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Retailers face OFT block on expansion

The Office of Fair Trading could step in to block retailer acquisitions if it believes they are anti-competitive, according to senior vehicle manufacturer executives.

Block exemption clearly states that dealers can purchase businesses with the franchise included. After 2005, when the location clause is scrapped, they will also be able to open showrooms anywhere they wish in the European Union. The OFT, however, has the power to veto any deals or expansion in the UK if it invokes competition clauses.

Mercedes-Benz director of passenger cars Dermot Kelly believes this will happen if a retail group controls more than a quarter of a carmaker's business. This 25% could relate to several issues – sales volume, number of outlets or even regional saturation – and cases could be prompted by carmakers or other dealer groups. “We, through the OFT, can force a dealer to sell outlets if they exceed the 25% competition rule,” says Kelly. “But we need a few test cases for the position to be made clear.”

AM understands this issue might affect Mercedes-Benz's wholly-owned retail network. It controls more than 30% of UK sales through the London, Birmingham and Manchester market areas. But until the clause is tested in court the full implications will not be known.

Alan Williams, OFT vehicle competition specialist, says there would need to be clear anti-competitive issues for an investigation.

“We tend to view the brand as not the market in itself on competition issues, so we would not necessarily investigate where a dealer had more than 30% of, say, Ford's UK car sales,” he says. “But this could potentially come to our attention if it is believed to be anti-competitive.”

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