In a leaked consultation document, head of EC competition unit Paolo Cesarini says there is “no valid reason” to keep a separate regulation for the appointment of franchised motor retailers.
The end of the existing eight-year automotive BER will coincide with a review of a general exemption rule covering retailing. The issue is whether its replacement can satisfy the various demands of companies in the motor industry.
Jacopo Moccia, the CECRA director, believes it would not. “Without the protection, dealers would always be fearing that bullying manufacturers would take away their contracts,” he said.
“This could be catastrophic. It would remove from dealer groups their right to open outlets with a franchise they hold. We don’t understand why the EC wants to go back a decade, and we see no benefit to consumers from it doing so.”
John Wormald, of the global consultancy Autopolis, shares CECRA’s concerns. “Without a specific BER, the power of vehicle manufacturers would be greatly strengthened,” he said. “They might be completely unrestrained in the way they give contracts to franchised dealers.
“There would be no protection either for large groups because separate agreements relate to each of their dealerships. Car manufacturers tend to see dealers as no more than a conduit for what’s coming off their assembly lines.”
Wormald believes the EC has wanted for some time to “get shot” of a specific automotive BER because it sees no real competition problem relating to the sector.
“I believe Cesarini feels there are other industries where the EC needs to pay more attention to competition,” he said. “His view is that any issues can be settled nationally, and do not need pan-EU legislation.”
Wormald’s concern is that the EC has been influenced by economists with no detailed understanding of the way the motor industry works.
ACEA, the European carmakers trade organisation, is cautious about the proposals. Sigrid de Vries, communications director, said: “We don’t know yet what will be in the EC document, and it could turn out to be industry neutral.
“When the umbrella exemption changes from 2010 it could contain additional clauses relating to the automotive industry. Dealer organisations are expressing concerns but vehicle manufacturers are keen to maintain their relationship with them.”
Some industry commentators are also urging caution. They believe the reality of a new general BER can eventually be acceptable to both dealers and manufacturers, whatever the official wording.
“Block Exemption is far too complex to condense into a single phrase like ‘a free-for-all in car selling’,” said one. “Never forget that Paolo Cesarini is a shrewd Italian lawyer. The absence of a Block Exemption solely for the automotive industry would not necessarily mean there was no exemption for the industry. It is the way these exemptions are interpreted that counts.”
#AM_ART_SPLIT# Robust opposition from retailers
This month the EC circulated a discussion document to the Office of Fair Trading in the UK and its equivalent competition bodies in other EU countries. Some in the industry believe the EC was hoping for leaks to start a debate on Block Exemption. It will expect robust opposition from retailers.
At the end of May, the EU will publish a draft proposal, and that will be the starting point for CECRA and others to table their formal objections and proposals. Scrapping a ‘sector-specific’ Block Exemption would be a far-reaching step. It would put the relationship between carmakers and franchised dealers on the same footing as burger producers and their retail outlets. So far, the EU has accepted that the motor industry is different. Reasons include the volume and price of its products, the high level of technology in cars and heavy investment required.
In 2002, the EU accepted that motor retailers were entitled to the financial safety net of contracts that safeguarded their ability to make a return on their investment.
The driving force behind the EC’s stance in framing BER legislation is competition. Its objective is putting consumers first – protecting their interests on health and safety and other issues, while keeping costs to a minimum.
CECRA’s Moccia said: “The EC is proposing removing stability from car dealers at a time when food and other producers are exerting increasing control over retailers in other sectors.”
According to one industry consultant, the NFDA and CECRA still have plenty of room for negotiation. “This is not a foregone conclusion in the eyes of the EC,” he said.
“CECRA keeps believing its own propaganda and its opposition is easier to grasp than Cesarini’s stance.
“The important thing to remember is that the key to this is how Block Exemption of any kind will feel in the end, not how it’s described in a legal document.”
#AM_ART_SPLIT# NFDA continues to lobby for dealers
Sue Robinson, NFDA director, said: “Our focus is to ensure that dealers’ rights to engage in active competition and exploit new opportunities in the sector are preserved through clear, workable and robust safeguards, regardless of the strict legal format of the rules themselves.”
The NFDA has always recognised the EC’s options of reducing retail motor sector cover to a ‘general regulation’. Robinson and other RMIF officials pressed the case for dealer protection when they met EC representatives in March.
This month they lobbied Geoffrey Norris, the prime minister’s special adviser at No.10. Norris had requested a briefing on the dealer position on BER.
Meetings are also scheduled with Baroness Vadera, under-secretary for business and competitiveness, and with representatives from the Department for Business, Enterprise, and Regulatory Reform (BERR).
Robinson said: “Dealers make substantial investments in their facilities and the valuable services that they provide to customers. It is in the long-term interests of consumers that such investments are recognised.
“The Commission is also aware of the imbalance in bargaining power between dealers and manufacturers and the problems for competition that this can cause.”
She added: “It follows that the Commission is contemplating certain measures to try to ensure that competition is not prejudiced going forward - although the format of such measures is still very much up for discussion.”
She said the effectiveness of such measures remained to be seen.