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EC compiles secret report on future of Block Exemption

The European Commission has ordered a secret investigation into the possible changes to the franchised dealer network in the UK as part of the review of Block Exemption.

The resulting report, AM-online understands, addresses five options for the future of car dealers as part of the EC's deliberations on the order. The exemption expires in September 2002.

The five car distribution options the EC is considering are:

  • Free-for-all distribution with independent motor vehicle retailers such as banks and supermarkets having the right to purchase new cars directly from manufacturers.
  • Exclusive distribution with the manufacturer agreeing to sell new vehicles to only one dealer in a particular territory. The dealer does not have to meet quality standards or volume targets, and is free to sell cars to independent agents. Dealers may also be able to actively prospect for business outside their sales territories.
  • Qualitative selective distribution with the manufacturer appointing dealers based on qualitative criteria - such as showroom standard or aftersales service. This could also allow internet companies and supermarkets to sell cars, providing they meet those qualitative criteria.
  • Qualitative and quantitative selective distribution, but without territorial exclusivity. The dealer must meet the quality issues (as above) but must also be of a minimum size. This allows manufacturers to set different criteria for different distributors, such as dealers, supermarkets and internet firms.
  • Qualitative and quantitative selective distribution with territorial exclusivity. This is similar to the current system, but could be relaxed to allow dealers to prospect customers outside their territories.

    Manufacturers could either sell cars directly to consumers in competition with dealer networks, or only sell 'directly to consumers who belong to categories identified in the new regime (eg fleet consumers)'. The report also acknowledges the wish of contract hire companies to be considered by manufacturers as end consumers and not as intermediaries, because they are the legal owners of the cars on their fleets.

    Manufacturers favour a continuation of the current block exemption that has two principal elements, selectivity and exclusivity. Selectivity means a manufacturer can set specific criteria for its dealers, such as stipulating standards for showrooms and demanding an aftersales service. Under most selective distribution systems, manufacturers are obliged to sell their products to every distributor that meets their criteria.

    But car distribution is also exclusive, which means manufacturers can appoint only one distributor per territory. This dealer then has to focus on its territory and cannot actively prospect for business beyond its territory. The EC has invited the European Car and Truck Rental Association (ECATRA) to respond to the report, giving its member organisation the British Vehicle Rental & Leasing Association the opportunity to have its views heard in Brussels.

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