The legislative jigsaw

Once upon a time, all there was to worry about was the block exemption regulation itself. The Commission produced a Notice setting out some detail about price differentials, and later one that expanded on how to recognise an intermediary, but essentially the rules that applied to the motor industry seemed pretty self-contained. Now the rules are split between two separate block exemption regulations, each of which comes with guidelines (items 1 to 4 in the list below), plus the manufacturers' concessions on dealer protection issues in the form of the code of good practice, while there are more guidelines and Notices that might be relevant to considering the application of the competition rules to motor vehicle agreements. And technical information is now dealt with in Regulation 715/2007. They can all be found through the Commission's website, but for ease of reference I'll post links here:

1. Commission Regulation (EU) 461/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector.
2.  Supplementary guidelines on vertical restraints in agreements for the sale and repair of motor vehicles and for the distribution of spare parts for motor vehicles.
3. Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices.
4. Commission notice - Guidelines on Vertical Restraints  (Official Journal C 130, 19.05.2010, p. 1).
5. Code of good practice regarding certain aspects of vertical agreements in the motor vehicle sector.
   
6. Commission notice on the definition of the relevant market for the purposes of Community competition law (Official Journal: OJ C 372 09.12.1997, p. 5-13).
7. Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis) ( Official Journal C 368, 22.12.2001, pages 13-15).
8. Communication from the Commission - Notice - Guidelines on the application of Article 81(3) of the Treaty (Official Journal C 101, 27.04.2004, pages 97-118).
9. Commission Notice - Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty (Official Journal C 101, 27.04.2004, pages 81-96)
10. Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6) and on access to vehicle repair and maintenance information.

The demise of multifranchising: problems for small networks?

One area where there are big differences between the new block exemption regime and the old one is in the treatment of multifranchising. In essence, the problem arises because of the different definitions of non-compete obligations in the old and new regulations. Under Regulation 1400, non-competes were permitted up to 30 per cent - meaning that a dealer or authorised repairer could be obliged to buy up to 30 per cent of its requirements from one source, which left room for them to have three sources (and a frustrating and useless bit to spare). That, you'll notice, is a rather liberal interpretation of "non-compete". Now, the vertical restraints block exemption (Regulation 330/2010)has become the relevant part of the patchwork of documents that now makes up the motor vehicle block exemption, and it takes a more logical but less helpful view of what amounts to a non-compete: it says 80 per cent is permissible.

The Commission has tried to justify this enormous change (and big step backwards, whether you approve of it or not, because it takes us back to the first motor vehicle block exemption which didn't permit multifranchising at all) by dismissing multifranchising (or multibranding, as they now like to call it) as something that never really worked anyway.

The idea of allowing dealers - by which I mean distributors and authorised repairers - to take on more than one marque is intended to prevent foreclosure of the market. A small manufacture, or a new entrant, needs to be able to get a toe-hold, and they can't expect to find lots of garages looking for a solus franchise. The only way competition can realistically be preserved in this area is by insisting that dealers be allowed to take on more than one franchise. So, for small manufacturers and their networks, as Automotive Management reports this week in connection with Hyundai, the changes are not good news.

Competition authorities will point out that if foreclosure is a problem the rules on competition can be brought to bear. It will be a breach of Article101 of the new Treaty, and if it is conduct that the block exemption permits, that permission can be withdrawn. True, but the Commission hasn't yet withdrawn exemption from a motor vehicle distribution agreeement and it's had 25 years in which to do so - and don't tell me there haven't been enough problems to justify it. Anyway, what dealer - especially the sort of dealer who's likely to be anxious about being able to multifranchise - is going to pick that sort of fight with a vehicle manufacturer?