Motor vehicle exemption Regulation 461/2010: what does the Commission's evaluation report say?

Published on 28 May, the Evaluation Report on the functioning of Regulation 461/2010 on the motor vehicle block exemption, seems to outline a continuation of the movement initiated during the transition to the general regulation: in the field of the sale of new cars and PR, manufacturers will be very free and their networks will only have to comply. Conversely, as was already the case with the 2010 regulation, DG Competition will support the interests of the independent repair industry and all stakeholders who consider that manufacturers are tempted to use technological developments to strengthen their market power.
The Commission published at the end of May 2021 its "Evaluation report on the functioning of Regulation 461/2010 on the motor vehicle block exemption".
Indeed, this Regulation concerns the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector1 (called the "Motor Vehicle Block Exemption Regulation" and abbreviated as RECSA). Article 7 of the Regulation requires the Commission to monitor the operation of the Regulation and to report by 31 May 2021. 
In order to carry out this "monitoring", to produce this report and ultimately to decide on the evolution of the provisions concerning this RECSA, the Commission is mobilising three main elements in its own work: the public enquiry, the survey of national competition authorities (NCAs) and a study commissioned last year from Ernst and Young and delivered at the end of 2020.
The documents published at the end of May consist both of this summary evaluation report (16 pages in French) and a working document which develops the subject and supports it with the three elements mentioned, which it summarises in three annexes (180 pages in English).
To be more precise, the Commission considers that it must assess this SABR by considering that it includes "the operation of the motor vehicle block exemption regulation and the supplementary guidelines ("SRG")" which have been attached to it, as well as "the Vertical Restraints Block Exemption Regulation and the Guidelines on Vertical Restraints ("VRG")" - the so-called "General Regulation" - insofar as they apply to the distribution of new motor vehicles, the provision of repair and maintenance services and the distribution of parts.
These four sets of rules are collectively referred to as RECSA, the report says. In other words, it is the entire European regulatory edifice built - or rebuilt - in 2010 and implemented in the following years and governing the distribution of new cars, parts and the car maintenance and repair market that is being examined.
Of course, the question for the Commission and its DG Competition is not whether this structure is good for some or others, for employment, for regional planning, for innovation, for the competitiveness of European manufacturers or for the fight against global warming or road safety.

The only relevant question is whether, from the point of view of consumers, it is justified to allow, under the restrictive conditions set out in 2010, the automotive sector to derogate from common law as defined in the first paragraph of Article 101 of the Treaty in order to come under paragraph 3 which stipulates that, in the interest of consumers, it is sometimes legitimate to allow restrictive vertical practices to develop. In such cases, it is necessary to circumscribe this derogatory right (circumscribe this exemption) and to check periodically that the reasons for granting these derogations (and the conditions for depriving the beneficiaries of them) continue to prevail and/or must be redefined.

Overall, for those who are used to reading this type of Brussels document, it will come as no surprise to read that the results of the regulation are 'generally positive': intra-brand and inter-brand competition has not declined in any of the three areas; legal certainty has increased; the ability of new manufacturers to establish themselves commercially in Europe is assured; the national competition authorities (NCAs) feel that they have a framework that allows them to ensure a coherent application of Article 101...
In short, everything is going well, the Commission had done a magnificent job in preparing the current ECCAS and most of it will have to be renewed. Nevertheless, the evaluation of the 1400/2002 was drafted in fairly similar terms and this did not prevent some fairly heavy developments, and it is therefore necessary to look more closely at the nuances that are expressed in order to grasp what is likely to evolve in the coming year.
In this perspective, we should not expect developments - or reversals - as significant as those which consisted in placing the distribution of new vehicles under the general regime of franchises. In fact, the architecture of the structure built in 2010 consists in leaving the manufacturer-franchisor a very wide latitude of appreciation in the organisation of its vehicle and parts distribution networks, considering that the consumer has nothing to gain from having distributors and their businesses protected against manufacturers and their dominant positions.
On the contrary, from DG Competition's point of view, the efforts made by manufacturers in the context of inter-brand competition are made in order to offer consumers the best service under the best cost conditions and there is therefore every reason to let them do so. The fact that manufacturers need investors to ensure the required capillarity of their networks and the ability of the said distributors to collectively organise their representation to manufacturers should then allow compatibility between the interests of the co-contractors to be ensured without the need to parasitise competition law with concerns about preserving the interests of the weaker party to the contract, as tended to be the case in the exemption regulations before 2010.
In return for this much increased ability of manufacturers to organise their distribution freely, the deal in 2010 was to maintain and strengthen the protections of the interests of all stakeholders in the parts, service and repair markets by systematically weakening the market power that manufacturers and brand networks could acquire in this area.
There is every indication in both the report and the working document that the renegotiation of the RECSA will confirm and update this compromise by continuing to allow manufacturers to do as they please with regard to sales, both online and offline, direct and delegated, active and passive.
On the other hand, as regards after-sales, DG Competition's doctrine will remain very concerned with preserving the interests of the independent repair sector and of all the stakeholders who consider that manufacturers are constantly tempted to abuse the dominant positions that the evolution of technologies can give them.
Maintaining a specific regulation exercising constant vigilance on a few key dossiers and allowing the Commission as well as the NCAs to maintain and update an expertise that assures independent operators and consumers against the risks concerned already seems a likely conclusion. 
Moreover, to avoid that the first part of the compromise interferes with the second, both the stakeholders and the Commission are exercising vigilance. Thus, on several occasions, the risk of misuse of warranties depriving the self-employed of an important part of the market is underlined and this clearly signals this vigilance.
Free access to technical and maintenance information transmitted or not by vehicles is obviously another key point of vigilance and the lobbying of independent repairers and brand networks seems to have borne fruit (1).
From a slightly different perspective, the report mentions the attempts of some NCAs to redefine markets by challenging the separation of sales and after-sales issues and proposing that it is now "systems" (or "bundles") that are in competition (2). The report summarises this position as follows: 
"In some cases, a systems market can be defined which includes motor vehicles and spare parts, taking into account, inter alia, the life of the vehicle and the preferences and purchasing habits of users. In such cases, the relevant market shares would be those for the whole system (multi-brand) rather than for repair and maintenance and the supply of spare parts. During the consultations leading to this report, some NCAs suggested that car markets could be considered as such a system.
The report carefully considers the argument that if this were to be the competitive treatment applied by consumers who would now be comparing systems, then the examination of the aftermarket would no longer be relevant as such. The report appears to reject the argument of these NCAs by stating: 
"On the basis of the information gathered in the course of the assessment, it appears that there are likely to be, at least for passenger cars, brand-specific after-sales markets."
In a symmetrical perspective, the "independents" ensure that manufacturers do not prohibit them from challenging them in the new car market. Thus, the working document stresses that an association of leasers insists that the status of end user should be explicitly granted to leasers in the regulation and not only in the guidelines (3).
The idea is to make the granting of the exemption to manufacturers conditional on several key clauses, including that of "non-discrimination" between end-users: lessors thus require to be treated as if they were private individuals or any other "end-user". 
They must also be free, as purchasers of the vehicles, to pass on, or not, to the manufacturer the name of the end user hirer. This is a way of considering that if the so-called "systems" were to develop and define all or part of the "relevant market", then the competition that the independents defend today on the aftermarket would essentially be claimed on the "systems" market. The Commission indicates in the report that it has taken this argument on board.
Thus, the balance of power now seems to be in line with the 2010 compromise. However, stakeholders and the Commission are alert to developments that could destabilise it and are already lighting the fires.
(1) The report states (p.13): "Much on-board data, or information derived from it (such as the fact that a vehicle has a particular fault or requires routine servicing), can be considered an essential input for repair and maintenance. Where such data or information is not available from other sources and is provided to authorised repairers, it should therefore also be provided on an equal footing to independent operators who are in competition with these repairers.
(2) The Working Paper states (p.131): "some NCAs question whether the hitherto separate markets for the sale of new motor vehicles and for aftersales services may not be tipping towards an integrated multi-brand "system" market.
(3) Working document, p.96: "An association of the vehicle leasing / rental sector argued that the "end user" status of leasing companies should be mentioned explicitly in the VBER and MVBER, as currently it is only found in the SGL. The exemption should be made conditional on (i) OEMs not discriminating between end users; (ii) OEMs not applying registration and use requirements; (iii) OEMs not requiring retention periods for vehicles; and, (iv) purchasers of vehicles not being obliged by OEMs to provide the name of the end customer. 

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