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EC 'political voice' backs Block Exemption

EC 'political voice' backs Block Exemption Carmakers and European dealers lobbying in favour of the current Block Exemption regulations have made their first political breakthrough. A powerful European Community committee has produced a report strongly in favour of continuing the present legislation beyond 2002.

The influential Economic and Social Committee of the European Community has told Commissioner Mario Monti, the man who will make the final decision on the rules, that it “favours confirming the special block exemption for motor vehicle distribution”.

The committee urges Mr Monti to “explore methods of amending and extending the current regulation”. Although it has no legislative role, it is a powerful political voice in Brussels. Its remit is to consider the economic and social effects of proposals put forward by the Commission.

Staff from Mr Monti's office who attended the committee's meetings were surprised by the strength of feeling in favour of Block Exemption. More than 80% of committee members voted in favour of the report, which was sent to Mr Monti at the end of May. He is expected to publish draft proposals for Block Exemption in autumn.

The report is critical of several aspects of the present review of Block Exemption. It says Mr Monti has drawn too heavily on experiences in the British market which might lead to “over-hasty conclusions about a system which has functioned well in the rest of the Community market”.

It also supports retailers, calling for any revised regulations to have “practical impact in providing greater protection for dealers and small and medium businesses operating in the European car sector”. It is clear that committee members feel the current termination notice for franchise agreements is inadequate.

The report says: “The threat of termination appears to continue in practice to give power to the manufacturer, particularly in a situation of fewer dealerships. The longer periods of security given to the dealer by the current legislation do not, in practice, seem to have increased dealer independence.”

Dealer representatives lobbying in Brussels are pressing for a minimum five-year termination clause, no termination without due reason (as is the case in the US) and for dealers to have the right to sell on the franchise with the business, unless the carmaker can give good reason otherwise.

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