EC to Sweep Away Auto Trade Restrictive Practices

10 January 2002

Europe, since the 1950s a hotbed of car trade restrictive practices, will from September witness sweeping changes that tilt the auto market’s regulatory bias in favor of consumers instead of dealers and manufacturers.

For nearly half a century, European Union legislation has exempted automakers from antitrust laws that outlaw anticompetitive sales practices – claimed by manufacturers as essential to their operation of pan-EU sales and service networks. Exemption, argued the carmakers, would operate to the benefit of all concerned by promoting car safety and mutual trust among manufacturers, dealers and consumers.

But, as many cynical Euro-citizens have observed, it also confers on the auto trade a number of lucrative privileges such as the link between sales and services; and has proved a convenient barrier to cross-border sales and competition across the EU.

Two years in gestation, the new legislation will take effect in September permitting …

• European car dealers to sell multiple makes of new cars on the same premises;

• Outsourcing of repair services by new-car dealers;

• Individual dealers to market across the EU;

• Any repair shop satisfying qualitative criteria to designate itself an authorized service center;

• Repair shops to buy spare parts from alternative sources than vehicle manufacturers.

“We want to put the consumer back in the driver's seat,” says an unidentified EC official. “We're trying to inject a lot more competition into two markets, sales and after-sales, and that's always a good thing for the customer.”

However, many regret that the reforms do not go far enough. Carmakers will still be allowed to restrict or block supplies to sources of which they disapprove, supermarkets and internet re-sellers for example.

“It’s a shame” the EC has not also required manufacturers to deal directly with internet resellers, opines Justin Skinner, e-commerce manager for Direct Line Insurance whose unit is a leading online auto-seller. “It’s not a good answer for consumers … it could potentially impact on our UK customers who’d have been able to benefit from better discounts we’d have been able to make with manufacturers.”

The auto trade, which bitterly opposes the reforms – especially the axing of the golden link between sales and service – is decidedly unenthusiastic about their imposition: “Dealers should be responsible for sales and service,” growled DaimlerChrysler’s Hans Glatz in Brussels.

News source: Wall Street Journal