Motor Vehicle Distributors

[back to previous text]

Mr. Page: I can assure my hon. Friend that she will receive—not from me, but from others who read this debate—details of margins and retained margins, particularly on new cars from marque dealers. In fact, dealers like to sell used cars, because they make more money from the people who buy them.

Miss McIntosh: To assist such people when they read the debate, I would pre-empt any comment they wish to make by referring them to table 23 on page 112 of exhibit D, the car price differentials. That is an apolitical study that was made over a considerable time, probably at considerable expense. It should be recognised that UK margins, on average, are down from 17.4 per cent. in 1993 to 12.7 per cent. in 1999. However, they are still incredibly high. I urge the Minister to give some thought to what the impact would be of removing them. Would it be a severe loss to the dealer, or a pecuniary benefit to the consumer?

I have welcomed this morning's debate. I support my hon. Friend the Member for Christchurch in saying that the motion that the Minister moved at no great length this morning is particularly woolly. I hope that he will take the opportunity to give us an idea of where we go from here.

12.8 pm

The Minister for Competition and Consumer Affairs (Dr. Kim Howells): We have had a very valuable and interesting debate. Many important points have been raised and I repeat my thanks for the opportunity that the debate has offered to explore the views of hon. Members on the important question of the future of car distribution in Europe.

I shall try to deal with matters in the order in which they were raised. The hon. Member for South-West Hertfordshire gave us the benefit of his long experience in this area. I should like to hear what evidence he has for his assertion that margins are about 3 per cent., compared with the report's claim that they are nearer to 10 per cent.

Mr. Page: I have now seen the reason: that is the gross margin given by the manufacturer; it is not the margin that the dealers achieve, because they give discounts on every car.

Dr. Howells: I thank the hon. Gentleman. That has clarified the position for me. I made it clear at the outset that the Government do not yet have a fully settled position on the dealer regime that could replace the present block exemption when it expires at the end of September next year. With his usual vigour and insight, the hon. Member for Christchurch has said that we should have one, and I agree with him; of course we should, and we will. However, I put it to him, without the usual cliches or trying to score political points, that we have moved quickly. I know that I was worried about the matter when first appointed to this job two and a half years ago. As the hon. Gentleman knows better than I, reference to the Office of Fair Trading and then to the Competition Commission takes a long time. We had some most valuable input from the Select Committee, which has sharpened our focus a great deal.

Let me explain the timetable to the hon. Member for Christchurch. He will know that the Commission has the lead on changes to the block exemption. I assure him that we will be in regular discussion with the Commission during this year; I understand that it will issue its proposals in the autumn, which means that, as the hon. Gentleman said, we must move fast and be clear exactly what we want the successor regime model to be. I understand that the Commission's proposals will be made public later this year; we can then all take part in a better informed debate.

Mr. Chope: The Minister highlights that important landmark. I hope that he agrees that what is also important is that the Government are able to influence the Commission before it makes its proposals in the autumn. Will he let us know exactly what is happening to that end?

Dr. Howells: We will certainly be forthright and clear in what we tell the Commission. I have tried to suggest to the Committee that I see little virtue in the continuation of the block exemption, but I cannot accept that it has no redeeming features—those on safety, for example, although they need not be part of a block exemption, are important. Safety is crucial for arrangements that affect after-sales and servicing. It is essential that nothing in the successor regime compromises safety. To use a cliche, that is a bottom line beneath which we cannot go.

On the other hand, it is not clear that we require the current limitations on competition in their entirety in order to address safety issues—the point that the hon. Member for Christchurch and my hon. Friends have made. There is no good reason to deny the independent repair sector the information, parts and equipment that it needs to meet its customers' requirements. Customers have the right to choose where to have their car serviced and to be assured that their chosen garage will have access to the parts, equipment and information required on fair terms. That must be guaranteed.

On after-sales servicing, the review concludes that, although there are no major problems with the honouring of warranties of cars bought from local dealers, manufacturers have not always informed their dealer networks across the European Union that they are obliged to honour warranties on cars purchased in another member state. That is important. After-sales services provided by dealers do not always meet consumer expectations, although they are often more expensive than those provided by independent repairers. The review also notes that competition in the area is generally confined to the period after the expiry of the warranty, and argues that the so-called natural link between sales and servicing, which was central to the present system, seems no longer to exist. There is no good reason to deny the independent repair sector the information, parts and equipment that it needs to meet its customers' requirements.

My hon. Friend the Member for Upminster (Mr. Darvill) stressed the need for a well-managed transition from the present regime to a properly and fairly regulated successor regime, which will emphasise safety and allow increased and vigorous competition. That is my view too. We should study the situation carefully but quickly, as the hon. Member for Christchurch reminded us. September 2002 sounds distant, but it is not. It will arrive like an express train.

I am sure that my hon. Friend the Member for Derby, North (Mr. Laxton) and the hon. Member for Christchurch, who moved the amendment, will be overjoyed to learn that the Government have no problem in accepting it. It sharpens the motion and is a good indicator of our thinking. The Committee will know that it is customary merely to take note of reports such as the one that we have been discussing. However, I am happy to accept the amendment because it reflects the Government's intentions.

This morning's Committee sitting, together with the evidence that we have provided and the determination shown by the Government in their work with the Office of Fair Trading and the Competition Commission, signal clearly to the European Commission that we mean business. The Commission's response so far, and especially the response of Mario Monti, conveys a welcome sense that they share our worries about the impact on European consumers of the present regime. We look to them to present proposals for a consumer-friendly successor regime. I hear with alarm hon. Members' reports of the tentative response that they encountered in Brussels. It is important that the Commission should realise that the world is changing fast. Consumers' aspirations and demands are changing quickly. A failure by the new regime to embrace those new demands and aspirations will be to the detriment of consumers and the industry in Europe.

Question, That the amendment be made, put and agreed to.

Main Question, as amended, agreed to.


    That the Committee takes note of European Union Document No. 13889/00, a Commission report on the evaluation of Regulation (EC) No. 1475/95 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements; notes its conclusion that the ``natural link'' between sales and after-sales service seems no longer to exist; notes further its conclusions that the objective of increasing the commercial independence of dealers has been achieved ``to only a limited extent'', that independent repairers are being denied access to technical information, and that they offer services at least as good and generally cheaper than dealers; notes further that car buyers still face difficulties when they try to purchase new vehicles in another member state; and, in view of the Commission's clear finding that the justifications advanced in 1995 for the block exemption are no longer valid, calls on the European Commission, in line with the views of the UK Competition Commission, to allow the block exemption to expire in September 2002.'.

        Committee rose at eighteen minutes past Twelve o'clock.

The following Members attended the Committee:
O'Brien Mr. Bill (Chairman)
Borrow, Mr.
Darvill, Mr.
Henderson, Mr. Ivan
Loughton, Mr.
McIntosh, Miss
Wright, Mr. Anthony D.

The following also attended, pursuant to Standing Order No. 119(5):
Chope, Mr. Christopher (Christchurch)
Laxton, Mr. Bob (Derby, North)
Flint, Caroline (Don Valley)
McNulty, Mr. Tony (Harrow, East)
Howells, Dr. Kim (Minister for Competition and Consumer Affairs)
Page, Mr. Richard (South-West Hertfordshire)

Previous Contents

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2001
Prepared 7 March 2001