# CE2004088EN.01016301.xml

| 8.4.2004 | EN | Official Journal of the European Union | CE 88/163 |
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8.4.2004

EN

Official Journal of the European Union

CE 88/163

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(2004/C 88 E/0172)

WRITTEN QUESTION E-3989/03

by Theresa Villiers (PPE-DE) to the Commission

(7 January 2004)

Subject:   EU rules on sales and servicing

Subject:

| 1. | Can the Commission confirm that one of the aims of Commission Regulation (EC) No 1400/2002 (1) on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector is to enable car owners to use independent garages without infringing the terms of the manufacturer's warranty? |
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1.

Can the Commission confirm that one of the aims of Commission Regulation (EC) No 1400/2002 (1) on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector is to enable car owners to use independent garages without infringing the terms of the manufacturer's warranty?

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| 2. | Does the Commission have any evidence to suggest that car distributors are reducing the warranty period on new cars? |
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2.

Does the Commission have any evidence to suggest that car distributors are reducing the warranty period on new cars?

| 3. | After the initial warranty period has come to an end, can the Commission confirm that subsequent warranty periods are at the discretion of the distributor? |
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3.

After the initial warranty period has come to an end, can the Commission confirm that subsequent warranty periods are at the discretion of the distributor?

| 4. | Under the new Regulation, would it be possible for subsequent warranty periods to include a clause which requires servicing to be carried out only by those agents endorsed by the distributor, with the warranty becoming invalid if this is not done? |
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4.

Under the new Regulation, would it be possible for subsequent warranty periods to include a clause which requires servicing to be carried out only by those agents endorsed by the distributor, with the warranty becoming invalid if this is not done?

| 5. | Has the Commission any evidence to suggest that a similar practice has occurred in relation to second hand cars? Does the Commission believe that current practice, whereby the buyer of a second hand car has to purchase further warranty which usually includes an obligation to use only certain servicing agents, is in keeping with the spirit of the above Regulation? |
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5.

Has the Commission any evidence to suggest that a similar practice has occurred in relation to second hand cars? Does the Commission believe that current practice, whereby the buyer of a second hand car has to purchase further warranty which usually includes an obligation to use only certain servicing agents, is in keeping with the spirit of the above Regulation?

| 6. | Does the Commission have any plans to investigate whether these practices are occurring? |
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6.

Does the Commission have any plans to investigate whether these practices are occurring?

| 7. | What action would the Commission take against distributors and/or Member States if these practices were found to exist? |
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7.

What action would the Commission take against distributors and/or Member States if these practices were found to exist?

| 8. | How does the Commission propose to evaluate the impact of the Regulation? |
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8.

How does the Commission propose to evaluate the impact of the Regulation?

Answer given by Mr Monti on behalf of the Commission

(11 February 2004)

(11 February 2004)

| 1. | The Commission believes that independent repairers provide the consumer with a valuable alternative to authorised garages. One of the aims of Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector is to ensure that independent repairers continue to be able to provide such an alternative, and that they are not foreclosed from the market.
  In accordance with the new rules, during the period of a ‘basic’ manufacturer's warranty or an extended warranty bought from the manufacturer, it is usual and acceptable for the manufacturer to stipulate that work covered by that warranty may only be carried out at repair shops that it has endorsed or authorised.
  However, such ‘warranty work’ normally relates to defects in the new vehicle, and does not include routine servicing or breakdowns not covered by the warranty. If manufacturers were to systematically exclude independent repairers from carrying out such ‘non-warranty work’ on vehicles during the manufacturer's warranty period, this might result in foreclosure effects (2). |
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1.

The Commission believes that independent repairers provide the consumer with a valuable alternative to authorised garages. One of the aims of Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector is to ensure that independent repairers continue to be able to provide such an alternative, and that they are not foreclosed from the market.

In accordance with the new rules, during the period of a ‘basic’ manufacturer's warranty or an extended warranty bought from the manufacturer, it is usual and acceptable for the manufacturer to stipulate that work covered by that warranty may only be carried out at repair shops that it has endorsed or authorised.

However, such ‘warranty work’ normally relates to defects in the new vehicle, and does not include routine servicing or breakdowns not covered by the warranty. If manufacturers were to systematically exclude independent repairers from carrying out such ‘non-warranty work’ on vehicles during the manufacturer's warranty period, this might result in foreclosure effects (2).

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| 2. to 4. | It may be useful to distinguish between the different types of warranty and servicing packages that a car owner may encounter.
  Manufacturers' warranties, as referred to in paragraph 1 above, form part of the distribution agreement between dealers and manufacturers, and are therefore likely to be covered by Article 81 of the EC Treaty, and to fall within the scope of Regulation (EC) No 1400/2002. The Commission does not have any evidence to suggest that car manufacturers are generally reducing the length of the warranty periods that they offer on new cars. Indeed, the Commission has observed a trend towards longer manufacturers' warranties over the past few years.
  Dealer warranties, on the other hand, are financed and issued by the dealer, and result from a contract between the dealer and the consumer, and thus do not form part of the vertical distribution agreement between the manufacturer and the dealer. Such warranties are in general not covered by Article 81 or Regulation (EC) No 1400/2002. However, as the Office of Fair Trading report mentioned below makes plain, warranties described as ‘dealer-based’ are often financed in the main by the manufacturer rather than the dealer. These warranties should therefore be considered to be manufacturers' warranties for the purposes of Community competition law.
  The consumer can choose to extend the protection beyond the end of the manufacturer's warranty by buying an extended warranty from the manufacturer or from a third party, and may also choose to buy a servicing package. If the consumer buys an extended warranty from the manufacturer, the reasoning in paragraph 1 applies. |
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2. to 4.

It may be useful to distinguish between the different types of warranty and servicing packages that a car owner may encounter.

Manufacturers' warranties, as referred to in paragraph 1 above, form part of the distribution agreement between dealers and manufacturers, and are therefore likely to be covered by Article 81 of the EC Treaty, and to fall within the scope of Regulation (EC) No 1400/2002. The Commission does not have any evidence to suggest that car manufacturers are generally reducing the length of the warranty periods that they offer on new cars. Indeed, the Commission has observed a trend towards longer manufacturers' warranties over the past few years.

Dealer warranties, on the other hand, are financed and issued by the dealer, and result from a contract between the dealer and the consumer, and thus do not form part of the vertical distribution agreement between the manufacturer and the dealer. Such warranties are in general not covered by Article 81 or Regulation (EC) No 1400/2002. However, as the Office of Fair Trading report mentioned below makes plain, warranties described as ‘dealer-based’ are often financed in the main by the manufacturer rather than the dealer. These warranties should therefore be considered to be manufacturers' warranties for the purposes of Community competition law.

The consumer can choose to extend the protection beyond the end of the manufacturer's warranty by buying an extended warranty from the manufacturer or from a third party, and may also choose to buy a servicing package. If the consumer buys an extended warranty from the manufacturer, the reasoning in paragraph 1 applies.

| 5. | The Honourable Member should note that the sale of used cars does not fall within the scope of Regulation (EC) No 1400/2002 (3), and that such products are dealt with under the Commission's general block exemption for vertical restraints, Regulation (EC) No 2790/1999 (4) instead. |
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5.

The Honourable Member should note that the sale of used cars does not fall within the scope of Regulation (EC) No 1400/2002 (3), and that such products are dealt with under the Commission's general block exemption for vertical restraints, Regulation (EC) No 2790/1999 (4) instead.

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| 6. and 7. | It goes without saying that the Commission takes this matter extremely seriously and will duly investigate all complaints that appear to show that manufacturers' warranty schemes do not comply with the letter and spirit of Regulation (EC) No 1400/2002. However, at the present stage the Commission takes the view that it would be inappropriate to speculate as to what specific action it would take in a hypothetical instance, since this would depend on the exact facts of the case.
  The Commission would also like to take this opportunity to acknowledge the recent important work in this area carried out by the United Kingdom (UK) Office of Fair Trading (OFT) (5). |
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6. and 7.

It goes without saying that the Commission takes this matter extremely seriously and will duly investigate all complaints that appear to show that manufacturers' warranty schemes do not comply with the letter and spirit of Regulation (EC) No 1400/2002. However, at the present stage the Commission takes the view that it would be inappropriate to speculate as to what specific action it would take in a hypothetical instance, since this would depend on the exact facts of the case.

The Commission would also like to take this opportunity to acknowledge the recent important work in this area carried out by the United Kingdom (UK) Office of Fair Trading (OFT) (5).

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| 8. | The Commission would draw the Honourable Member's attention to the efforts made during the transitional period to clarify the way that the Regulation applies to warranty schemes, and in particular to the guidance given to all interested parties through an explanatory brochure (6) and a set of Frequently Asked Questions (7).
  Now that the transitional period is over, and the Regulation is bedding-in, the Commission will shift its efforts towards more focused monitoring and enforcement. The Commission will also carry out an assessment of the operation of the block exemption in accordance with Article 11 of Regulation (EC) No 1400/2002. |
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8.

The Commission would draw the Honourable Member's attention to the efforts made during the transitional period to clarify the way that the Regulation applies to warranty schemes, and in particular to the guidance given to all interested parties through an explanatory brochure (6) and a set of Frequently Asked Questions (7).

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Now that the transitional period is over, and the Regulation is bedding-in, the Commission will shift its efforts towards more focused monitoring and enforcement. The Commission will also carry out an assessment of the operation of the block exemption in accordance with Article 11 of Regulation (EC) No 1400/2002.

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(1)  OJ L 203, 1.8.2002, p. 30.

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(2)  See the reply to question 38 in the Commission's Explanatory Brochure for more explanation on this point.

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(3)  See Article 2(1) of Regulation (EC) No 1400/2002.

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(4)  Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, OJ L 336, 29.12.1999.

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(5)  OFT report entitled ‘New car warranties — Report of the market study’ (December 2003).

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(6)  See in particular Section 5.1.2.

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(7)  See the replies to questions 1 and 2. Both the Brochure and the FAQs are available on the Commission's website at: http://europa.eu.int/comm/competition/car_sector/distribution/

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