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SJ Berwin's Community Week: A Weekly Summary Of Competition Law And Policy Developments Issue 433 - 24 July 2009.

Article Excerpt
EU DEVELOPMENTS

New legal framework proposed for motor vehicle distribution and servicing agreements

The European Commission ("Commission") has set out its proposals for a new legal framework in relation to motor vehicle distribution agreements and repair and maintenance agreements. The current Block Exemption Regulation expires on 31 May 2010 and the Commission has been assessing how this has performed and whether there is a need for reform.

Block exemptions create safe harbours for categories of agreements, relieving companies from the need to individually analyse whether agreements comply with Article 81 EC. The motor vehicle sector, which includes passenger cars and commercial vehicles, has been the subject of specific block exemptions since the mid 1980s.

Overall, the Commission considers that the objectives underlying the current block exemption remain valid however a distinction should be drawn between the markets for (i) the sale of new vehicles and (ii) repair and maintenance and spare parts.

No significant competition shortcomings have been found in the market for the sale of new vehicles. To the contrary, this market is identified by structural overcapacity and falling prices. The Commission is therefore keen not to impose disproportionate regulatory constraints. In light of this, and to align its approach, the Commission proposes that motor vehicle distribution agreements should be covered by the general block exemption for vertical agreements (which is also currently under review).

The specific motor vehicle block exemption would therefore be phased out; however, in order for a smooth transition, it is proposed that the current block exemption would be extended to 31 May 2013 as regards new vehicles. Specific sectoral guidance would also be provided.

The after sales market, which accounts for some 40% of consumer expenditure on cars, was found to be less competitive largely due to its brand-specific nature. Again the Commission intends to apply the new general vertical competition rules to such agreements; however this will be in conjunction with sector specific guidelines and/or an additional more focused sectoral block exemption. Such specific provisions are considered necessary in order to address a number of problematic areas in the sector; such as ensuring that independent repairers have access to technical information and spare parts (in order to ensure that they can compete with the authorised networks). It would also tackle the misuse of warranties aimed at excluding independent repairers. This part of the new regime is proposed to apply from 31 May 2010.

Interested parties have until 25 September 2009 to submit observations.

Commission imposes €61 million...

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