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Block Exemption/Warranty
Please click one of the
buttons below to view
a copy of the Block Exemption for cars fact sheet,
Q4 is of importance
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What is the Cars Block Exemption? |
The EC cars block exemption is the European Commission
Regulation No. 1400/2002 (formerly Regulation No 1475/95), which
exempts from EC competition rules arrangements in the EU for
the distribution of new cars and their subsequent servicing.
The block exemption allows car manufacturers to
create networks of selective and exclusive dealerships.
The system of selective and exclusive distribution
was strongly criticised by the UK Competition Commission in
its April 2000 report on the market for new cars in the UK.
In November 2000, the European Commission published
a review of the workings of the block exemption, which concluded
that the system had failed to meet important objectives set
for it when it was established in 1995. In particular, the review
concluded that:
- buyers were still facing difficulties when
they tried to purchase new vehicles from another Member State;
- the "natural link" between sales
and after-sales service seemed no longer to exist;
- the objective of increasing the commercial
independence of dealers had been achieved only to a limited
extent; and
- independent repairers were being denied access
to technical information.
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When do the new rules apply? |
European Commission rules (cars block exemption)
became law on 1 October 2002. However, the majority of the provisions
did not come fully into effect until October 2003 following
the one year transition period.
The ban on "location clauses", which limit the geographical
scope of dealer operations, has raised major industry concerns.
To reflect this, this element will come into effect two years
later than the rest of the reforms - on 1 October 2005.
From October 2005, dealers will be free to set up secondary
sales outlets in other areas of the EU, as well as their own
countries. This should significantly strengthen competition
between dealers across the Single Market and help to ensure
that consumers get a fair deal.
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What effect will the new block exemption
have on the car selling market? |
An EC review of the old Block Exemption rules
on the sale of new cars in the EU found that they were not working
as intended. Buyers were still finding it difficult to buy cars
in another Member State.
The new rules will mean that:
- dealers are able to market their services and
reach customers in different areas or countries;
- dealers are able to sell more than one brand
of car at the same site (multi- franchising) with fewer restrictions;
- internet retailers will find it easier to co-operate
with dealers and with individual customers who wish to import
cars themselves
The provisions will increase competition in the
domestic and continental car market, which will give consumers
more choice and better value for money including a reduction
in car prices.
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What effect will the new block exemption
have on the car repair and servicing market? |
These changes will mean more competition in the
servicing and repair market leading to lower costs and higher
standards for consumers.
The after-sales market will be opened up, with a change to the
rules linking new car sales and servicing. Dealers will still
have to ensure that customers' cars are serviced and repaired
to manufacturer-approved standards, but they will no longer
have to do it themselves; and, independent garages and roadside
assistance organisations will have much greater access to technical
information, including diagnostic equipment and software.
Dealers will be freer to determine how they run their businesses.
The better the service they offer, the more they will be rewarded.
Poor performers will find it
harder to survive.
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What will be the effect on car pricing in
the UK? |
The Supply of New Cars Order 2000 was introduced
following the Competition Commission (CC) monopoly inquiry into
the supply of new cars. The CC found that private car buyers
in the UK were paying about 10% to much for the average car,
taking account of discounts, trade-ins and finance deals.
The CC found the operation of the selective and exclusive distribution
system permitted by the European Union's Car Block Exemption
rules to be the root cause of the increased cost of new cars
in the UK, and made a number of recommendations for fundamental
changes to this system.
The CC also made a number of recommendations for immediate action,
which resulted in the introduction of the Order in September
2000. One of the main provisions of the Order requires suppliers
to offer dealers who purchase volumes of cars outright equivalent
discounts to those offered to fleet customers who purchase similar
volumes. The intention of this provision is to close the price
gap between cars offered to fleet customers and those offered
through dealers to private buyers.
The new EC Cars Block Exemption should help reduce UK prices,
or at least lead to a levelling out across Europe of pre-tax
prices, by increasing competition and providing greater freedom
to import cars from other member states. There is evidence that
the process of levelling prices across the EU has been proceeding.
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Who do I complain to if I think the Block
Exemption is being exceeded? |
The responsibility for enforcing UK competition
law falls to the Office of Fair Trading (OFT). The Regulation
is therefore directly enforced in the UK by the OFT under the
new modernisation of enforcement of European Union Competition
rules.
Responsibility for enforcing across borders remains with the
European Commission. The Regulation places responsibility on
the Commission to monitor its operation on a regular basis and
to report in May 2008. The Commission will take the lead on
UK cases which have a Community wide dimension. OFT assists
the Commission as necessary.
In general, the Department for Business, Innovation and Skills
(BIS) takes the lead in the UK on competition policy issues
and on the development of new legislation including EC regulations
such as the cars block exemption.
Neither BIS or the OFT can advise individuals on the merits
of a specific EC case or make representations on their behalf
but the OFT can provide advice on procedures for approaching
the Commission.
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Where can I get further information on cars
block exemption? |
The text of the new block exemption, explanatory
brochure and other information can be found on the EC Cars block
exemption web pages.
The Department published a press notice in 2002 which the Consumer
and Competitions Minister, said "I very much welcome the
European Commission's new regulations, which will mean more
choice and fairer prices for consumers, and greater competition
and innovation in the retail sector. By making the European
single market work much better, they should bring UK prices
closer to those in other EU countries."
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