Under EU law, agreements that have as their object or effect the prevention, restriction or distortion of competition are prohibited. However, it is possible for certain agreements to benefit from an exemption to that prohibition, for example where they improve production or distribution.
To help businesses to decide whether specific types of agreements can benefit from exemption, the European Commission has introduced a number of "block exemption" regulations. If an agreement complies with the terms of a block exemption, then it will be exempt from the prohibition on anti-competitive agreements. That means that it will be within a "safe harbour" for competition law purposes - any competitive restrictions that it contains will not infringe competition law.
In line with this approach, the EU Commission adopted in 2002 a block exemption regulation covering arrangements for the distribution of new cars and their subsequent servicing. This regulation, which is due to expire in June 2010, 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 such conditions laid down by the regulation, such as giving authorised repairers (independent garages) access to technical information and spare parts.
This approach enhanced competition between authorised repairers by making sure that operators with the necessary technical expertise are able to establish themselves wherever there is a business opportunity.
Moreover, car owners have more opportunity to choose where they can carry out repair and maintenance to their cars and what spare parts they use since any repairer is allowed to join the network of authorised repairers of the car manufacturer by fulfulling a number of selection criteria set by the manufacturer. On May 28, 2008 the European Commission adopted an evaluation report on the operation of the regulation suggesting its removal. On vehicle repair it concluded that in view of the fact that independent repairers now have better access to technical information and their numbers have increased, future regulation may be unnecessary.
This report however was not well received in certain quarters, especially by independent repairers that argued that they can actively compete with authorised networks by offering consumers a comparable service, only if they have access to both technical information and spare parts, which are key inputs for performing repair and maintenance work. The current regulation seeks to ensure access to those inputs by setting out specific hard core restrictions.
Recently the Commission issued a draft regulation reviewing the previous one, in which it considers that the market for car repairs and maintenance is still not fully competitive with manufacturers' authorised repair networks enjoying high market shares.
In this sector the Commission is proposing that a block exemption system will still apply either through the employment of the general rules as currently reflected by the proposed new block exemption for vertical agreements complemented by sector-specific guidelines, or through the adoption of a focused block exemption regulation, or a combination of the two instruments with a view to reinforce competition authorities' ability to respond to competition concerns in a wider and more comprehensive manner.
Change will occur rapidly in the repairer sector with the new regime taking effect on June 1, 2010 and therefore repairers will need to watch developments at EU level closely to be able to respond quickly once the Commission's approach is clearer.
The Commission is consulting on its proposed approach until September 25.
Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.