The Spanish authority fined car-wash equipment maker Istobal €638,770 (2% of its Spanish revenue) for denial of parts and data to independent repairers. Though providing repair/maintenance services itself and via appointed third party service providers (each allocated to specific territories in Spain), Istobal denied parts and technical information to independent (non-appointed) repairers. The authority alleged this abuse of a dominant position in the provision of parts/data stifled competition.
The case takes a particularly hard line on refusal to deal with independent repairers.
- There was no suggestion that Istobal was a dominant provider of car-wash equipment. The allegation was that only Istobal parts and technical information could be used to repair its car-wash equipment. Hence Istobal was a monopolist, whose refusal stifled all independent competition.
- There was no analysis as to whether garages buying car-wash equipment factored into their buying decisions the availability of maintenance services. That is the oft used “secondary market” defence approved by the EU Court of Justice in EFIM. 1
- There was no analysis of whether competition between Istobal’s own brand of maintenance and those of its appointed maintainers were sufficient to generate competition. Indeed, much may turn on the fact that Istobal allegedly siloed the market among its appointed maintainers (so allocating each a territorial monopoly). But still the analysis appears harsh when set against the run of secondary market cases.
The case serves a reminder that companies with low market shares in their main product lines may still have high (or allegedly dominant) shares in relation to spare parts, technical information or consumables for their products.
- Take complaints seriously. Third party maintenance complaints, even though commonly unmeritorious, are routinely taken up by authorities and can be expensive and time-consuming to defuse.
- Consider your parts/technical data policy. If there’s a risk of market power complaints (even after considering second market defences) then consider whether your policy on appointing service providers and supplying parts and data is objectively defensible, for example applying objective quality-related criteria. Note that – counterintuitively – EU law can treat more strictly companies that appoint third party service providers over those that service equipment captively. Refusal to deal is generally more benignly reviewed where companies chose to preserve their activities inhouse.
- Assess aggravating factors. A potential concern this case was that that garages had no choice of approved maintainer, since Istobal appointed one per territory. Creating a pathway by which more might have been appointed (or at least justifying why one per territory was necessary to incentivise maintainer’s local investments in equipment and staff) may have diffused the concerns.
Golden Wash S.L., an independent maintainer of Istobal car-wash equipment, complained that Istobal refused to supply spare parts and technical data to car-wash maintainers.
- The CNMC considered a narrow market to establish dominance. Istobal was not found to be dominant in the (broad) market of car wash equipment, but only in the (much narrower) market of Istobal branded car wash equipment and spares. Accordingly, since the spare parts could only be obtained from the manufacturer (so-called captive parts), Istobal was considered to be a “monopolist in the manufacture and sales of [its] spare parts”.
- No secondary market analysis was conducted to conclude that Istobal was dominant. The CNMC confined its assessment to the analysis of the primary market (i.e. sale of car wash equipment) without considering the impact this can have on the secondary market. The CNMC seemed to disregard the disciplining theory, as stated in EFIM, which holds that competition on the primary market disciplines consumers’ behaviour on the secondary market. The CNMC, carried out no lifecycle cost analysis to assess whether sophisticated consumers like businesses take into account the price of spare parts when making their purchasing decision.
- It found the repair and maintenance services market was brand-specific. Technical assistance services on Istobal equipment could only be performed directly by Istobal or through third party authorised providers (members of Istobal network). While acknowledging that aftersales services for car wash equipment belong to “a not very well known market that requires a certain degree of specialization”, the CNMC concluded that the main criterion to become members of Istobal network (i.e. being an owner of Istobal equipment) was arbitrary and was not technically justified.
- The authority concluded Istobal was dominant on this narrow brand specific market based on the absence of independent repairers in the relevant market. Only Istobal and its appointees were present in the market. There were no independent repairers. Competition between authorised repairers and between authorised repairers and Istobal was not considered, albeit this may have been muted if each repairer had a separate territory.
Istobal was found to have abused its market power in the manufacturing and marketing of spare parts for its proprietary equipment by implementing a strategy aimed at preventing independent technical assistance providers from offering repair and maintenance services. Independent providers outside the Istobal network were not allowed to purchase spare parts, nor given access to technical data needed for the provision of such technical assistance services. This stifled effective competition in the provision of repair services.
In view of the above, the CNMC fined Istobal EUR 638,770 for breaching Arts. 1 and 2 of the Ley 15/2007 de Defensa de la Competencia (the equivalent of Arts. 101 and 102 TFEU). While the practices were considered to be “very serious infringements of competition law”, the CNMC concluded there were only limited effects on the domestic market and for this reason issued a fine equal to 2% of Istobal annual domestic revenues.
The decision of the CNMC is available here (only in Spanish).
1 Judgment of 19 September 2013, European Federation of Ink and Ink Cartridge Manufacturers v Commission, Case C-56/12 P ECLI:EU:C:2013:575.