An overhaul of the legal regime which regulates competition within the automotive industry is in the pipeline. With the current applicable block exemption bound to expire in around five months' time, the European Commission has set out new rules which will in the near future regulate competition in Europe in so far as this industry is concerned.
Distribution agreements entered into between car manufacturers and distributors have to date been governed by a sector-specific block exemption. This essentially means that once a distribution agreement is drawn up in compliance with the rules laid down in this block exemption, undertakings can operate with the reassurance that they are not in breach of EU competition rules.
Indeed, the Commission has to date always argued that though the general block exemption dealing with all types of vertical agreements is suitable for most economic sectors, it does not contain sufficient safeguards to remedy the competition issues specific to the motor vehicle industry. In particular, the Commission has always noted that competition between motor vehicle dealers within Europe was not strong enough and dealers were too dependant on car manufacturers. Therefore, a sector specific block exemption has always been deemed to be essential in order to regulate this industry.
Well, all this is set to change. Following extensive consultation with stakeholders and the publication of a communication earlier on this year, the European Commission has now published proposed legislative measures which are intended to eventually replace the current legal regime. The Commission has arrived at the conclusion that since competition as regards the sales of motor vehicles is now ripe within Europe, a sector-specific block exemption is no longer warranted in so far as the sales of new cars and commercial vehicles are concerned.
All distribution agreements which govern the sale and distribution of motor vehicles will in the future be regulated by the general block exemption which applies to all types of vertical agreements. Nonetheless, the Commission has conceded that a three-year adaptation period following the expiry of the current block exemption in May 2010 is necessary, prior to the application of these general rules. This concession is being granted in order to take account of brand-specific long-term investments made by dealers.
On the other hand, since competition is more limited in the repair and maintenance services sector, the Commission is proposing to adopt a specific block exemption which would regulate competition in this sector. The benefit of such block exemption for service and repair agreements will be limited to operators with a market share not exceeding 30 per cent.
Specific provisions regulating the supply of spare parts will also be included in this block exemption. These are intended to ensure that independent repairers can obtain carmaker-branded parts and that component suppliers can put their brand on components of spare parts and can continue to supply spare parts to the aftermarket.
Sector specific guidelines will clarify certain key issues which are of particular concern to undertakings operating in the motor vehicle sales and repairs industry. Hot issues such as multi-branding, imposition of resale prices and parallel trade in Europe will be tackled in these guidelines.
Interested parties now have until February 10, 2010 to submit their comments in relation to these new legislative measures which can be accessed at http://ec.europa.eu/competition/consultations/2010_motor_vehicles/index.html .
Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is also a visiting lecturer at the University of Malta.
mariosa@vellacardona.com