Ministers in two minds over spare parts protection plan

Date: 23/05/1996

By Fiona McHugh

INTERNAL market ministers will discuss plans to introduce legal protection for industrial designs at a meeting next week but, still torn between the competing interests of car-makers and spare parts dealers, they will not come to any decision.

“This is a highly political issue, so we have to consult the interested parties at length,” said one UK diplomat. “The Council is unlikely to take a definite stance before the end of the year.”

In a move which has since been backed by the European Commission, MEPs voted last year not to grant legal protection to visible car parts such as bumpers, lights and wing mirrors. Instead, they said, independent part makers should pay car manufacturers a “fair and reasonable” royalty fee each time they copied a design.

Given the amount of money at stake - the spare parts market is worth some 40 billion ecu a year - it is not surprising that the European Parliament's position has sparked fierce controversy in a number of member states.

France, Spain and Portugal, under pressure from domestic car-makers, oppose the royalty fee option. They would like to see greater protection introduced, perhaps in the form of the Commission's original plan which would have given car-makers a monopoly of the spare parts market for three years.

But Ireland, Denmark, Austria, the UK and Greece favour a free-market arrangement and are therefore likely to support MEPs' approach, which would allow independents to make parts from the day the design was put on the market, but would force them to compensate the original manufacturer financially. Invisible parts such as points and plugs would not be protected.

Germany and Italy, which are likely to decide the outcome of the debate, have not yet decided where they stand. Both have extensive car interests and would incur considerable wrath at home were they to give the royalty fee system their blessing. Even so, car industry sources say neither has ruled out acceptance of the Parliament's liberal position.

The two countries' indecision, along with the flexible position being adopted by the Benelux countries, will make it impossible for ministers to vote on the issue at their meeting next Tuesday (28 May). Instead, it will fall to Ireland, which takes over the EU presidency on 1 July, to establish a common position.

Companies such as Fiat and Mercedes have attacked the royalty fee plan, arguing that without full legal protection, car firms will be unable to recoup money invested in car part designs. “The (Parliament) vote represents a serious breach of intellectual property principles,” said a spokesman for ACEA, the Association of European Car Manufacturers. “The remuneration scheme put forward can in no way be considered as a reward for creative effort ... it would simply enable copiers to produce parts in which they have invested nothing.”

Car firms also point out that while they are obliged to put new parts through stringent tests, independent makers are not.

While they would obviously prefer to pay nothing, spare parts makers would nevertheless be willing to go along with the remuneration fee plan. They stress, however, that the charge must not be arbitrary but should be calculated as a percentage of the money invested by the car company in the design.

“If we must pay a royalty fee, then we must be sure that it is a fair and a reasonable one. It must be in proportion to the money invested in the design. Otherwise, the proposal will lead to an endless stream of court cases,” said Gerhard Riehle of European Campaign for the Freedom of the Automotive Parts and Repair Market (ECAR).

Consumer groups agree that, unless a clear-cut formula is included in the draft directive, car-makers will use the royalty scheme to keep their monopoly grip on the market.

“Our fear is that if car manufacturers are given too much power, they will use the royalty system to fend off competition,” said Jim Murray of the European consumer group, BEUC.

The Commission hopes that by backing the MEPs' position, it will help foster the growth of the independent market for parts which, while highly developed in the UK, is only beginning to get off the ground in other member states.

At the moment, rules on legal protection vary sharply between member states, with the UK providing no protection and France effectively granting car-makers the run of the market.

According to ECAR, car-makers account for at least 88&percent; of the car body parts sold in the EU and control 95&percent; of the market for car body panels.