Automotive Block Exemptions
Tom Maple, head of the FSP Automotive Team, highlights important changes to the Block Exemption Regulations and explains how they will affect the automotive industry.
The automotive industry has been the subject of Block Exemption Regulations (BERs) since 1985. The effect of these BERs has been to limit the prohibition on cartels and other agreements which would otherwise disrupt free competition. This is all set to change on 1 June 2013.
Regulation 330/2010 comes into force in relation to the automotive industry on 1 June 2013. Whilst it is of general application to all vertical agreements (that is, agreements between parties at different levels of the supply chain) and is not specific to the automotive industry, it is likely to have a significant impact on the relationship between manufacturers and dealers.
Whilst Regulation 330/2010 affects the purchase, sale and resale of new motor vehicles, a sector-specific BER still applies to the After Sales Market, namely Regulation 461/2010.
Effect of Regulation 330/2010 upon the automotive industry
Provided the market share of the manufacturer and dealer/distributor is below 30% in their respective markets (under the old regime only the manufacturer’s market share was relevant) manufacturers/OEMs may, from 1 June 2013:
- maintain a selective or exclusive distribution network – accordingly they may impose qualitative and/or quantitative standards on its dealerships;
- restrict its dealer from making active sales into a territory or customer group reserved to another dealer – however, it must not restrict passive sales;
- prohibit the opening of additional dealerships by allowing a ‘location clause’ – that is, as long as the market share threshold of 30% is met, OEMs may impose clauses preventing dealers from opening new branches;
- insist on single-brand showrooms at dealerships – if a dealer wants to be a multi brand site, the OEM can allow it, but is entitled to demand that the dealer reaches higher sales percentages or puts extra investment in to distinguish their brand from the others;
- dealer protection for contract breaches is no longer incorporated;
- any non-compete obligations must be limited to 5 years. At that point, a dealer must be free to change brands or to take another brand if they want to;
- oblige dealers to provide After Sales Services.
It should be noted that, whilst some significant changes are coming in, manufacturers are still prohibited from fixing retail prices.
Effect of Regulation 461/2010 – the After-Sales Market
Where networks of authorised repairers and parts distributors have a national market share of in excess of 30%, standard EU competition rules apply. However, where the share is less than 30%, the effect of the Block Exemption is as follows:
- Any repairer who meets the selective criteria can become an authorised repairer. Thus manufacturers will be able to set standards for licensed repairers (although they are not permitted to set arbitrary limits on the number of licensed repair outlets that can operate in an EU member state).
- A manufacturer must not prevent:
a supplier of spare parts, repair tools or diagnostic or other equipment from selling those goods or services to authorised or independent distributors or to authorised or independent repairers or end users;
members of a selective distribution system selling spare parts to independents who use these spare parts for the repair and maintenance of motor vehicles; or
a supplier of components for the assembly of motor vehicles from placing its trade mark or logo in a visible manner on the relevant components or on spare parts.
- Independent and authorised repairers must have equal access to technical information and spare parts;
- A warranty will not expire if servicing or maintenance has been performed by an independent repairer;
- Manufacturers cannot impose a condition preventing consumers from having their vehicles repaired with alternative, independent, parts;
- OEMs cannot insist on repairers distributing cars.
Where the market shares of both the supplier and distributor are below 30% of their respective markets, a number of changes will come into effect on 1 June 2013 and manufacturers and traders alike must be aware of the effects of these changes (which to a large extent take a more lenient approach than previously towards manufacturers).