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Vehicle sales and servicing needs special EC legislation

DAVID EVANS, Retail Motor Industry Federation chief executive, expects Block Exemption to be revised, not scrapped, but warns the timetable is tight.

Improvements to Block Exemption in 1995, intended to benefit dealers and customers, were designed to create an even-handed relationship between manufacturers and their retailers and to reduce the economic dependence of networks on carmakers.

Unfortunately, the extent to which those improvements have been, or are being respected, varies considerably and in many cases are subject to different interpretation.

Six years ago, the European Commission stated the adjustments it was introducing “were to stimulate competition in the motor vehicle sector, to improve the functioning of a single market, and to balance the diverse interests in question”.

Dealers need a measure of protection and security, in view of the substantial investment required in providing what the manufacturer demands, and customers expect. Brand image is promoted and customer satisfaction fulfilled by authorised dealers.

The system is regarded as the best means of ensuring customer satisfaction but the lack of security with only two years' notice of franchise termination at most – and, depending on circumstances, sometimes less – is not good enough.

It would be economically inefficient to permit an unlimited number of retailers for new motor vehicles as is acknowledged by the EC in the present Block Exemption regulation.

Many would probably wish to limit their interest to best-sellers, or particular derivatives without having to provide a full range, and not necessarily to provide aftersales.

If this happened the maintenance of quality standards and the viability of dedicated authorised dealers would be seriously undermined.

Vehicle manufacturers, franchised dealers and independent repairers agree the regulation and the selective and exclusive distribution system are together the best means of distributing vehicles and their service/repair.

New techniques such as the internet will have an increasing impact on providing information in support of purchasing decisions, but the traditional dealer network will survive, in the view of the RMI.

Vehicle distribution will undoubtedly be subject to change but continuing legislation will be required to regulate the motor industry.

The special characteristics of motor vehicles are such that specific consideration is necessary for the foreseeable future. The internet will develop but will not guarantee to deliver customer satisfaction and aftersales. Dealers can provide the required added value, however.

New distribution methods or marketing should provide dealers or intermediaries with new business opportunities but the Commission's evaluation report on the operation of Block Exemption suggests the regulation does not promote this.

The report says the internet as a marketing tool is not permitted or encouraged by some vehicle manufacturers but this is being questioned. On the contrary, there is no evidence that the development of the internet for this exchange of information or ultimate distribution of vehicles is impeded or prevented by the regulation.

The EC will prepare proposals for future legislation to take effect from October next year – a final decision should be made by mid-2002. The time-table is therefore quite tight.

A selective and exclusive distribution system for the sale and servicing of new vehicles exists throughout the world and is put into question only in Europe. The motor vehicle is unique as a product, not comparable with other goods.

The manufacturers are in agreement with the continuation of the current arrangements, so dealers will have a key role to play in distributing and servicing manufacturers' products.

Changes in the market place, new distribution channels or communication technology such as e-commerce will have to be recognised and permitted or encouraged.

In the legislation which follows the present regulation, adequate provision must be made to remove or to reduce substantially the economic dependence of dealers on vehicle manufacturers.

Dealers must be given greater security and more flexibility – a better balance is required.

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