Brussels, 30/05/2001 (Agence Europe) - The European Commission closed its investigation into the German car manufacturer Volkswagen by imposing a fine of EUR 30.96 million. The largest German manufacturer - and European -, was punished for having given instructions to German dealers of its brand, between 1996 and 1997, to follow a "price discipline" and not to sell the new Passat model at prices below the recommended retail price. The measures taken to limit discounts have as aim to fix retail prices, a practice called "hardcore restriction of competition" contrary to the European competition rules, which ban any price fixing measures.
The investigation began on the basis of complaints from consumers and after the analysis of answers given by Volkswagen to official requests for information. The information gathered by the Commission enabled to establish that between 1996 and 1997, the car manufacturer has sent a memo to its German dealers asking them not to sell the new Passat model at significantly lower prices to the recommended retail price and/or to limit, or even end, the discounts granted to customers, practice contrary to normal commercial behaviour. Some dealers were even threatened with reprisals such as the termination of their dealer contract, should they disobey these instructions. Volkswagen justified these measures by claiming that they where necessary to support the profitability of its dealers and to maintain the image of the new model's brand. The Commission, for its part, considered these practices as contrary both to Article 81 paragraph 1 of the EC Treaty and Regulation Nº1475/95, the block exemption regulation applicable to distribution and after-sales service for automotive vehicles specifying that the exemption no longer applies after "the manufacturer (…) directly or indirectly restricts the dealer's freedom to determine the prices and discounts in reselling contract goods". Thus the regulation protects the rights of European consumers to have competitive prices when buying cars, including discounts. Other than an evident disadvantage for the consumers, the practices by Volkswagen are also of a nature to reduce private exports out of Germany and to increase private imports towards Germany and to prevent any competition between dealers. However, apart from the quality of service, the possibility of selling at their resale prices constitutes for the dealers a crucial tool for competing.
The fine, considered as serious, is the second imposed by the European authorities on Volkswagen. In 1998, the Commission had already condemned it to a record fine of EUR 90 million for having prevented the importing of Audi and Volkswagen models from Italy towards Germany and Austria, for evident reasons due to substantial price differences. The competition spokesperson Michael Tscherny, also recalled that investigations are underway concerning illegal practices aiming to prevent parallel imports of the French Renault and Peugeot and that a final decision was on the verge of being made concerning DaimlerChrysler. Undertaking a speculative calculation to demonstrate the seriousness of the infringement punished by the European Commission, Mr Tscherny felt that on the basis of 400,000 vehicles of the Passat model sold over three years, consumers could have saved DM 1.6 billion (around EUR 200 million) if Volkswagen had not implemented this illegal practice. Questioned over the gap between the profits recorded by the company and the size of the fine, he explained that this latter reflects the seriousness of the infringement, but cannot be determined in a precise manner. The mere fact of imposing a fine for violation of the competition rules has a dissuasive effect on the companies added the Commission spokesperson.