16 COMPETITION IN MOTOR VEHICLE
DISTRIBUTION AND SERVICING
(30856)
12571/09
+ ADDS 1-2
COM(09) 388
| Commission Communication: The future competition law framework applicable to the motor vehicle sector
|
| Legal base | —
|
| Document originated | 22 July 2009
|
| Deposited in Parliament |
13 August 2009 |
| Department | Business, Innovation and Skills
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| Basis of consideration |
EM of 28 August 2009 |
| Previous Committee Report |
None, but see footnote 58 |
| To be discussed in Council
| No date set |
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
16.1 Article 81 of the Treaty generally prohibits all agreements,
decisions, or practices between undertakings, which may affect
trade between Member States and which have as their object or
effect the prevention, restriction or distortion of competition
within the single market. However, Article 81(3) allows for practices
which would otherwise be prohibited where they contribute to improving
the production or distribution of goods, or to promoting technical
or economic progress, while allowing consumers a fair share of
the resulting benefits; and which do not, in turn, impose restrictions
not essential to the attainment of those objectives or afford
undertakings the possibility of eliminating competition in respect
of a substantial part of the products in question.
16.2 Using the powers granted to it by Council Regulation No 19/65/EC,[55]
the Commission has enacted its own measures on how Article 81(3)
should be applied to vertical agreements, these being set out
currently in Commission Regulation (EC) No 2790/1999.[56]
This is based on the proposition that the likelihood of any efficiency-enhancing
effect outweighing any anti-competitive effects would depend upon
the degree of market power held by the undertakings concerned,
and that there should be a presumption that such advantages would
arise where the supplier has a share of less than 30% of the relevant
market. However, irrespective of the market share involved, the
Regulation does not cover certain types of severely anti-competitive
(hardcore) restraints, including those with minimum or fixed resale
prices or which restrict the territory into which, or the customers
to whom, a distributor or repairer may sell the goods or services.
It also places a limit on the duration within which certain types
are agreement can be exempt.
16.3 In addition, there are also longstanding and
specific exemptions under Article 81(3) in respect of the distribution
and servicing of motor vehicles. These were previously set out
in Regulation 1475/95[57]
(commonly known as the "cars block exemption"), which
created a special regime for distribution and servicing, allowing
car manufacturers to operate selective and exclusive distribution
systems, subject to certain restrictions. That exemption expired
at the end of September 2002, and the Commission therefore put
forward in November 2000 an evaluation[58]
of the Regulation, particularly as regards the impact of the exempted
system of distribution on the price differentials of motor vehicles
between different Member States, and on the quality of service
to final consumers. (This had been preceded in April 2000 by the
publication of a report by the UK Competition Commission on the
supply of new motor cars within the UK, which focussed mainly
on the high prices for new cars sold in this country, but which
also evaluated many aspects of Regulation 1475/95, concluding
that it permitted restrictive practices which worked against the
public interest, and should be changed, or at least allowed to
expire.)
16.4 Following subsequent discussion, the Commission
adopted the current Regulation 1400/2002,[59]
which introduced stricter rules on the purchase or sale of new
vehicles, spare parts, and repair and maintenance services. In
particular, it was based on a presumption that the likelihood
of any efficiency-enhancing effect outweighing any anti-competitive
effects would arise where the supplier has a market share of up
to 30% for the distribution of new vehicles and spares, or for
after sales services involving authorised repairers provided with
the relevant equipment and training, and up to 40% where quantitative
selective distribution is used for sales of new vehicles. More
specifically, the main objectives of this Regulation are summarised
by the Commission as:
- preventing foreclosure of competing
vehicle manufacturers and safeguarding their access to the market;
- ensuring competition between dealers of the same
brand;
- enabling independent repairers to compete effectively
with the manufacturers' networks of authorised repairers by ensuring
undistorted access to technical repair information as well as
to original and matching quality spare parts by all aftermarket
operators;
- protecting competition between authorised repairers
by ensuring access to the manufacturers networks on the basis
of qualitative standards;
- protecting competition on the spare parts markets
by preventing restrictions inhibiting spare part producers' access
to the aftermarket;
- preserving the deterrent effect of Article 81
so as to avoid the block exemption being used by manufacturers
to inhibit independent pro-competitive behaviour by authorised
dealers and repairers.
The current document
16.5 That Regulation is due to expire in May 2010,
and in this document, the Commission has sought to analyse its
effect, and to suggest the steps which should now be taken, where
it identified four broad policy options, namely:
- prolonging the current Regulation;
- letting the Regulation lapse and allowing the
general block exemption Regulation 2790/1999[60]
to apply to the motor vehicle sector;
- adopting sector specific provisions in the form
of guidelines accompanying the general block exemption;
- adopting sector specific provisions in the form
of a block exemption regulation focussing on restrictions of competition
in the aftermarket and complementing the provisions of the general
block exemption.
In doing so, it looked in some depth at a number
of specific issues, notably preventing the foreclosure of competing
vehicle manufacturers, protecting intra-brand competition, protecting
competition between independent and authorised repairers, ensuring
effective competition within manufacturers' networks of authorised
repairers, and preventing the foreclosure of spare parts producers
in the automotive aftermarkets. In addition, it says that it has
taken into account the current difficulties facing the motor industry
as a result of the steep fall in demand resulting from the economic
crisis, and that it wishes to avoid imposing constraints which
are not justified in terms of protecting competition. In particular,
it says that a basic distinction should be drawn between markets
for the sale of new vehicles and those for repair and maintenance
services and/or the distribution of spare parts.
16.6 As regards the sale of new vehicles, the Commission
says that it has not found indications of significant competition
shortcomings, and that the current block exemption should be maintained
until 2013, with motor vehicle distribution agreements benefiting
thereafter from the general block exemption on vertical agreements,
subject to specific guidance being provided on how the general
principles would apply in certain areas. However, it concludes
that competition is less intense for repair and maintenance services
and/or spare parts distribution due to their brand-specific nature.
Consequently, it considers that such agreements should be subject
to the general block exemption, complemented by either sector-specific
guidelines or a focussed block exemption regulation (or a combination
of the two). It suggests that this would address the core aftermarket
issue of ensuring the access of independent garages to technical
information and spare parts, and tackle new issues which have
become more prominent in recent years, such as the use of warranties
aimed at excluding independent repairers.
The Government's view
16.7 In his Explanatory Memorandum of 28 August 2008,
the Minister for Further Education, Skills, Apprenticeships and
Consumer affairs at the Department for Business, Innovation and
Skills (Mr Kevin Brennan) says that the UK has already expressed
concerns over the access to information, particularly technical
information, including specifications and codes for the independent
aftermarket, and has made several representations to the Commission
on the subject (as have most other Member States). He suggests
that the current proposals appear to take account of these concerns,
and says that, after its public consultation ends on 25 September
2009, the Commission is aiming to produce formal proposals by
the end of the year.
Conclusion
16.8 This is a detailed document, covering an
important area of policy, and, for that reason, we think it right
to draw to the attention of the House the Commission's thinking
on the measures which will be needed, particularly in maintaining
competition for repair and maintenance services and the distribution
of spare parts. However, since the Commission's consultation period
has now finished, and it has said that it will be producing formal
proposals shortly, we are clearing it.
55 OJ No. 36, 6.3.65, p.533. Back
56
OJ No. L.336, 29.12.99, p.21 Back
57
OJ No. L.145, 29.6.95, p.25. Back
58
(21898) 13889/00: see HC 28-iii (2000-01), chapter 4 (17 January
2001). Back
59
OJ No. L.203, 1.8.02, p.30. Back
60
Like Commission Regulation 1400/2002, this is due to expire in
May 2010, and the Commission is understood to be preparing a further
Regulation. Back
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