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...