Dealer standards American style

It's a story very reminiscent of what happens over here too. Ford has told Lincoln dealers to put their hands in their pockets and come up with an average of $1 million to remodel their dealerships. For those dealers fortunate enough to represent Ford too, the average is $1.9 million, Automotive News reports. But maybe some British dealers (or  manufacturers) would regard that as small beer? All in the name of "dealer standards", "brand values" and "customer experience."

Block exemption effect on property market

Nothing new about block exemption replacement creating uncertainty in all sorts of ways, including the property market. Automotive Management has this story. The trend, not only for block exemption reasons, is towards larger dealers, and it's the bigger dealer groups (not to mention the sponsored dealers) who are financially in a position to benefit from the disruption caused by the block exemption. I certainly recall clients deciding that it was time to retire when a new block exemption came along - back in '95 and '02.

Mike Pearce, of Rapleys, the nationwide commercial property and planning consultants, is quoted in AM on the demand for showroom properties from retailers and fast-fit outlets, which I suppose conveniently (in a way) meshes with dealers moving to ever-more-flamboyant gin palaces on the edge of town. He says that while manufacturers have not been raising the dealer standards bar during the financial crisis, they are changing tack now and the cost of entry to the established and especially premium networks, already high, will increase. On the other hand, he thinks that multifranchising (multibranding as the block exemption has unnecessarily rechristened it) for smaller marques will be the way forward for many smaller dealers as well as for smaller manufacturers and new entrants. What a pity that the Commission has effectively written multifranchising out of the block exemption at this stage - not that it's prohibited, of course, just not a right for dealers.

NFDA concern over new agreements

New agreements are being issued by manufacturers, and the National Franchise Dealer Association (NFDA) is warning dealer councils that they should alert their members to them. Press reports (such as this one in Fleet News) are not clear exactly what they need to be alerted about - but the main concern seems to be that dealers are not being given adequate opportunity to take advice on the effect of the new agreements. Sue Robinson, director of RMI NFDA, said:

The European Commission has created an expectation that manufacturers should operate in a transparent manner with their dealers and adhere to minimum standards of behaviour in their commercial relationships, as set out in a published code of conduct. We are urging all dealer councils to lobby manufacturers for such a code that would make the relationship between dealers and manufacturers as fair as possible.

The Supplementary Guidelines on the new motor vehicle block exemption (Regulation 461/2010) say (in para 7):

The history of competition enforcement in this sector shows that certain restraints can be arrived at either as a result of explicit direct contractual obligations or through indirect obligations or indirect means which nonetheless achieve the same anti-competitive result. Suppliers wishing to influence a distributor's competitive behaviour may, for instance, resort to threats or intimidation, warnings or penalties. They may also delay or suspend deliveries or threaten to terminate the contracts of distributors that sell to foreign consumers or fail to observe a given price level. Transparent relationships between contracting parties would normally reduce the risk of manufacturers being held responsible for using such indirect forms of pressure aimed at achieving anticompetitive outcomes. Adhering to a Code of Conduct is one means of achieving greater transparency in commercial relationships between parties. Such codes may inter alia provide for notice periods for contract termination, which may be determined in function of the contract duration, for compensation to be given for outstanding relationship- specific investments made by the dealer in case of early termination without just cause, as well as for arbitration as an alternative mechanism for dispute resolution. If a supplier incorporates such a Code of Conduct into its agreements with distributors and repairers, makes it publicly available, and complies with its provisions, this will be regarded as a relevant factor for assessing the supplier's conduct in individual cases. 

I have added the emphasis - both the italics and the bold. That word "if" makes a huge difference - not that the NFDA is wrong, but clearly it is not a mandatory requirement to have a Code. Of course, the sort of Code the guidelines are talking about would do the job of the old dealer protection measures in the block exemption - the ones that the Commission decided had no place in a competition instrument ...