Author Paul Whittingham

Issue Summer 08

Publication IoD

The European Union competition authorities introduced a special set of regulations expressly for the motor trade which were intended to improve the choice for consumers and give dealers and independent garages greater clout against car manufacturers.

These Block Exemption Regulations (BER) came into force in 2002 and expire in 2010, to be replaced by new regulations which, it is hoped, will learn from the experiences of the BER. So, with only two years to run, have the BERs been successful?

One of the main objectives was to allow “multi-branding” as previously manufacturers restrained certain dealers from selling other brands. There has been a consequential growth in multi-franchise firms with consolidation of dealers into larger multifranchise groups. The EU has reported, however, that across Europe a lot of the smaller local “sub-dealers” have disappeared as part of this process.

The ability for consumers to use an intermediary was liberalised under the BER and we have seen the growth of car brokers who act for the buyer rather than the seller. This has achieved savings for consumers and provided pressure on local dealers to offer discounts to win sales.

A major priority of the BER was to de-couple the sale of new cars from the repair and servicing side. This is why we now see certain franchised businesses which have no sales showroom but are able to call themselves authorised repairers. Similarly, a business wanting a sales franchise may not have suitable workshops but servicing can be undertaken elsewhere.

Perhaps the most contentious area of the BER implementation has been in relation to independent repairers. The independents need access to manufacturers’ technical information and specialist diagnostic equipment to service or repair increasingly complicated vehicles. The BER obliges manufacturers to provide such information but it seems that compliance by manufacturers has been inconsistent.

Some of the independents have responded by becoming authorised repair franchises and a European Commission report in 2006 noted that the ratio of independent to authorised repairers had fallen from 7:1 to 5:1 across the EU.

The repairers who are determined to remain independent, face the cost of acquiring specialist equipment and information and sometimes club together to buy them. In the UK, some independents formed the Right to Repair Campaign and one of the complaints is that, even where they have access to manufacturers’ information to repair or service cars, some vehicles have to go to a franchised dealership for “recommissioning” after the repair has been completed. The cost of this erodes some of the price advantage which the independents say is their competitive edge against authorised repairers.

It remains to be seen what the European Commission will produce to replace the BER, which have been successful in some of the intended effects but less so in others.

Paul Whittingham

Partner & Head of Corporate Law

Tel: 01473 232425

Email: paul.whittingham@ashtonkcj.co.uk

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