The major project of the organisation of the automobile distribution

Although still important, the debates on the legal regime applicable to distribution have, since 2010, become less acute. If this is the case, it is essentially because "the die has been cast": the fact that the legal debate has been brought under the general regime has technically clarified and corresponded to a kind of "technical purification" of the issue, which now only raises questions of competitive efficiency and refrains from seeking to preserve the interests of the parties. The current debate confirms these trends and reinforces them with regard to the digital file in particular: with few legal constraints, manufacturers will have to be skilful and imaginative in the face of major developments.  

The draft Vertical Agreements Block Exemption Regulation (VBER) and the guidelines for its interpretation published by the Commission on 9 July confirm what observers of the dossier had foreseen:
i) the Commission is rather satisfied on the "doctrinal" level with the movement it has given to the competition law applicable to car distribution and which consists in treating it like any other selective distribution system, within the framework of a general exemption regulation concerning vertical distribution agreements;
ii) it follows that all attempts by national or European associations representing distributors to revert in one way or another to the more protective provisions of investors' rights that prevailed under the previous regulations and, in particular, Regulation 1400/2002, are highly unlikely to succeed.
As summarised in the words of Joseph Vogel, "the role of competition law is not to protect competitors but to protect competition": Since 2010, this confusion has ceased, the automotive exception and the associated quest for a form of protection for the weaker party to the contract have come to an end and the freedom for manufacturers to organise their selective distribution as they see fit has increased.
 
Symmetrically, for distributors, the conditions of assignment of their contracts, their freedom to transmit information on their customers and, finally, all the elements which they placed at the heart of their freedom of enterprise are no longer guaranteed but must be negotiated contractually with manufacturers either individually or collectively: this is no longer a matter for competition law as long as it does not affect the benefits which the consumer can derive from the distribution system which the General Regulation allows to be exempted.
 
This is the position that was quite clear as early as 2006 when the Commission undertook - when Nelly Kroes was Competition Commissioner - to evaluate the 1400/2002.  
It has not changed since then and - apart from the very particular Austrian decision - the case law has fairly systematically confirmed it: manufacturers, provided they are below the thresholds and find investors to sign the contracts they propose, are under little constraint. Since it is still important for distribution groups to continue to grow and since manufacturers have, since 2010, once again had a say in transfer operations, the ability and opportunity for the said investors to challenge such and such a clause is de facto weak and the system thus structured is quite largely placed structurally under a regime marked by unilateralism. The existence - and vitality - of national and European groups and the charter of good conduct hardly temper this reality.
 
In relation to this now structural characteristic, the few changes that are envisaged - and will, in all likelihood, be validated - to adapt selective distribution to the new world created by the emergence of digital platforms obviously accentuate the line by giving even more latitude to manufacturers. 
Indeed, as Florence Lagarde explained to us on 16 July, the previous regulatory provisions prevented manufacturers from charging distributors different fees depending on whether they reached end customers by mobilising their showrooms and sales teams and/or whether they sold online. The aim was to protect the digital sales channel and, since it was feared that producers in general and car manufacturers in particular would seek to make it impractical for "its distributors", this prohibition of differential pricing was introduced.
 
Although it is not clear what role these legal provisions may have played here, it can be seen today that, while the existence of a selective distribution system has prevented the large online sales platforms from extending their empire to the car industry, digital technology is playing a major role in the car trade. If this is the case, it is because the distribution groups have adapted to it, partly on their own initiative and partly at the instigation of "their" manufacturers.
The manufacturers have changed their attitude and are no longer wary of online vehicle sales and the risk of losing control of customer relations, product policies and margins. On the contrary, in 2021, manufacturers are demanding and obtaining the right to develop their "direct sales" through this means without losing the right to organise their distribution selectively. In this way, they hope to avoid sharing the margin with the distributors on the volumes they sell directly. For online sales (at least partially) provided by the network via its own site, the chat rooms or call centres that it centralises, dual pricing can also make it possible to "move the cursor" and to remunerate the distributor less (or even much less) depending on the estimated importance of the "commercial work" provided.
 
Thus, dual pricing, initially desired by manufacturers to block new entries and refused by the Commission, is now demanded by them to better manage a leaner system "for the benefit of consumers" in which the fat lost will be that imposed by traditional distribution. Secondly, in order to deal with consumer demands and satisfaction in the best possible way and to administer the remuneration system correctly, highly transparent information systems - i.e. systematically transferring all information to headquarters - will have to be set up and fed by the sales outlets.
 
It is possible that the organisation of distribution will have to evolve accordingly in order to adapt to large-scale changes in the division of commercial work because manufacturers would see an interest in doing more to capture a share of the sums that they have hitherto agreed to pass on to the networks. It is not certain that the choice of reducing the number of cases in order to keep the same "formats" at the points of sale is practicable.
Indeed, it would imply giving up too much of the capillarity considered necessary and, for this reason, the concession scheme, carrying out all the businesses (new, used, PR, AV and credit distribution) and making significant specific investments for the grantor, seems to be questioned today. Although there are still major uncertainties and variations in national provisions, manufacturers are apparently seriously considering contractual arrangements that are more like those of "commercial agents", which would make it possible to "cut back" on specific investments while maintaining strong incentives to push the metal in each territory.
 
Finally, insofar as the legal uncertainties seem relatively low, the questions that will arise - for Stellantis and the others - in the next two or three years will concern the choice of contractual arrangements and remuneration systems: the freedom given to manufacturers in this respect has already been greatly increased since 2010 and the project only reinforces this trend.
For this reason, because the pandemic will undoubtedly have left its mark, because electrification will change the relationship between customers and the car and the pace of renewal, and because the importance of digital channels in terms of car sales and services has no reason to diminish, manufacturers have a very large-scale project ahead of them, around which some of the differences in performance that will be seen between them will be determined. 
 
19/07/2021 
 
 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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