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Block Exemption in depth - quantative selective distribution has not improved competition

The adoption of quantitative selective distribution agreements by almost all carmakers under the current Block Exemption Regulation (BER) has not broadened competition, states the European Commission's evaluation report.

It has found that BER has failed to meet an objective of creating more competition between dealers representing the same franchise by encouraging carmakers into more diverse distribution channels.

"It is generally felt that quantitative selective distribution is more restrictive of intra-brand competition than are systems such as exclusive distribution," it states.

"Overall the BER has not succeeded in removing the straitjacket effect of the previous sector specific block exemption, and the second objective has therefore not been met."

The fact that carmakers have reduced their networks' density since 2002 leads the report to question whether this form of distribution in effect may have led to a reduction in competition between dealerships representing the same brand.

But it notes that selective distribution prevents non-franchised retailers from benefiting from the marketing efforts of dealers, allows carmakers to better control the geographic spread of their networks to improve their economies of scale, reduce transaction costs and avoiding uneven brand representation.

  • 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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