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AM poll: The impact of block exemption changes

No: 7.1%

Yes: 42.9%

Too early to say: 50%

After months of speculation on what impact moving the industry to a general block exemption on June 1 would have, some dealers believe it’s too early to say how their businesses have been affected, while some have experienced change.

Some manufacturers had already terminated their networks and issued new contracts, but there hasn’t been a collective cry for help or shouts of exploitation beyond what the industry has seen before.

Property consultants and legal experts were convinced that under a general block exemption, manufacturers would exploit powers to veto rights over dealership sales and acquisitions.

One such example given is that the dealer wishing to sell is required to give advance notice to the manufacturer, who then attempts to locate two willing purchasers of the business.

The outgoing dealer then decides whether or not to accept one of these offers or retain the dealership, even if a higher price could be obtained from a suitable third party.

AM has published a white paper on the move to a general block exemption and here are some excerpts from industry experts:

Paul Burrows, principal, Grant Thornton Automotive Services: “An under-performing dealer, or one with an unclear future, will now face even greater pressure to improve, to hit targets and to comply with standards – and be in a weaker position if the NSC believes they have no future in the network.”

Dr Andrew Tongue, director, International Car Distribution Programme: “The outgoing block exemption rules explicitly protected dealers and steered manufacturer behaviour in a number of areas; the new ones are much less prescriptive and as a result hand franchise power back to the manufacturers to determine questions such as the degree of brand-exclusivity at their dealerships for themselves.”

Miles Trower, partner at national law firm TLT: “Certain manufacturers may, of course, use the opportunity of block exemption reform and new agreements to extend their reach into other areas of dealer activity, which are not core to new vehicle sales.

"In a market where margins are already thin, cannibalising those areas of a dealer’s business that help them survive not only undermines the manufacturer/dealer relationship, but can also make a difficult trading situation much worse.”

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