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EC loses VW pricing case

Volkswagen has won a crucial court battle overturning a 31 million euro fine imposed by the EC in 2001 for alleged price collusion with its German dealers.

The victory has incensed many EC competition bureaucrats who thought the case against VW was undeniable. They accused the German manufacturer of barring dealers in 1996 and 1997 from selling the new Passat below a recommended selling price and from offering discounts. They claimed furthermore that the retailers had tacitly complied with the manufacturer.

But the Luxembourg Court overturned the fine after ruling that the dealers did not act in collusion with VW. “The signature of the dealership agreement by Volkswagen's dealers could not be regarded as implied acceptance, given in advance, of Volkswagen's anti-competitive initiatives,” it said.

Without proof of collusion, the EC's case collapsed. Volkswagen disputed having infringed the rules of free competition, arguing in particular that its initiatives with regard to its dealers were unilateral. There was therefore no agreement between the parties.

The Commission has two months to appeal to the Court of Justice, the EU's highest tribunal, on points of law. A spokesman for EU Competition Commissioner Mario Monti said it was too early to say whether an appeal would be launched, but expressed frustration at the court ruling.

Proving collusion on the part of dealers in such cases was next to impossible, according to spokesman Tilman Lueder. “As the dealer risks being excluded from the network, he will never say anything,” he told reporters. “The dealer, who is dependent on the manufacturer, has no choice but to basically stay silent. If that is not enough proof, then we don't have the means to prove anything.”

The ruling could have a far-reaching impact in the future as manufacturers seek to maintain margins in an increasingly competitive and fractured European new car market. Volkswagen is one of several manufacturers to have attracted the attention of EC competition authorities in recent years for suspected price-fixing. The creation of the single currency and the revised block exemption laws introduced in October are helping to rewrite the European new car market, and pushing manufacturers to relinquish some of the control they've exercised over retail networks in the past.

Commentators, however, worry that this case could prove a set-back. They say carmakers will be encouraged to flout the block exemption rules if dealers are, as Lueder says, too frightened to speak up.

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