1 October completes block exemption renewal

27 September 2005 #SMMT News

An amendment to the so-called ‘location clause’ marks the final change to motor industry block exemption rules. Effective from 1 October, the move will break down some of the geographical ties which have prevented one dealer from setting up an outlet within another’s territory. The European Commission hopes this will boost competition between showrooms selling the same brand of cars.

In renewing the block exemption in 2002, the Commission recognised the role the new car distribution rules play in protecting consumers. They ensure that only those with the right skills and training can sell, service and repair new cars – safety-critical and technically complex products.

However, the Commission believed a shake-up could improve competition. So while it renewed block exemption in 2002, changes were made to some of the rules.

For example, the sales-service tie was cut. This meant franchised dealers were no longer obliged to offer service and repair facilities on-site. The change has paved the way for independent outlets to apply to become authorised repairers although each is carefully vetted to ensure quality and technical competence requirements demanded by new car customers are fully met.

Access to technical information has also been widened, enabling those outside franchise networks to carry out service and repair work. To help facilitate this, manufacturers now operate technical help lines, as well as providing information via websites.

Multi-franchising is also allowed under the amended rules which means that more than one brand can be sold within the same showroom. Finally, the location clause amendment comes into force next week. This marks the final piece of the jigsaw.

‘We welcomed the renewal of block exemption in 2002 and now the changes are complete’, commented SMMT chief executive Christopher Macgowan. ‘So far no detailed analysis of the impact of the new block exemption has been made but we understand the Commission has launched its study. We hope this will reveal whether changes to the location clause increase intra-brand competition or whether they will leave the UK with fewer, larger showrooms.’

Aside from block exemption, SMMT and its members have taken steps to improve competition and the consumer experience during the new car warranty period.

Working with the Office of Fair Trading, manufacturers relaxed servicing requirements that tied customers to their franchised network during the new car warranty. While most customers still prefer to use their local dealer, independent garages can be used as long as work is carried out to the manufacturer’s recommended schedule and at the right intervals.

SMMT was also proud to boast the first Office of Fair Trading (OFT) approved Code of Practice. Its New Car Code of Practice includes performance monitoring and low cost arbitration for customers, as well as penalty points for any manufacturer that fails to meet its high standards. The Code has now been operating for a year.

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