Independent garages and the Motor Vehicle Block Exemption Regulation
http://www.parliament.uk/commons/lib/research/briefings/snbt-05060.pdf
Standard Note:
SN/BT/5060
Last updated:
5 May 2009
Author:
Louise Smith
Section
Business and Transport Section
Recent press reports have raised concern about a viable future for independent car garages that carry out servicing and need access to spare parts.
The concern relates to the expiration, in 2010, of the EC cars block exemption, (the European Commission Regulation No. 1400/2002. It exempts from EC competition rules, arrangements in the EU for the distribution of new cars and their subsequent servicing. It is often referred to as the "Motor Vehicle Block Exemption" or "BER". The Regulation essentially allows car manufacturers to create networks of selective and exclusive dealerships, provided that they do not contain any serious restrictions of competition and that they meet the other conditions laid down by the Regulation, such as giving authorised repairers (independent garages) access to technical information and spare parts.1 The Regulation is due to expire next year and there are differing views on whether it should be renewed or replaced and if so, what with. Independent garages have expressed concern that if the Regulation is not renewed, they will lose access to technical information and spare parts provided by the car manufacturers. The European Competition Commissioner has subsequently “guaranteed” that any new rules will not “make life harder” for independent garages.2
This note explains further the purpose of the Regulation, the proposed changes and sets out the European Commission and the Government’s views of the changes.
This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to address the specific circumstances of any particular individual. It should not be relied upon as being up to date; the law or policies may have changed since it was last updated; and it should not be relied upon as legal or professional advice or as a substitute for it. A suitably qualified professional should be consulted if specific advice or information is required.
This information is provided subject to our general terms and conditions which are available online or may be provided on request in hard copy. Authors are available to discuss the content of this briefing with Members and their staff, but not with the general public. 1 Department for Business, Enterprise and Regulatory Reform, Block Exemption for Cars Quick Facts [on 5 May 2009]
2 Neelie Kroes, European Commissioner for Competition Policy, Closing remarks at roundtable to discuss future of the Car Block Exemption, Speech 09/45, 9 February 2009
Contents
1 The Motor Vehicles Block Exemption Regulation 2
2 Proposed change 3
2.1 Independent garage concern 4
2.2 Government comment 4
2.3 EU Commission assurance 5
1
The Motor Vehicles Block Exemption Regulation
The EC cars block exemption, (the European Commission Regulation No. 1400/2002 (formerly Regulation No 1475/95)) is due to expire in 2010. It currently exempts from EC competition rules, arrangements in the EU for the distribution of new cars and their subsequent servicing. It is often referred to as the "Motor Vehicle Block Exemption" or "BER". The Regulation essentially allows car manufacturers to create networks of selective and exclusive dealerships, provided that they do not contain any serious restrictions of competition and that they meet the other conditions laid down by the Regulation, such as giving authorised repairers (independent garages) access to technical information and spare parts.3 The Regulations are due to expire next year and there are differing views on whether they should renewed or replaced and if so, what with. Independent garages have expressed concern that if the Regulation is not renewed, they will lose access to technical information and spare parts provided by the car manufacturers.4
The explanatory brochure to the Regulation summarises its original general purpose:
The […] Regulation is designed to increase competition and bring tangible benefits to European consumers. It opens the way to greater use of new distribution techniques, such as Internet sales and multi-brand dealerships. It will lead to more competition between dealers, make cross-border purchases of new vehicles significantly easier, and lead to greater price competition. Car owners will have more opportunity to choose where they have repair and maintenance carried out and what spare parts are used.5
The Regulations became law in October 2002, but the majority of the provisions did not come fully into effect until October 2003 following a one year transitional period. In relation to car repairers the aims of the regulations were:
- to allow manufacturers to set selection criteria for authorised repairers, so long as these do not prevent the exercise of any of the rights enshrined in the Regulation;
– to ensure that if a supplier of new motor vehicles sets qualitative criteria for the authorised repairers belonging to its network, all operators who fulfil those criteria can join the network. This approach will enhance competition between authorised repairers by making sure that operators with the necessary technical expertise can establish themselves wherever there is a business opportunity; 3 Department for Business, Enterprise and Regulatory Reform, Block Exemption for Cars Quick Facts [on 5 May 2009]
4 See for example, “EU ruling will mean higher car repair bills”, The Daily Telegraph, 10 September 2008
5 Commission Regulations (EC) No 1400/2002 of 31 July 2002, Explanatory Brochure, p3 2
– to improve authorised repairers’ access to spare parts which compete with parts sold by the vehicle manufacturer;
– to preserve and reinforce the competitive position of independent repairers; these currently carry out on average about 50% of all repairs on motor cars. The Regulation improves their position by reinforcing their ability to gain access to spare parts and technical information in line with technical advances, especially in the field of electronic devices and diagnostic equipment. The access right is also extended to training and to all types of tools since access to all four of these elements is necessary if an operator is to be able to provide after sales services. A desirable and important side effect of this wider access is to encourage improvement in independent repairers’ technical skills, to the benefit of road safety and consumers in general.6
This last aim has been particularly relevant to independent garages and their ability to carry out repairs and get access to the appropriate spare parts.
2
Proposed change
On 28 May 2008 the European Commission adopted an evaluation report on the operation of regulation 1400/2002.7 The report suggested the removal of the block exemption regulations. On vehicle repair it concluded:
On the repair and maintenance markets, independent repairers now have better access to technical information; thanks to Commission enforcement action. Meanwhile, the number of authorised repair outlets has increased, because - in line with general competition policy - manufacturers (whose networks have high market shares as regards the repair of their vehicles) must let everyone into their networks providing that quality criteria are met. Suppliers of spare parts have maintained their competitive position vis-à-vis the vehicle manufacturers' own spare parts distribution channels.8
The report suggested that future regulation may be unnecessary because of other regulations in overlapping policy areas. It suggested that any future regime should be less complex:
Other provisions, such as those obliging manufacturers to give independent repairers access to technical information, have been effective, but will in the future be superseded by rules in other EU policy areas (namely the Council Regulation on vehicle emissions 715/2007). The Report therefore suggests that car owners might benefit from improvements in competition if less complex rules were to apply to the sector. The form and content of the future regime will be decided in the next stage of the review process.9
No decision has yet been formally taken on how the motor vehicle repair market will be regulated after May 2010.
6 Commission Regulations (EC) No 1400/2002 of 31 July 2002, Explanatory Brochure, p14
7 Commission Evaluation Report on the Operation of Regulation (EC) N° 1400/2002 concerning Motor Vehicle Distribution And Servicing, May 2008
8 European Commission press release, Antitrust: Commission report on car block exemption shows that competition has improved, 28 May 2008
9 Europa Press Release, Antitrust: Commission report on car block exemption shows that competition has improved, 28 May 2008 3
2.1
Independent garage concern
The suggestion that the block exemption regulations might be removed has led to reports in the press that independent garages will no longer get access to spare parts.10 The campaign group, the Right to Repair Campaign (R2RC), was launched in October 2007 by independent (i.e. non-franchised) car repairers. They argue for the maintenance aspects of the block exemption to continue, and have called for the parts of it that have proved to work less well to be strengthened.11 In their response to the evaluation report R2RC said:
The members of the Right to Repair Campaign disagree with the Commission’s conclusion that a more effects-based approach and less regulation would lead to better results for consumers. Rather, more legal certainty would better ensure the coherent application of Community competition law throughout the EU. It would be detrimental for all aftermarket operators and consumers alike to remove rules which provide legal certainty and which have recently established a frame for effective competition in the automotive sector.
AIRC, CECRA, EGEA, FIA and FIGIEFA12 are of the opinion that if the automotive sector had to rely, as suggested by the European Commission, on many scattered legal instruments, which are still under revision, not even in place or the scope of which is limited, this would create a legal patchwork. Such a legal patchwork would however not represent a satisfactory framework for competition in the markets for new vehicles, spare parts, tools, servicing and repair, and ultimately would threaten consumers’ freedom to purchase their vehicles wherever they like and to have them maintained, serviced and repaired in the workshop of their choice.13
In addition to this, R2RC are not satisfied with the existing regulation and point to what they see as problems or loopholes:
By accident or design vehicles are more complex and access to information is being restricted in most cases by the price that the vehicle assemblers charge therefore negating the benefits that BER was intended to bring. In addition using a loophole that restricts access to technical information in certain circumstances it is becoming increasingly necessary for vehicles to be sent to the dealership for ‘recommissioning’ even if the repair has been successfully completed by the independent repairer. The effect of this on the independent repair industry is that inevitably there will be fewer vehicles that they are able to repair and if the vehicle assemblers succeed in their aims the independents will be fewer if any exist at all. The effect on the consumer will be the reduction of choice on where the vehicle is repaired and an increase in cost of repair.14
2.2
Government comment
The European Commission asked for comments on the Evaluation report by 31 July 2008, these have been published on the Commission website.15 The Department for Business, Enterprise and Regulatory Reform comments on the Evaluation are also published. In respect of after-sales servicing, the Government said: 10 “EU ruling will mean higher car repair bills” The Daily Telegraph 10 September 2008
11 Right to Repair UK website, http://www.r2rc.co.uk/home/content/view/1/97/ or Right to Repair EU website
12 AIRC – Association Internationale des Réparateurs en Carrosserie; EGEA – European Garage Equipment Association; CECRA – European Council for Motor Trade and Repairs; FIA – Fédération Internationale de l’Automobile; FIGIEFA – International Federation of Automotive Aftermarket Distributors
13 R2RC EU press release, Sector specific rules are needed to ensure fair and effective competition!, 2 June 2008
14 Right to Repair Campaign website, Welcome to R2RC.co.uk - Trade [on 5 May 2009]
15 European Commission website, Competition: Motor Vehicles – What’s New? [on 5 May 2009]
4
To cover vehicles pre-dating the coming into force of alternative measures for new models in 2009, there needs to be a specific requirement for vehicle manufacturers to provide repair and recommissioning information.
This information should be supplied in a usable standard format. Stakeholders indicate that some manufacturers, despite the [Motor Vehicle Block Regulations] MVBR, either do not supply technical information, provide incomplete information or alternatively supply reams of documentation which makes it very difficult for the requesting garage to isolate the relevant section. Further, in some cases, there appears to be an IP based restriction on how this information can be used, passed on or stored for future use.
Part of the rationale for the withdrawal of the [Motor Vehicle Block Exemption] MVBE is that the lack of cases or problems notified to the European Commission and to national competition authorities indicates the market is relatively competitive. Detailed discussion with stakeholders indicates this is not necessarily the case, particularly in the area of access to information. Businesses are reluctant, even large concerns that may have the economic resource, to bring an action against vehicle manufacturers when they must maintain a close relationship with these same manufacturers for other significant parts of their business. This is especially true of small and medium sized repair and maintenance businesses which simply do not have the resource, either economic or legal, to make a complaint that on current timeframes, might be two to three years before hearing.
Stakeholders have raised the particular concern that existing databases, to which they have access, holding vehicle manufacturers technical information will either be discontinued or allowed to lapse by not being updated. The potential consumer detriment in this particular area is large and the UK sees this as a priority issue with consequences for the longer-term repair and maintenance of the vehicle parc by independent repairers.16
Although the UK Government supports in general the Commission’s view that the Regulations should not be renewed, it concedes that unless the issues set out above can be addressed by other means, the block exemption might have to remain in “some reduced form”.17
2.3
EU Commission assurance
On 9 February 2009 European Commissioner for Competition Neelie Kroes held an informal roundtable discussion on the future of the car block exemption regulations. Although no decisions were taken at the discussion, the Commissioner recognised the diversity of views that existed. In her closing remarks she stated that she would guarantee that any changes to the rules would not make life harder for independent repairers:
How do we ensure that independent workshops can remain viable? You will have seen already our distrust of the tying or bundling of products and information in other sectors like technology – we will not allow such problems to arise in the motor vehicle industry. This issue is at the heart of the concerns of many motorists about the review of the block exemption. I understand the concern, but I want to give motorists a cast-iron guarantee: I will not agree to any change to the rules that will make life harder for independent repairers. Access to technical information and alternative brands of spare parts will continue to be necessary preconditions for such workshops to repair these 16 BERR, UK Initial Reaction to European Commission Evaluation Report In Respect Of The Motor Vehicle Block Exemption (MVBE), 25 July 2008
17 BERR, UK Initial Reaction to European Commission Evaluation Report In Respect Of The Motor Vehicle Block Exemption (MVBE), 25 July 2008, p2
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older vehicles, so that they are driven safely, and meet vehicle emissions standards. I am very much in favour of joined-up policy in this area.18
A press release reporting the discussion explained that the next steps would be for the Commission to “now design our future policy to take account of the contributions from stakeholders, with a view to releasing a Commission Communication on the subject.” 19 18 Neelie Kroes, European Commissioner for Competition Policy, Closing remarks at roundtable to discuss future of the Car Block Exemption, Speech 09/45, 9 February 2009
19 European Commission press release, Antitrust: Commissioner Kroes hosts roundtable to discuss future of the Car Block Exemption Regulation, MEMO/09/57, 9 February 2009
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