Court ruling is customer's gain

The January 2008 finding against Calor Gas Limited has already had a massive effect on the lives of Defendants Express Fuels and D Jamieson Limited, but the far reaching implications of the findings will have Cylinder Dealers all
over Scotland sitting up and taking notice.The Court held that the effect of the exclusivity provisions and post termination restrictions of Calor Gas’ Agreements were
in breach of European Competition Law and, as such, not enforceable. Calor’s traditional position has been that their former Dealers are not permitted to handle the company’s cylinders once they are no longer in partnership, even to
exchange them for the new Supplier’s cylinders. However, the court’s decision leaves this practice seriously under threat. Dealers that wished to leave Calor and take their gas supplies from a competitor were always concerned that they would be unable to maintain the whole of their customer base going forward. With the majority of their regular customers possessing Calor cylinders, customers
needing a new cylinder would naturally wish to exchange their empty cylinders for full ones, irrespective of branding. With Calor preventing the Dealer from even
touching their cylinders, this would put them in an almost impossible position -either refuse to take the empty Calor
cylinder and quite possibly lose a customer, or else take the cylinder in and risk facing the full wrath of Calor Gas and their legal team.

The Defendants found themselves in just such a position in 2004 when they chose to leave Calor for Flogas UK Ltd. After making the difficult decision to acceptempty Calor cylinders in exchange for Flogas cylinders in order to protect their business, they soon realised how seriously Calor viewed the situation when they found themselves facing a court case. With the support of their new supplier
Flogas behind them, they decided not to back down but to fight the court case, feeling justified in their position.

Much of the trial was taken up with the question of Calor Gas’ post handling restriction; it was accepted early on that
Calor had a very real “commercial interest in enforcing the provision” in order to encourage customers to visit another Calor outlet as opposed to the former Calor Dealer who they had previously dealt with. Equally it was understood by the judge that the former Dealer would have a commercial interest in breaching this restriction in order not to lose customers. It was ultimately decided that due to the market share of over 50% that Calor had and the fact that the judge found that the restrictive clause’s main objective was to protect Calor’s commercial interests, these post termination handling restrictions breached Article 81 of the EC Treatyamounting to a significant restriction oncompetition in a mature market.

Throughout the court case, and indeed to this day, Calor maintained that that they have the absolute right to stipulate who handles their property. Although their
proprietary rights over their cylinders were never questioned, the judge did hold that Calor’s objectives in maintaining these rights could be achieved by allowing a
former dealer to obtain possession of the cylinders and return them to Calor.

Indeed, it was held that the alternative risked the potential non-return, abandonment and theft of cylinders, none of which were desirable. It was held that safety considerations favoured allowing experienced individuals,
including competitor Dealers, to take possession of them, given that the Dealer then uses reasonable measures to return the cylinder to Calor.

2 Apr 2008