AM Online

The Big Picture: Competition gets regional

Two years ago, the Office of Fair Trading told AM that it was not interested in regional dominance by retailers, either by number of sites or control of franchised brand.

The only thing it was interested in was national dominance of the total market.

Alan Williams, then OFT vehicle competition specialist, added that brands were not the market in themselves. “We would not necessarily investigate where a dealer had, say, more than 30% of Ford’s UK sales,” he said.

Last month the OFT U-turned on the three-month pre-registration rule, now it has performed a similar reversal on its anti-competition policy. Pendragon has been spared referral to the Competition Commission over its acquisition of Reg Vardy only by offering to sell seven Vauxhall sites and one Land Rover dealership.

The OFT’s concern isn’t a lack of sales competition; it’s about localized servicing and repairs competition. It believes Pendragon could have a monopoly on servicing in several regions, including west Yorkshire and Glasgow.

But hang on, customers are free to choose any reputable repair business – independent or franchised - without affecting their warranty. And any independent can become an authorized repairer provided it meets set criteria. So is Pendragon really stifling competition? There are still plenty of options for customers.

The OFT is basing its decision on a survey that shows most consumers take their new cars to franchised dealers for servicing and repairs. This is either down to a lack of consumer awareness about aftermarket options – arguably the OFT’s own failing – or perhaps buyers are happy to continue using franchised dealers (and enjoy the higher residual values). In which case, dealers should be praised for providing good levels of customer service.

If the OFT is going to change the rules, what about Pendragon’s other brands? It has 30% of Jaguar’s UK outlets – sales and aftersales. And as sole importer for Cadillac, it has all its sales and aftersales outlets. Not much competition there.

And, why hasn’t the OFT tackled Mercedes-Benz, whose franchised dealers operate huge regional territories and control all service and repair outlets? Mercedes itself controls the London, Birmingham and Manchester regions. Shouldn’t it face investigation?

Pendragon, which has around 6% market share, wants to buy more groups. Next time, it can expect to face the Competition Commission.

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