WRITTEN QUESTION E-3180/02

by Charles Tannock (PPE-DE) to the Commission

(7 November 2002)

Subject: The Extension of the Block Exemption from Competition Law

Could the Commission indicate why it felt it necessary to extend the Block Exemption from Competition Law for the motor trade for three years, even though there had been plenty of time for the industry to prepare for its termination in September of this year?

The Commission retains wide-ranging residual powers in the area of Competition Law. Does it intend to use them against motor manufacturers deemed to have violated EU Competition Law, and, if so, will it respond only to complaints or will it initiate its own investigations?

One of my London constituents experienced problems which occur all too frequently to those who try to purchase right-hand-drive vehicles on the continent.

He tried to purchase a Chrysler Grand Voyager in Holland given the very substantial price differential (more than 30 %) but discovered that:

(a) Chrysler dealers in Holland require a full deposit for the vehicle as opposed to a small percentage deposit if it is a left-hand-drive vehicle;

(b) they cannot deliver in less than twelve months (although delivery time for a left-hand-drive vehicle in Holland is three months and delivery time for a right-hand-drive vehicle in the UK is three months);

(c) a surcharge of EUR 2 000 is levied in Holland for right-hand-drive vehicles (surely not a reflection of the true costs).

Are such practices legal, and, if not, has the Commission considered hiring teams of independent investigators to investigate how widespread they are so long as the Block Exemption is maintained?

Answer given by Mr Monti on behalf of the Commission

(20 December 2002)

The first point raised by the Honourable Member, relating the reasons why the Commission felt it necessary to adopt Regulation (EC) No 1400/2002(1), has already been dealt with by the Commission in detail in the reply to the Honourable Member's Written Question E-0292/02(2).

The second point raised by the Honourable Member concerns the Commission's willingness to enforce Community competition law against motor manufacturers. The Commission's powers in this area are not residual, but are rather granted to the Commission by the Council pursuant to Article 83 of the EC Treaty. The Honourable Member's attention is drawn in particular to Article 83(2)(d) of the EC Treaty.

Council Regulation (EEC) No 17/62(3) gives the Commission wide powers to investigate alleged breaches of the competition rules, either on its own initiative or following complaints. The Commission does not hesitate to use these powers where it deems it appropriate to do so. In recent years, the Commission has carried out extensive investigations using the powers given to it by the Council. So far these investigations have resulted in the Commission imposing a total of around EUR 250 million in fines in four separate cases against three major vehicle manufacturers.

In other individual cases, where consumers complain about problems they have encountered while trying to buy vehicles abroad, the Commission finds it appropriate and more effective from the consumer's point of view to take the matter up with the carmaker concerned.

The Honourable Member should also note that the powers of national competition authorities to enforce Community competition rules will be substantially enhanced by the upcoming modernisation of the procedural rules.

The third point raised by the Honourable Member relates to the level of deposit required by dealers in the Netherlands before they will place an order for a right-hand-drive car. The Honourable Member will be aware that deposits are often used in commercial transactions to cover one party's losses in the event that the other party pulls out of the transaction. Where a consumer no longer wishes to purchase the vehicle that he has ordered, the dealer may be left with a car that he can not immediately re-sell. This risk is higher for vehicles with specifications different to those normally sold by the dealer. It is therefore normal commercial practice for dealers on the continent to ask for a higher deposit before accepting an order for a right-hand-drive vehicle. Despite its monitoring of the market, the Commission is not aware of the practice of full deposit mentioned by the Honourable Member. Should this practice be established and result from an agreement, it would deserve further examination with regards to competition rules.

The Honourable Member's fourth point relates to delivery times. Delays for right-hand-drive vehicles supplied to a continental dealer should normally be comparable to those for left-hand-drive vehicles supplied to the same dealership. The Commission regularly deals with consumer complaints relating to this point. In many cases, contacts with relevant carmakers have led to satisfactory results for consumers in this respect.

The fifth point raised by the Honourable Member relates to right-hand-drive surcharges. There is no rule of Community competition law that obliges a manufacturer to make right-hand-drive vehicles available on the continent at the same price as vehicles with local specifications. The amount that a given variant of a vehicle costs to develop, produce and deliver will depend, amongst other things, on the number of units involved. Since, for example, more left-hand-drive vehicles are generally produced than their right-hand-drive equivalents, production costs for left-hand-drive vehicles are usually lower. To take account of this, most manufacturers impose a surcharge on right-hand-drive vehicles delivered to dealerships in mainland Europe. The level of this surcharge must, however, be objectively justifiable.

The Commission has never considered hiring teams of independent investigators to investigate the matters raised by the Honourable Member. In the Commission's view, the methods already employed to detect and punish infringements of the competition rules have proved themselves adequate.

The new framework laid down by Regulation (EC) No 1400/2002 will reduce the scope for abuse and will make it easier for consumers to buy vehicles in other Member States.

(1) 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 OJ L 203, 1.8.2002.

(2) OJ C 277 E, 14.11.2002, p. 30.

(3) EEC Council: Regulation No 17: First Regulation implementing Articles 85 and 86 of the Treaty, OJ P 13, 21.2.1962.