UK government comments on draft block exemption regulation

06 June 2002 #SMMT News

The UK government today made its first public comment on the

draft block exemption regulation proposed by Mario Monti, European competition

commissioner. The statement from the DTI acknowledged that a legal framework,

that is block exemption, is needed to protect consumers and that the motor industry

continues to work to deliver a modern and dynamic distribution system. The government

said that it would not oppose a delay in any measures to break up established

dealer networks.

Commenting on the UK government position Christopher Macgowan,

SMMT chief executive said, ‘The industry agrees that Mario Monti must tread

carefully in making any decision to dissolve established dealer networks. These

are key to ensuring high levels of consumer protection and any changes without

full discussion of the implications would be in no-one’s interest.

‘We remain concerned that the government continues to confuse

the issue of block exemption with price. UK car prices have fallen up to 30

per cent in the past four years and the British consumer continues to benefit

from healthy competition in the market place.

‘Many of the aspirations contained within the draft regulation

are already being delivered by the industry today with dealers offering more

than one brand at many sites across the UK.’


Notes to Editors

  1. UK car prices have fallen consistently over the past two-and-a-half

    years as shown by the most recent independent survey from the Alliance & Leicester

    Car Price Index in May 2002. The cost of car ownership has fallen sharply

    compared with incomes – dropping 30.2 per cent since the Car Price Index began

    in June 1998.
  2. The motor industry believes that there are still four main

    issues which must be addressed:

  • Location clause. The removal of any restriction on the

    location or number of dealers in the distribution network will create disruption

    to the dealer networks. Small and medium sized dealers are likely to be confronted

    by predatory actions from larger and better-funded dealer groups. This is

    likely to lead to the rapid consolidation of dealerships across the EU.
  • After-sales service. The introduction of the concept of

    an authorised repairer presents difficulties for the manufacturer. The European

    Commission has accepted that the service and maintenance of vehicles is important

    for safety and environmental performance. Without some limit on the numbers

    and control of the location of authorised repairers it will be very difficult

    for the manufacturers to maintain quality and service across the network.

  • Multi-franchising. The European Commission is very keen

    to see the greater take up of multi-franchising. Manufacturers accept that

    some greater flexibility is required, but wish to retain the right to demand

    brand specific staff in the multi-franchise environment. This would ensure

    that individual brands were promoted professionally and maintained competition

    between brands in the same showroom.
  • Price Harmonisation. The European Commission has indicated

    that it wants to achieve greater price harmonisation across the single market.

    This is currently undermined by significant variations in the taxes levied

    on motor vehicles by EU states. These can in some circumstances add 200 per

    cent to pre-tax prices.

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