Car sales study clears the way for reform

Date: 13/12/01

By Laurence Frost

RETAILERS and manufacturers are digesting a study published this week paving the way for reform of the distribution arrangements granted to carmakers under EU law.

The report by consultants Andersen refrains from making recommendations for a review of the industry's block exemption from competition rules.

However, it identifies benefits to consumers resulting from an end to dealers' exclusive territorial contracts and a change to the system that prevents them from stocking more than one brand of car.

The report, ordered by the European Commission, stops short of suggesting an end to the obligation on dealers to provide after-sales service and repairs. "Breaking the link between sales and after-sales would have major negative impacts," it concludes.

The position provides some reassurance to manufacturers that make a significant proportion of revenues from sales of spare parts through their 'tied' dealers.

"There's no question of whether [the link] should be kept, there's a question of whether it should be reorganised," said Marc Greven of the European Automobile Manufacturers' Association.

But the recommendation is less welcome for online retailers and car supermarkets, for whom after-sales obligations are an obstacle to market entry.

Online sellers want the block exemption changed or abolished to allow them to buy cars directly from manufacturers with no strings attached.

"It's difficult to see how [after-sales obligations] would be applied to internet car retailers," said Justin Skinner of Jamjar.com, the UK's largest car seller. "We're a virtual organisation - that's the whole point. We don't have expensive forecourt costs to pass on."

The study also warns that too much reform too fast could disrupt the industry and diminish service standards, especially in the short term.

Report of a study, published in December 2001 by consultants Andersen, paving the way for reform of the distribution arrangements granted to carmakers under EU law.