of renewal of the block exemption on its
expiry in 2002. This question will in any event probably be
affected by the outcome of the Commission's current competition
policy review of vertical restraints.