Fabian Demicoli

Commission adopts revised competition rules for motor vehicle distribution and repair

 The European Commission has adopted new competition rules for agreements between vehicle manufacturers and their authorised dealers, repairers and spare parts distributors. The new rules will increase competition in the market for repair and maintenance by improving access to technical information needed for the repairs and by making it easier to use alternative spare parts. They will allow the Commission to tackle manufacturers' abuse of warranties when they request that cars are serviced only in authorised garages. The new rules will also reduce distribution costs for new cars by eliminating overly restrictive rules. 

The new rules introduce a 30% market share threshold above which agreements between car manufacturers and authorised repairers will no longer be block exempted, aligning the rules with the general framework (Vertical restraints block exemption Regulation 330/2010 adopted on 20 April, see IP/10/445 and MEMO/10/138). This will make it easier for the Commission to tackle possible abuses to the detriment of consumers, such as the refusal to grant independent repairers access to technical information. It will increase competition between authorised and independent repairers.

The new rules will strengthen repairers' access to alternative spare parts which can represent a big share of the repair bills. Car manufacturers will no longer be able to make the warranty conditional on having the oil changed or other car services only in authorised garages. Of course, manufacturers may request repairs covered by the warranty – and paid for by the manufacturer – be carried out within the authorised network. All this is important for consumers because repair bills account for an estimated 40% of the total cost of owning a car and costs have been rising in recent years.

Regarding the distribution of cars, the Commission's evaluation has shown that car sales markets are highly competitive. Margins for vehicle manufacturers and dealers are slim, and for several years production over-capacities and technological improvement have led to consumer benefits in terms of falling real car prices and increasing choice. The financial crisis has added to the downward pressure on prices.

In this context, the existing rules are clearly overly complicated and restrictive and have had the indirect effect of driving up distribution costs, which make up on average 30% of the price of a new car. The Commission therefore proposes to simplify these rules and treat the distribution of cars like any other market. The current distribution model will continue to be exempted in most cases, but certain sector-specific clauses which have proven ineffective or counter-productive will not be carried forward. The new regime will give carmakers more flexibility to organise diverse networks in which multi-brand dealers co-exist alongside dealers fully committed to promoting the brands of a single manufacturer.

The new rules will come into force on 1 June 2010 as concerns the repair and maintenance markets, and on 1 June 2013 with regard to the vehicle sales markets and will be valid until 31 May 2023. The Commission will monitor developments and take appropriate remedial action if it detects problematic behaviour or changed competitive conditions, as it has done in the past.

Background

Block Exemption Regulations exempt categories of agreements that comply with their provisions from the EU ban on restrictive business practices (Article 101(1) of the Treaty on the Functioning of the European Union). The old rules for the car sector (Regulation 1400/2002) were adopted in 2002 and expire on 31 May. Before adopting the new rules the Commission conducted an extensive and lengthy consultation process.

In the past few years, the Commission has brought four cases against DaimlerChrysler, Fiat, Toyota and GM to ensure that they allow independent garages adequate access to repair information (see IP/07/1332). However, other potential problems involve access to spare parts and the refusal to honour warranties if consumers have work done outside the authorised repair networks. The Guidelines and block exemption adopted today give detailed clarification for stakeholders on how the Commission intends to apply the rules in these areas.

What we can do for you

INFORMATION POINT

BUSINESS SERVICES

MEMBERSHIP BENEFITS

LOCAL ISSUES & LEGISLATION

B2B NETWORKING EVENTS

LEGAL ADVICE

FUNDING ASSISTANCE

COURSES

BECOME A MEMBER

The Malta Chamber of SMEs represents over 7,000 members from over 90 different sectors which in their majority are either small or medium sized companies, and such issues like the one we're experiencing right now, it's important to be united. Malta Chamber of SMEs offers a number of different services tailored to its members' individual requirements' and necessities. These range from general services offered to all members to more individual & bespoke services catered for specific requirements.

A membership with Malta Chamber of SMEs will guarantee that you are constantly updated and informed with different opportunities which will directly benefit your business and help you grow. It also entails you to a number of services which in their majority are free of charge and offered exclusively to its members (in their majority all free of charge).