Online firms to fight car industry block exemption

Date: 08/02/01

By Laurence Frost

INTERNET car sellers are throwing their weight behind moves to end exclusive 'tied dealerships' with EU manufacturers.

The stakes are high as European Commission hearings begin next week on the block exemption, which allows car-makers and dealers to sign agreements which would otherwise fall foul of competition rules.

Among the online firms making submissions will be Virgin Cars, part of the sprawling commercial empire which includes airline giant Virgin Atlantic. It will be represented in Brussels by company chief Richard Branson.

Other internet car sellers putting their case include German operator GetYourCar and JamJar.com, launched last year by the UK's largest insurer, Direct Line.

"The block exemption gets in the way of consumers," said JamJar's e-commerce manager Justin Skinner. "Manufacturers are keeping car prices at abnormally high levels across Europe."

He believes that changes in EU law are vital to protect the online car trade. "We're being tolerated at the moment, but if we get too vocal the manufacturers could shut us down," said Skinner. "We can't buy directly from them, but they still control our supply - and it could dry up."

A report adopted by the Commission last November found that the exemption - which expires at the end of next year - had prevented consumers from enjoying the benefits of the EU single market.

It also said that manufacturers had used the block exemption to hinder the development of electronic trade, which had not been taken into account in the drafting of the original rules.

But the European carmakers lobby ACEA argues that electronic retailers are seeking unfair advantages over their off-line rivals.

"I don't suppose JamJar.com intends to maintain showrooms or service facilities, or to make the same investments as franchise dealers," said ACEA lawyer Marc Greven. "Some people call that free-riding."

The quality of after-sales service and repairs would also suffer if authorised dealerships were forced out of business, especially in rural areas, he added.

Possible changes to the block exemption are to be considered during the second day of hearings on Wednesday (14 February).

Consumer groups will present proposals for an alternative regime for the car industry. Without this, they fear that manufacturers could keep many exclusive deals under general competition rules, which set a 30% market share threshold below which such vertical agreements are allowed.

"The crux of the challenge is to devise a new regime which is able to reconcile the need for quality of servicing with the need for more competition," said Dominique Forrest of the European consumers' association BEUC.

But Commission officials say privately that the end of the block exemption is far from assured, in spite of EU competition chief Mario Monti's public pledge to put the consumer first.

"In the end it's going to be a collegiate decision," said an online industry insider. "We've still heard nothing from the Consumer Commissioner, David Byrne - and [industry chief] Erkki Liikanen is swinging both ways."

Internet car sellers are throwing their weight behind moves to end exclusive 'tied dealerships' with EU manufacturers. The stakes are high as European Commission hearings begin next week on the block exemption, which allows car-makers and dealers to sign agreements which would otherwise fall foul of competition rules.