ECJ assesses agreements between car repairers and insurers linking the rate of repairs to brokerage activities

On 14 March 2013, the European Court of Justice ("ECJ") issued a judgment (Case C-32/11) following a reference from the Hungarian Supreme Court concerning the cooperation between car repairers and insurers.

In Hungary, the main insurers each year conclude an agreement with car repairers or their national association on the conditions and rates for repair services for insured vehicles. However, not only do the repair shops execute these repairs, they also act as insurance brokers for the insurance companies. In the agreement concerned, the hourly repair rate paid by the insurer was made dependent on the number of insurance policies signed by customers of the repairer. The referring judge now asked whether linking car repair services to the activities of repairers acting as insurance brokers has the object to restrict competition within the meaning of Article 101(1) TFEU.

The ECJ first recalled its established case law that infringements by object are those restrictions of competition that are by their very nature injurious to the proper functioning of normal competition. According to the Court, the establishment of a link between two, normally independent, activities (repair services and insurance brokerage) does not automatically mean that such agreement qualifies as an object infringement within the meaning of Article 101(1) TFEU. However, such link can constitute an important factor in that assessment. In any event, the assessment of the agreement concerned must take into account that it affects two markets. It is then for the Hungarian court to decide whether the agreements concerned are injurious to the proper functioning of the car repair and/or car insurance market. The following factors are relevant for that analysis: (i) the economic and legal context, including the fact that domestic legislation requires intermediaries or insurance brokers to be independent from the insurance companies, (ii) whether the agreements eliminate or seriously weaken competition on the market in light of the structure of that market, the presence of alternative distribution channels and their respective importance and the market power of the companies concerned and (iii) the fact that the agreements concerned appear to be concluded on the basis of recommended prices established in decisions of the national association of car repairers. Those decisions could potentially harmonise the hourly rates for car repairs and, therefore, restrict competition by object. Given that the insurers conclude the agreement directly with that national association, the potential unlawfulness of the association’s decisions can, therefore, render the agreements between the insurer and the national association null and void.