WRITTEN QUESTION E-1239/01

by Graham Watson (ELDR) to the Commission

(26 April 2001)

Subject: Distribution of new cars

The current rules for the distribution of new cars (the so-called block exemption) are under review. What measures are in place to prevent manufacturers from taking tighter control of their market before the revised rules are imposed? Does the Commission have evidence of any such action by manufacturers?

Answer given by Mr Monti on behalf of the Commission

(12 June 2001)

The Honourable Member's question refers to car manufacturers taking tighter control of their market. The Commission presumes that the Honourable Member has in mind those car manufacturers that choose to reduce their reliance on a franchised dealer network in favour of directly owned distribution centres.

The Commission would like to take this opportunity to emphasise that Commission Block Exemption Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article 85(3) of the EC Treaty to certain categories of motor vehicle distribution and servicing agreements(1) does not dictate which of the many available legitimate sales methods a company may adopt; it merely stipulates that a carmaker who elects to sell via a selective and exclusive distribution network must adhere to a set of specific rules. The provisions in the Regulation that give a dealer protection against premature termination of his contract are principally intended to counterbalance the high degree of manufacturer power inherent in a selective and exclusive distribution system operating through dealerships and do not aim to favour sales via a network dealership over direct sales, or vice versa.

The Commission would also underline that the restructuring of dealership networks is a normal commercial decision, and one whose essential legitimacy is recognised in the Regulation. The main rules governing the right to terminate a dealership will be set out in an individual dealer's contract, and will be subject to any over-riding rules of national law. Article 5 of Regulation (EC) No 1475/95 provides additional protection by stipulating that a manufacturer wishing to terminate a dealership must give two years' notice, or one year's notice should a re-structuring of the dealership network become necessary. In case of dispute, the Regulation provides for reference to an expert third party or an arbitrator, without prejudice to the parties' right to apply to a national court.

The Commission notes that several manufacturers have carried out network re-structuring in recent years, and it is aware that DaimlerChrysler is currently re-structuring its network in the United Kingdom. Although most of this re-organisation would seem to simply involve the merging of existing exclusive sales territories and the consequent termination of dealerships, the Commission understands that DaimlerChrysler is taking direct control of Mercedes sales and marketing in several metropolitan areas.

The Commission is also aware that certain british Mercedes dealers have taken DaimlerChrysler to court in the United Kingdom, alleging a breach of contract. While the british courts have the necessary legal competence to apply the Regulation should this be necessary, the Commission would be pleased to answer any questions that the british judges might put as to its interpretation, pursuant to the Notice on Co-operation with National Courts(2).

(1) OJ L 145, 29.6.1995. The Commission adopted an Evaluation Report on Regulation (EC) No 1475/95 on 15 November 2000. The report is available on the Internet at http://europa.eu.int/comm/competition/car_sector/distribution/eval_reg_1475_95/report/

report.

(2) OJ C 39, 13.2.1993.