Car industry’s special regime under threat

Date: 07/10/1999

By Peter Chapman

COMPETITION chief Mario Monti is turning up the heat on EU car-makers over the way they sell their products across the Union.

The EU's new anti-trust buster rocked the industry last month when he announced a second investigation into the pricing practices of Germany's Volks-wagen and a new inquiry into the activities of France's Peugeot.

He also made it clear that he intended to get tough on distribution practices across the industry by launching a review of the 'block exemption' from anti-trust rules granted to the sector in 1995, which many claim encourages firms to indulge in anti-competitive practices.

The current exemption, which will expire in 2002, allows firms to run exclusive dealerships, giving them the right to decide who gets a franchise to sell their cars in a region. Critics such as independent car dealers argue that this shuts competitors out of the market, while consumers maintain that it allows car makers to keep prices artificially high.

But European car lobby group ACEA claims that ending the exemption would do EU motorists more harm than good. Director of legal affairs Marc Greven says it would lead to trusted old dealer networks being replaced by car 'supermarkets which would not carry the same wide range of cars. Moreover, he insists that price differentials in the car sector are among the lowest in EU industry, one differences in member states' tax regimes are stripped out.

Insiders believe, however, that Monti will reject these arguments and end the sector's special treatment. Instead, they predict, the industry will be covered by a new 'general' block exemption for all firms below a 30% market share threshold.

Greven argues that this would create legal uncertainty and prompt fierce arguments over how the threshold should be applied within member states.

Competition Commissioner Mario Monti is turning up the heat on EU car-makers over the way they sell their products across the Union. Part of a survey 'Challenges for industry', p13-20.