Michelin II [2005] March Volume 1, Issue 1

Facts

• Commission took decision that Michelin was in breach of Article 102 in relation to pricing schemes for replacement tires (follow up from Michelin I).

• Details of scheme were as follows:

  • There was a quantity rebate and a service bonus.

  • The quantity rebate were based on a scale whereby the rebate increased with the volume purchased by the dealer during the past year and the rebate applied to all purchases that were made in that year. 

  • The Service Bonus depended on the dealer reaching a minimum annual turnover and entering into a number of commitments. 

General Court

• Service bonus was abuse of dominant position because it depended on the subjective assessment of Michelin with regard to the dealers performance. This was aimed to induce loyalty by tying the dealers to Michelin.

• Service bonus was abusive because it depended on subjective assessment (more surprising was consideration of quantity rebates) - we thought until then that quantity rebate always fine.

• European commission claimed that system was loyalty inducing because it was based on a dealers entire turnover with Michelin, and period of time was a year, which was considered a very excessive period of time.

• General court took view that quantity rebate system in which there is a significant variation in discount rates between lower and higher steps, and which has reference period of a year or more, has the characteristics of a loyalty inducing scheme.   

• Court looked very carefully of characteristics of particular quantity rebate and held that where there is a very significant difference between rates, this had the characteristics of a loyalty inducing scheme.

  • No longer follows that a quantify rebate is always fine

RELATED CASES

• Michelin v Commission