AM Online

Block Exemption in depth - franchise terminations and sales

The Block Exemption Regulation's stipulation of minimum durations for contracts is doubted to have had much impact in reassuring dealers of a return on their investment.

This could be an area for change in the next BER. However, the European Commission's evaluation report highlights that longer-term contracts might actually be more restrictive of competition.

It fears they may prevent manufacturers from replacing poorly performing dealers with more efficient newcomers, and may delay the introduction of new contracts that respond to changes in market circumstances.

The European Commission's evaluation report states: "In any event, it is doubtful that Article 3(5) of the BER can have had much effect, given that in the vast majority of cases, suppliers have given dealers indefinite contracts that can be terminated on two years' notice: something which hardly gives much protection to a dealer's brand-specific investments."

BER provides dealers with the right to sell their dealerships to other companies of their choice already representing that brand, and not be directed by their carmaker partners.

It was intended to foster European market integration through the development of cross-border dealer groups. But the EC notes that virtually all dealership transfers have occurred at a national level.

"The aim has therefore not been achieved, and the BER may instead have led to dealer concentration in certain local areas, potentially creating future problems for the national competition authorities," states the report.

  • The report will be discussed in detail at the AM/NFDA Autoretailing conference (click here to book) on June 5 in Birmingham.
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