Car sales:- What will change with the new EU regulation on cars?

Over the last several years, the way cars were distributed and sold was not completely free from competition. This explains why you would usually find only one brand of car from one single dealer. Much the same applies with respect to spare parts for your car and to getting it repaired.

This situation developed because in Europe, the car-making industry, unlike other industries, was protected from full exposure to competition. This situation has tended to favour the industry, less so the consumers.

After lengthy discussions, the Commission has now reviewed this situation and come out with a new regulation on the motor vehicle sector that introduces more competition without, however, going all the way. It did so in order to strike a better balance between industry and consumers without giving full victory to either side.

As a result, the Commission expects the conditions for competition to improve. In turn, it hopes that car prices, which still differ widely from one European country to another, will tend to converge but also to go down.

A key point in the new rules is that car manufacturers will lose some of their power in deciding how, where, who and at what price cars are sold throughout Europe. In turn, dealers (which are the companies that actually sell the cars) will obtain more independence from the car manufacturers which supply them with cars. Although things such as "exclusive distribution" and "selective distribution" will remain, there will be stricter controls to ensure that these do not lead to competition being stifled out.

More concretely, consumers should be able to buy different brands of cars from the same dealer and not just different models of the same brand. So far, dealers had not been able to sell different brands, except under very strict conditions which made it difficult or even commercially unattractive.

It will also be easier for consumers to shop around for the best price in other countries, either directly on their own or through the use of intermediaries. Intermediaries are persons who basically shop around in other countries for good deals and avoid consumers the hassle of having to do it themselves.

So far the use of intermediaries had been greatly discouraged by manufacturers. But now, this type of activity will become much freer at a clear advantage of consumers. Intermediaries will only need to produce a mandate from consumers on whose behalf they are acting in order to ensure that they get served from dealers outside their own country.

This will make it easier, for instance, for UK residents (where cars are expensive) to buy their right-hand drive cars in countries on the continent, such as Belgium, where prices are significantly cheaper.

The new rules also allow dealers to set up shop in other EU countries without any restrictions - something that until now, manufacturers could prevent. However, following pressure from the industry, this will only be possible after a transitional period that ends in 2005.

The rules do not go so far as to oblige manufacturers to sell to supermarkets or internet operators. However, this is not excluded if supermarkets make the grade and manufacturers agree to supply them. Equally, internet operators can also operate as intermediaries, helping consumers shop around for the best deal.

Nor do the rules affect car registration taxes - these are known to be very high in Malta.

So far as repairs are concerned, the new rules introduce some very important changes. It will be easier for dealers to shed off their responsibility over repairs.

So far, official dealers were obliged to carry out repairs. But this will no longer be necessary if repairs are subcontracted. Equally, the new rules enable mechanics to become "official repairers" and they cannot be refused if they meet the standards to join the official network. Moreover, if mechanics become official repairers, they may still repair other cars of different brands.

More importantly, however, the rules will, for the first time, give greater access to independent repairers (mechanics) to get the complete know-how relating to the repairs of particular cars without suffering any discrimination because they are not part of the "official network". This is very important because it means that any mechanic who wants to specialise on certain types of cars without being part of an official dealer can obtain the full technical information and training under the same conditions as official repairers.

For the consumer this means that it will be easier to get your car repaired at a mechanic of your choice rather than repair the car only at the repairs department of the official dealer. It will also give consumers who already use independent mechanics the peace of mind that the mechanic is up-to-date with latest technology relating to your car and is not fiddling around and second-guessing how your car should be repaired.

Much the same applies to spare parts where the new rules ensure that it will be easier for consumers to get a better choice between original spare parts supplied directly by the manufacturers or by other spare parts manufacturers and non-original (matching) spare parts supplied by others.

Until today, the consumer had been rather limited in choosing spare parts in Malta, even having to endure longish delays before getting a delivery of a part.

The new rules cannot in any way be seen as revolutionary and one should not expect as much. But they do take the car industry one step closer to free competition. They enter into force this October giving companies one year to adapt their existing contracts. As such they apply to the European Economic Area which includes the EU as well as Iceland, Norway and Liechtenstein.

But they are also of interest to Malta in the context of the imminent prospect of membership - although even without membership, Maltese official importers dealing with EU companies are usually offered standard contracts that apply in the EU market. These contracts should now reflect the new conditions introduced by these new EU rules.