Communication pursuant to Article 5 of Council Regulation No 19/65/EEC of 2 March 1965 on the application of Article 81(3) of the Treaty to categories of agreements and concerted practices (Text with EEA relevance)
Date: 2002-03-16
Institutions: European Commission
Subjects: competition law, motor vehicle industry, sale, vertical agreement

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Communication pursuant to Article 5 of Council Regulation No 19/65/EEC of 2 March 1965 on the
application of Article 81(3) of the Treaty to categories of agreements and concerted practices

(2002/C 67/02)

(Text with EEA relevance)

The Commission invites all interested parties to send their comments on the following draft Commission
Regulation (EC) on the application of Article 81(3) of the Treaty to categories of vertical agreements and
concerted practices in the motor vehicle industry. The draft Regulation is accompanied by an explanatory
memorandum.

Comments should be sent to the Commission at the following address not later than one month after the
date of the present publication:

European Commission
Directorate-General for Competition
Directorate F, Unit F2 (cid:151) Motor vehicles and other means of transport
B-1049 Brussels
E-mail: comp-draft-car-ber@cec.eu.int

Draft

COMMISSION REGULATION (EC) No . . ./. . .

of [. . .]

on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted
practices in the motor vehicle industry

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 19/65/EEC of 2 March
1965 on the application of Article 85(3) of
the Treaty to
certain categories of agreements and concerted practices (1),
as last amended by Regulation (EC) No 1215/1999 (2), and in
particular Article 1 thereof,

Having published a draft of this Regulation (3),

Having consulted the Advisory Committee on restrictive
practices and dominant positions,

Whereas:

(1) Regulation No 19/65/EEC empowers the Commission to
apply Article 81(3) of the Treaty (formerly Article 85(3))
by regulation to certain categories of vertical agreements
falling within
and corresponding concerted practices
Article 81(1).

(2) Experience acquired with distribution and after

sales
servicing agreements in the automobile industry makes
it possible to define categories of vertical agreements

(1) OJ 36, 6.3.1965, p. 533.
(2) OJ L 148, 15.6.1999, p. 1.
(3) OJ C . . .

which can be
conditions laid down in Article 81(3).

regarded as normally satisfying the

(3) Experience acquired with markets for the distribution of
motor vehicles and markets for spare parts and repair and
maintenance services for motor vehicles leads to the
conclusion that rules stricter than those provided for by
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 (4) are necessary in this sector,
in
particular where a supplier has recourse to selective or
exclusive distribution.

vehicles,

(4) This Regulation applies to vertical agreements for the
purchase or
vertical
sale of new motor
agreements for the purchase or sale of spare parts for
motor vehicles and vertical agreements for the purchase
and sale of repair and maintenance services where these
agreements are concluded between non-competing under-
takings, between certain competitors or by certain
associations of retailers of goods. This Regulation also
applies to these vertical agreements when they contain
ancillary provisions on the assignment or use of intel-
lectual property rights. For the purposes of this Regu-
lation, the term (cid:145)vertical agreements(cid:146) includes the corre-
sponding concerted practices.

(4) OJ L 336, 29.12.1999, p. 21.

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Recitals on the general conditions for coverage by this Regu-
lation

distribution, no such market share threshold is necessary
for this Regulation to apply.

(5) The benefit of the block exemption should be limited to
vertical agreements for which it can be assumed with
they satisfy the conditions of
sufficient certainty that
Article 81(3).

(6) Vertical agreements of the categories defined in this Regu-
lation can improve economic efficiency within a chain of
production or distribution by facilitating better coor-
in
dination between the participating undertakings;
particular, they can lead to a reduction in the transaction
and distribution costs of
the parties and to an opti-
misation of their sales and investment levels.

(7) The likelihood that such efficiency-enhancing effects will
outweigh any anti-competitive effects due to restrictions
contained in vertical agreements depends on the degree of
market power of
concerned and
to which those undertakings
therefore on the extent
face competition from other
suppliers of goods or
services regarded by the buyer as interchangeable or
substitutable for one another, by reason of the products’
characteristics, their prices and their intended use.

the undertakings

This

sector

severely

benefits.

anti-competitive

(8) It can be presumed that, where a supplier’s share of the
relevant market does not exceed the thresholds provided
for in the general conditions for the application of this
Regulation, vertical agreements which do not contain
restraints
certain types of
in production or
generally lead to an improvement
distribution and allow consumers a fair share of
the
specific Regulation
resulting
contains stricter rules than those provided for by Regu-
lation (EC) No 2790/1999, and it can therefore in
particular be presumed that
in general distribution
agreements have such advantages where the supplier
concerned has a market share of up to 30 %, or of up
to 40 % in case of quantitative selective distribution for
the sale of new motor vehicles. In the case of vertical
agreements containing exclusive supply obligations, it is
the market share of the buyer which is relevant for deter-
mining the overall effects of such vertical agreements on
the market.

(9) Above the market share thresholds provided for in the
general conditions for the application of this Regulation,
there can be no presumption that vertical agreements
falling within the scope of Article 81(1) will usually give
rise to objective advantages of such a character and
magnitude
the disadvantages
which they create for competition. However, where the
recourse to purely qualitative selective
supplier has

to compensate

for

as

(10) To prevent a supplier from terminating a contract because
a distributor or a repairer engages in pro-competitive
behaviour, such as active or passive sales to foreign
consumers, multi-branding or
subcontracting of after
sales services, which may not be restricted under this
Regulation, every notice of
termination must clearly
state the reasons for the termination. Furthermore, a
period of notice, normally of two years is introduced in
order to strengthen the independence of distributors from
their suppliers.

(11) In order to favour a quick resolution of disputes which
may arise between the parties to a distribution agreement
and which might otherwise hamper effective competition,
the Regulation should only cover agreements which
provide
each party to have
recourse to an independent expert third party or arbi-
trator,
in particular where notice is given to terminate
an agreement.

the possibility of

for

Recitals concerning the hardcore restrictions

(12) This Regulation should not exempt vertical agreements
severely anti-competitive
containing certain types of
restraints which are not indispensable to the attainment
of the positive effects mentioned above, irrespective of the
market share of the undertakings concerned.

(13) This is in particular the case for vertical agreements
containing severely anti-competitive restraints, such as
minimum and fixed resale prices, as well as certain
types of territorial protection, which should not benefit
from the block exemption established by this Regulation.

(14) Retailers may in general not be prohibited from carrying
out active or passive sales of contract goods or corre-
sponding goods to any end users within the meaning of
including end users who have given author-
Article 1,
isation to an intermediary or purchasing agent
to
purchase, take delivery, transport or store a new motor
vehicle on their behalf.

(15) Members of a selective distribution system may in
particular be neither directly nor
indirectly restricted
from actively or passively selling or advertising contract
including the
and corresponding goods by any means,
Internet or Internet referral sites,
to end users within
the meaning of Article 1, including their intermediaries
or purchasing agents,
in markets where the supplier
operates a selective distribution system.

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(16) The right

to prohibit an authorised distributor

the only restriction on active sales

from
operating out of an unauthorised place of establishment
is
in selective
distribution systems which may, under certain conditions,
be covered by this Regulation. However, this restriction
will not be covered by this Regulation if it restricts the
distributor’s business from expanding at the authorised
place of establishment by, for instance, limiting the infra-
structure necessary to allow increases in sales volumes,
including increases brought about by Internet sales.

not cover vertical agreements which do not enable a
distributor
to order, stock and sell any such vehicle
which corresponds to a model within its contract range.
Discriminatory
supply
objectively
unjustified
regarding delivery times or
conditions,
prices,
to corresponding
supplier
vehicles, are to be considered as a restriction on the
ability of the distributor to sell such vehicles.

or
in particular
the
by

applied

or

the

purchase

remuneration

(17) If the supplier were to limit the distributor’s sales to end
users in other Member States, for instance by making the
distributor’s
price
dependent on the destination of the vehicles or on the
place of residence of the end users, this would amount to
an indirect restriction of sales. Other examples of indirect
restrictions on sales include supply quotas based on a
sales territory other than the common market, whether
or not these are combined with sales targets, or sales
targets based on a
than the
common market. Bonus systems based on the destination
of the vehicles or any form of discriminatory product
the
allocation, whether
production output or otherwise, may also amount
to
indirect restrictions on sales.

in the case of

territory other

shortage of

sales

(18) Vertical agreements that do not oblige the motor vehicle
distributors and repairers within a supplier’s distribution
system to honour warranties, perform free servicing and
carry out recall work in respect of motor vehicles sold by
the manufacturer in question anywhere in the common
sales.
market amount
in order to allow sales by motor vehicle
Furthermore,
distributors
common
throughout
to end users
market,
this Regulation does not cover distribution
agreements which do not require the repairers within
the supplier’s system to carry out repair and maintenance
services for the contract goods and corresponding goods
wherever these goods are sold in the common market.

to an indirect

restriction of

the

(19) This Regulation does not cover any vertical agreement
that restricts the sale of original spare parts or spare
parts of matching quality by members of the distribution
system to independent repairers which use them for the
provision of repair or maintenance services. Without
access to such spare parts, these independent repairers
would not be able to compete effectively with the auth-
orised repairers within the distribution system of a vehicle
manufacturer,
since they could not offer consumers
services of good quality which contribute to the safe
and reliable functioning of motor vehicles.

(20) In order to give end users the right to purchase any motor
vehicle which is offered within another Member State
from a distributor of their choice, this Regulation does

satisfied if

subcontracts

including the honouring of warranties,

(21) Motor vehicles are expensive and technically complex
mobile goods which require repair and maintenance
services at regular and irregular intervals. However, it is
not indispensable for distributors of new motor vehicles
to also carry out repair and maintenance services. The
legitimate interest of suppliers and consumers can be
these
the distributor
fully
services,
free
servicing and recall work, to a repairer or to a number
of repairers within the distribution system of the supplier
and if the consumer is duly informed about the location
of the official repairer in case of subcontracting. Nor is it
necessary, in order to adequately provide for repair and
maintenance services, for repairers to also sell new motor
vehicles. This Regulation therefore does not cover vertical
agreements containing any direct or indirect obligation or
incentive which leads to the linking of sales and after sales
service activities or which makes the performance of one
of these activities dependent on the performance of the
other; this is in particular the case where the remun-
authorised repairers
eration of
relating to the purchase or sale of goods or services
necessary for one activity is made dependent on the
sales of goods or services relating to the other activity,
or where all such goods are indistinctly aggregated into a
single remuneration or discount system.

the distributors or

(22) In order to ensure effective competition on the main-
tenance and repair markets and to allow repairers to
offer
final consumers competing spare parts such as
original spare parts and spare parts of matching quality,
this Regulation does not cover vertical agreements which
hinder the repairers belonging to the distribution network
of a vehicle manufacturer, distributors of spare parts, end
users or independent repairers from sourcing spare parts
from
from the manufacturer of such spare parts or
another third party of their choice.

(23) Furthermore, in order to give authorised and independent
repairers and consumers genuine choice as regards spare
parts, this Regulation does not cover agreements by which
a manufacturer of motor vehicles limits the ability of a
manufacturer of original spare parts to place its trade
mark or logo on these parts effectively and in a visible
manner, whether the parts are supplied to the manu-
facturer of vehicles for assembly or
to repairers for
replacement purposes.

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(24) This Regulation does not cover vertical agreements which
restrict the right of authorised repairers to use spare parts
of matching quality for the repair or maintenance of a
motor vehicle. However, in view of the vehicle manufac-
in repairs under
turers’ direct contractual
warranty, free servicing, and recall operations, this Regu-
lation covers an obligation for the authorised repairer to
use original spare parts supplied by the vehicle manu-
facturer for these repairs.

involvement

obligation to employ brand specific sales personnel, are
considered to be non-exempted indirect non-compete
obligations. Similarly, an obligation to display the full
range of motor vehicles constitutes a non-exempted
indirect non-compete obligation if it makes the sale or
display of vehicles manufactured by different undertakings
impossible or unreasonably difficult.

tools,

clubs,

automobile

independent

information,

repair equipment or

(25) In order to protect effective competition on the market
for repair and maintenance services and to prevent fore-
repairers, manufacturers must
closure of
allow interested independent operators
to have full
access to all technical information, diagnostic and other
including all relevant software, and
equipment,
training required for
the repair and maintenance of
motor vehicles.
Independent operators who must be
allowed such access include independent repairers, manu-
tools, publishers of
facturers of
technical
roadside
assistance operators, operators offering inspection and
testing services
and operators offering training for
repairers. The conditions of access should in particular
not discriminate between authorised and independent
operators; access should be given in due course upon
the information should take
request;
account of
independent
operator uses it. A manufacturer should give independent
repairers access to technical information on new motor
vehicles at the same time as such access is given to its
authorised repairers and should not oblige an independent
repairer to purchase more than the necessary information
needed for the type of repair or maintenance work to be
executed.
for
suppliers to withhold access to technical
information
which might allow a third party to bypass or disarm
on-board anti-theft devices. Moreover,
the legitimate
interest of the motor vehicle manufacturer to decide the
mode of exploitation of its intellectual property rights and
know-how has to be taken into account when granting
licences to third parties. However, these rights must be
exercised in a manner which avoids any type of abuse.

the price for
extent

legitimate and proper

to which the

is, however,

the

It

(27) In order to ensure that repairers can carry out repairs or
maintenance on all motor vehicles, this Regulation does
not exempt any obligation limiting the ability of repairers
of motor vehicles
to provide repair or maintenance
services for brands of competing suppliers.

the

to obligations which have

(28) In addition, specific conditions are required to exclude
in a selective distribution system
certain restrictions
from being covered by this Regulation. This applies in
particular
effect of
preventing the members of a
selective distribution
system from selling the brands of particular competing
suppliers, which could easily lead to foreclosure of
certain brands. Two further conditions are necessary in
order to create opportunities for distributors who wish
to seize market opportunities outside their place of estab-
lishment, for market integration and in order to increase
price
consumers where
suppliers have a certain overall presence. To this end a
restriction imposed on the authorised distributor of
passenger cars as to its ability to establish itself in any
Member State, is excluded from the cover of the Regu-
lation. Moreover,
for suppliers of new motor vehicles
other
than passenger cars, a condition limiting the
duration of restrictions on the place of establishment of
a distributor to five years is necessary in order to allow
both parties to adapt their agreements to changing market
conditions.

competition and choice of

(29) Moreover,

this Regulation does not cover

limiting the ability of a retailer to sell
for motor vehicles.

restrictions
leasing services

Recitals on specific conditions

(26) In order to ensure access to or to prevent collusion on the
relevant markets and to give distributors opportunities to
sell vehicles of brands from two or more manufacturers,
that are not connected undertakings, certain specific
conditions are to be attached to the block exemption.
To this end, non-compete obligations should not be
exempted. In particular, this Regulation does not cover
any prohibition on sales of competing makes. This is
without prejudice to the ability of the manufacturer to
require the distributor to display the vehicles in brand-
specific areas of the showroom in order to avoid brand
further requirements, such as an
confusion. However,

Recitals on withdrawal and non-application of this Regulation

(30) The market-share

limitations,

the non-exemption of
certain vertical agreements, and the conditions provided
for in this Regulation normally ensure that the agreements
to which the block exemption applies do not enable the
participating undertakings to eliminate competition in
respect of a substantial part of the goods or services in
question.

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this may occur

the block exemption;

(31) In particular cases in which the agreements falling under
this Regulation nevertheless have effects incompatible
with Article 81(3), the Commission may withdraw the
benefit of
in
particular where the buyer has significant market power
on the relevant market on which it resells the goods or
provides
the services or where parallel networks of
vertical agreements have similar effects which significantly
restrict access
to a relevant market or competition
thereon; such cumulative effects may for example arise
in the case of selective distribution. The Commission
may also withdraw the benefit of the block exemption if
competition is significantly restricted in a market due to
the presence of a supplier with market power or if prices
and conditions of supply to distributors of the motor
vehicles
as between geographic
markets. It may also withdraw the benefit of the block
exemption if discriminatory prices, supplements or sales
conditions are applied for the supply of corresponding
in addition
goods,
to the price for
in the contract
the relevant model
range, unjustifiable supplements such as those which
take account of the different national taxes.

in particular if the supplier charges,

substantially

differ

(32) Regulation No 19/65/EEC empowers the authorities of
the block
Member States to withdraw the benefit of
exemption in respect of vertical agreements having
effects incompatible with the conditions laid down in
Article 81(3), where such effects are felt in their respective
territory, or in a part thereof, and where such territory
has the characteristics of a distinct geographic market;
Member States should ensure that the exercise of this
power of withdrawal does not prejudice the uniform
application throughout
the
Community competition rules or the full effect of the
measures adopted in implementation of those rules.

the common market of

(33) In order to strengthen supervision of parallel networks of
vertical agreements which have similar restrictive effects
and which cover more than 50 % of a given market, the
Commission may declare this Regulation inapplicable to
vertical agreements containing specific restraints relating
to the market concerned,
thereby restoring the full
application of Article 81 to such agreements.

General recitals

(34) This Regulation is without prejudice to the application of

Article 82.

measures adopted in implementation of
including this Regulation,

those rules,

HAS ADOPTED THIS REGULATION:

Article 1

Definitions

For the purposes of this Regulation:

(a)

(b)

(c)

(d)

actual or potential
(cid:145)Competing undertakings(cid:146) means
suppliers on the same product market;
the product
market includes goods or services which are regarded by
the buyer as interchangeable with or substitutable for the
contract goods or services, by reason of
the products’
characteristics, their prices and their intended use.

(cid:145)Non-compete obligation(cid:146) means any direct or indirect obli-
gation causing the buyer not to manufacture, purchase, sell
or
resell goods or services which compete with the
contract goods or services, or any direct or indirect obli-
gation on the buyer to purchase from the supplier or from
another undertaking designated by the supplier more than
50 % of the buyer’s total purchases of the contract goods
or services and their substitutes on the relevant market,
calculated on the basis of the value of its purchases in the
preceding
a
requirement that the distributor sell motor vehicles from
other suppliers in separate sales areas of the showroom in
order to avoid confusion between the makes.

year. This does not

calendar

include

(cid:145)Exclusive supply obligation(cid:146) means any direct or indirect
obligation causing the supplier to sell the goods or services
specified in the agreement only to one buyer inside the
Community for the purposes of a specific use or for resale.

(cid:145)Selective distribution system(cid:146) means a distribution system
where the supplier undertakes to sell the contract goods or
services, either directly or indirectly, only to distributors or
repairers selected on the basis of specified criteria and
to
where these distributors or repairers undertake not
sell such goods or services to unauthorised distributors
or unauthorised repairers, without prejudice
to the
ability to sell spare parts and the obligation to provide
all technical information, diagnostic equipment, tools and
training required for the repair and maintenance of motor
vehicles or
the implementation of environmental
protection measures to unauthorised repairers.

for

(35) In accordance with the principle of

the primacy of
Community law, no measure taken in pursuance of
national
the
uniform application throughout the common market of
the Community competition rules or the full effect of any

laws on competition should prejudice

(e)

(cid:145)Quantitative selective distribution system(cid:146)
is a selective
distribution system where the supplier uses criteria for
the selection of distributors or repairers which directly
limit the number of selected distributors or repairers.

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(f)

is a selective
(cid:145)Qualitative selective distribution system(cid:146)
distribution system where the supplier uses criteria for
the selection of distributors or repairers which are only
qualitative in nature, are required by the nature of the
contract good or service, are laid down uniformly for all
potential members of
the distribution system, are not
applied in a discriminatory manner, and do not directly
limit the number of distributors or repairers.

(g)

(cid:145)Intellectual property rights(cid:146)
rights, copyright and neighbouring rights.

includes industrial property

(h)

(cid:145)Know-how(cid:146) means a package of non-patented practical
information, resulting from experience and testing by the
supplier, which is secret, substantial and identified: in this
context, (cid:145)secret(cid:146) means that the know-how, as a body or in
the precise configuration and assembly of its components,
is not generally known or easily accessible;
(cid:145)substantial(cid:146)
means that the know-how includes information which is
indispensable to the buyer for the use, sale or resale of the
contract goods or services;
the
know-how must be described in a sufficiently compre-
hensive manner so as to make it possible to verify that
it fulfils the criteria of secrecy and substantiality.

(cid:145)identified(cid:146) means that

(i)

(cid:145)Buyer(cid:146), whether distributor or repairer, includes an under-
taking which, under an agreement falling within Article
81(1) of the Treaty, sells goods or services on behalf of
another undertaking.

(j)

(cid:145)Authorised repairer(cid:146)
is a provider of repair and main-
tenance services for motor vehicles operating within the
distribution system set up by a supplier of motor vehicles.

(k)

(cid:145)Unauthorised or independent repairer(cid:146)
is a provider of
repair and maintenance services for motor vehicles not
operating within the distribution system set up by a
supplier for its motor vehicles.

(l)

(cid:145)Motor vehicle(cid:146)
roads and having three or more road wheels.

is a vehicle intended for use on public

(m) (cid:145)Passenger car(cid:146) is a motor vehicle intended for the carriage
of passengers and comprising no more than eight seats in
addition to the driver’s seat.

(n) The (cid:145)contract range(cid:146) refers to all the different models of
motor vehicles purchased by the distributor from the
supplier.

(o) A (cid:145)motor vehicle which corresponds to a model within the

contract range(cid:146) is such a vehicle:

(cid:151) manufactured or assembled in volume by the manu-

facturer, and

(cid:151) identical as to body style, drive-line, chassis, and type
of motor with a vehicle within the contract range, and

(cid:151) which is the subject of a distribution agreement with
another undertaking within the distribution system set
up by the manufacturer or with his consent.

(p)

(cid:145)Spare parts(cid:146) are parts which are to be installed in or upon
a motor vehicle so as to replace components of
that
vehicle.

(q)

(r)

(s)

(t)

(u)

(cid:145)Original spare parts(cid:146) are spare parts which are produced
by the manufacturer of the components which are or were
used for the assembly of the new motor vehicle and which
are manufactured on the same production line as these
components. It is for the spare part producer to prove
that these spare parts match the quality of the components
used for the assembly of the new motor vehicles.

(cid:145)Spare parts of matching quality(cid:146) are spare parts which
match the quality of the components which are or were
used for the assembly of a new motor vehicle and which
are produced by the producer of these components or
another undertaking and for which the
spare part
producer can prove that they match the quality of those
components.

(cid:145)Undertakings within the distribution system(cid:146) are the
manufacturer and undertakings which are entrusted by
the manufacturer or with the manufacturer’s consent
with the distribution or
repair or maintenance of
contract goods or corresponding goods.

(cid:145)End user(cid:146)
includes leasing companies unless the leasing
contracts used provide for a transfer of ownership or an
option to purchase the vehicle prior to the expiry of the
contract.

in the sense of Article 4(2) shall
(cid:145)Independent operator(cid:146)
include in particular independent repairers, manufacturers
technical
of
information,
assistance
operators, operators offering
inspection and testing
services and operators offering training for repairers.

repair equipment or
automobile

tools, publishers of

roadside

clubs,

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Article 2

Scope of application

(b) the supplier is a manufacturer and a distributor of goods,
while the buyer is a distributor not manufacturing goods
competing with the contract goods; or

1.
Pursuant to Article 81(3) of the Treaty and subject to the
provisions of this Regulation, it is hereby declared that Article
81(1) shall not apply to agreements or concerted practices
entered into between two or more undertakings each of
which operates,
the agreement, at a
the purposes of
different level of the production or distribution chain, where
the agreements or concerted practices relate to the conditions
under which the parties may purchase, sell or resell motor
vehicles, spare parts for motor vehicles or repair and main-
tenance services for motor vehicles ((cid:145)vertical agreements(cid:146)).

for

This exemption shall apply to the extent

2.
that such
vertical agreements contain restrictions of competition falling
within the scope of Article 81(1) ((cid:145)vertical restraints(cid:146)).

3.
The exemption provided for in paragraph 1 shall apply to
vertical agreements entered into between an association of
undertakings and its members, or between such an association
and its suppliers, only if all its members are retailers of motor
vehicles or spare parts for motor vehicles and if no individual
member of the association, together with its connected under-
takings, has a total annual turnover exceeding EUR 50 million;
vertical agreements entered into by such associations shall be
covered by this Regulation without prejudice to the application
of Article 81 to horizontal agreements concluded between the
members of
the association or decisions adopted by the
association.

4.
The exemption provided for in paragraph 1 shall apply to
vertical agreements containing provisions which relate to the
assignment to the buyer or use by the buyer of intellectual
property rights, provided that
those provisions do not
constitute the primary object of such agreements and are
directly related to the use, sale or resale of goods or services
by the buyer or its customers. The exemption applies on
condition that, in relation to the contract goods or services,
those provisions do not contain restrictions of competition
having the same object or effect as vertical restraints which
are not exempted under this Regulation.

The exemption provided for in paragraph 1 shall not
5.
apply to vertical agreements entered into between competing
undertakings; however, it shall apply where competing under-
takings enter into a non-reciprocal vertical agreement and:

(a) the buyer has a total annual

turnover not exceeding

EUR 100 million; or

(c)

the supplier is a provider of services at several
levels of
trade, while the buyer does not provide competing services
at
trade where it purchases the contract
services.

the level of

Article 3

General conditions for applicability of the Regulation

1.
Subject to paragraphs 2, 3, 4, 5, 6 and 7 of this Article,
the exemption provided for
in Article 2 shall apply on
the supplier’s market share on the relevant
condition that
market on which it sells the new motor vehicles, spare parts
for motor vehicles or repair and maintenance services does not
exceed 30 %.

2.
By way of exception to paragraph 1 the market share
threshold for the application of Article 2 shall be 40 % for
selective distribution
agreements
systems for the sale of new motor vehicles.

establishing quantitative

The market share thresholds of paragraph 1 and 2 shall
3.
not apply to agreements establishing qualitative selective
distribution systems.

4.
In the case of vertical agreements containing exclusive
supply obligations, the exemption provided for in Article 2
shall apply on condition that the market share held by the
buyer does not exceed 30 % of the relevant market on which
it purchases the contract goods or services.

The exemption provided for in Article 2 shall apply on
5.
condition that
the vertical agreement concluded with a
distributor or repairer provides that if a supplier wishes to
give notice of termination, the notice must include detailed
reasons for the termination in order to prevent a supplier to
end a vertical agreement with a distributor because of practices
which may not be restricted under this regulation, in particular
those practices, restriction of which results in the misappli-
cation of the exemption either to the vertical agreement as a
whole, in accordance with Article 4, or to the restriction in
question, in accordance with Article 5.

The exemption provided for in Article 2 shall apply on
6.
condition that
the vertical agreement concluded with a
distributor or repairer provides that if a supplier wishes to
give notice of termination, the period of notice for regular
termination of the agreement has to be at least two years for
both parties; this period is reduced to at least one year where:

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(a) the supplier is obliged by law or by special agreement to
pay appropriate compensation on termination of
the
agreement; or

(cid:151) the restriction of sales to end users by a distributor

operating at the wholesale level of trade,

(b) the supplier terminates the agreement where it is necessary
to reorganise the whole or a substantial part of
the
network.

(cid:151) the restriction of sales of new motor vehicles and spare
parts to unauthorised distributors by the members of a
selective distribution system, subject to the provisions
of (e) below,

The exemption provided for in Article 2 shall apply on
7.
condition that the vertical agreement provides for the parties to
refer disputes concerning the fulfilment of their contractual
obligations to an independent expert third party or arbitrator.
Such disputes may for instance arise over the application of
the attainment of sales
agreed criteria to set sales targets,
targets or supply obligations,
the implementation of stock
requirements, the implementation of an obligation to provide
or use demonstration vehicles, whether the prohibition to
operate out of an unauthorised place of establishment limits
the ability of the retailer’s business to expand or whether the
termination of an agreement is justified by the reasons given in
the notice. This possibility is without prejudice to each party’s
right to apply to a national court.

Article 4

Hardcore restrictions

1.
The exemption provided for in Article 2 shall not apply
to vertical agreements which, directly or indirectly, in isolation
or in combination with other factors under the control of the
parties, have as their object:

(a)

the restriction of the distributor’s or repairer’s ability to
determine its sale price, without prejudice to the supplier’s
ability to impose a maximum sale price or to recommend a
sale price, provided that this does not amount to a fixed or
minimum sale price as a result of pressure from, or
incentives offered by, any of the parties;

(b) the restriction of

the
customers to whom, the distributor or repairer may sell
the contract goods or services, except:

the territory into which, or of

(cid:151) the restriction of active sales into the exclusive territory
or to an exclusive customer group reserved to the
supplier or allocated by the supplier
to another
distributor or repairer, where such a restriction does
not limit sales by the customers of the distributor or
repairer,

(cid:151) the restriction of the buyer’s ability to sell components,
to
the purposes of
supplied
customers who would use them to manufacture the
same type of goods as those produced by the supplier;

incorporation,

for

(c)

the restriction of cross-supplies between distributors or
repairers within a selective distribution system,
including
between distributors or
repairers operating at different
levels of trade;

(d) the restriction of active or passive sales of motor vehicles,
spare parts for all motor vehicles or repair and main-
tenance services to end users by members of a selective
distribution system operating at the retail
level of trade,
without prejudice to the ability to prohibit a member of
a quantitative selective distribution system from operating
out of an unauthorised place of establishment, provided
that such a prohibition does not limit the distributor’s or
repairer’s business expansion at the authorised place of
establishment;

(e)

the restriction of the sales of spare parts for motor vehicles
by members of a selective distribution system to inde-
pendent repairers which use these parts for the repair
and maintenance of a motor vehicle;

(f)

the restriction of the distributor’s ability to sell any motor
vehicle which corresponds to a model within the contract
range of the distributor;

(g) the restriction of the ability of the distributor of motor
vehicles to subcontract the provision of repair and main-
tenance services to authorised repairers on condition that
the distributor duly informs the consumer before the
conclusion of the sales contract about the location of the
authorised repairer;

(h) the restriction of the repairer’s ability to limit its activities
to the provision of repair and maintenance services and the
distribution of spare parts;

(i)

(j)

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the restriction agreed between a supplier of original spare
parts or spare parts of matching quality, repair tools or
diagnostic or other equipment and a manufacturer of
motor vehicles, which limits the supplier’s ability to sell
these goods to independent distributors, authorised or inde-
pendent repairers or end-users which use them for the
repair or maintenance of motor vehicles;

facture, purchase, sell or resell motor vehicles or to provide
repair or maintenance services;

(d) any direct or indirect obligation limiting the ability of the
repairer of motor vehicles to provide repair or maintenance
services for brands of competing suppliers;

the restriction of a distributor’s or repairer’s ability to
obtain original spare parts or spare parts of matching
quality from a third undertaking of its choice and to use
them for the repair and maintenance of motor vehicles,
without prejudice to the ability of a supplier of new
motor vehicles to require the use of original spare parts
supplied by it for repair under warranty, free servicing and
vehicle recall work;

(k) the restriction agreed between a manufacturer of motor
vehicles which uses components for the initial assembly
of motor vehicles and the supplier of such components
which limits the latter’s ability to place its trade mark or
logo effectively and in an easily visible manner on the
components supplied or on original spare parts and spare
parts of matching quality.

tools,

2.
The exemption provided for in Article 2 shall not apply
where the supplier of motor vehicles refuses to give inde-
information, diag-
pendent operators access to any technical
nostic and other equipment,
including any relevant
software, and training required for the repair and maintenance
of these motor vehicles or for the implementation of environ-
mental protection measures. Access has to be given to inde-
pendent operators in a non-discriminatory and proportionate
way. If the relevant item is covered by an intellectual property
right or constitutes know-how, access shall not be withheld in
any abusive manner.

Article 5

Specific conditions

The exemption provided for in Article 2 shall not apply to any
of the following obligations contained in vertical agreements:

(e) any direct or indirect obligation causing the members of a
the brands of

to sell

selective distribution system not
particular competing suppliers;

(f) any direct or indirect obligation on any member of a
selective distribution system for
the distribution of
passenger cars limiting its ability to establish sales or
delivery outlets or warehouses at other locations within
the common market;

(g) any direct or

indirect obligation within a

selective
distribution system which has a duration exceeding five
years and which restricts the location of the establishment
of a distributorship for motor vehicles other than passenger
cars;

(h) any direct or indirect obligation as to the place of estab-

lishment of an authorised repairer.

Article 6

Withdrawal of the Regulation by the Commission

The Commission may withdraw the benefit of this Regulation,
pursuant to Article 7(1) of Regulation No 19/65/EEC, where it
finds in any particular case that vertical agreements to which
this Regulation applies nevertheless have effects which are
incompatible with the conditions laid down in Article 81(3)
of the Treaty, and in particular:

(a) where access to the relevant market or competition therein
is significantly restricted by the cumulative effect of parallel
networks of similar vertical
restraints implemented by
competing suppliers or buyers; or

(a) any direct or indirect non-compete obligation relating to

the sale of motor vehicles;

(b) where competition is restricted on a market where one
is not exposed to effective competition from

supplier
other suppliers; or

(b) any direct or indirect obligation causing the retailer not to
leasing services relating to contract goods or corre-

sell
sponding goods;

(c) where prices or conditions of supply for contract goods or
substantially between

corresponding goods differ

for
geographic markets; or

(c) any direct or indirect obligation causing the distributor or
repairer, after termination of the agreement, not to manu-

(d) where discriminatory prices or sales conditions are applied

within a geographic market.

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Article 7

Withdrawal of the Regulation by the authorities of a
Member State

Where in any particular case vertical agreements to which the
exemption provided for in Article 2 applies have effects incom-
patible with the conditions laid down in Article 81(3) of the
Treaty in the territory of a Member State, or in a part thereof,
the characteristics of a distinct geographic
which has all
that Member State may
market,
withdraw the benefit of application of
this Regulation in
respect of
the same conditions as
provided in Article 6.

the relevant authority of

territory, under

that

Article 8

Non-application of the Regulation

1.
Pursuant to Article 1(a) of Regulation No 19/65/EEC, the
Commission may by regulation declare that, where parallel
networks of similar vertical restraints cover more than 50 %
of a relevant market, this Regulation shall not apply to vertical
agreements containing specific restraints
relating to that
market.

A regulation pursuant to paragraph 1 shall not become

2.
applicable earlier than one year following its adoption.

Article 9

Market share calculation

the market sales volume of

The market shares provided for in this Regulation shall be
1.
calculated on the basis of
the
contract goods or services and other goods or services sold
by the supplier, which are regarded as interchangeable or
substitutable by the buyer, by reason of the products’ charac-
teristics, their prices and their intended use;
if market sales
volume data are not available, estimates based on other
reliable market
including market sales values,
may be used to establish the market share of the undertaking
concerned. For the purposes of Article 3(2),
it is either the
market purchase volume or estimates thereof which shall be
used to calculate the market share.

information,

(c)

if the market share is initially not more than 30 % or 40 %
respectively but subsequently rises above that level without
exceeding 35 % or 45 % respectively,
exemption
provided for in Article 2 shall continue to apply for a
two consecutive calendar years following the
period of
year in which the market share threshold of 30 % or
40 % respectively was first exceeded;

the

(d) if the market share is initially not more than 30 % or 40 %
respectively but subsequently rises above 35 % or 45 %
respectively, the exemption provided for in Article 2 shall
continue to apply for one calendar year following the year
in which the level of 30 % or 40 % respectively was first
exceeded;

(e)

the benefit of points (c) and (d) may not be combined so as
to exceed a period of two calendar years;

Article 10

Turnover calculation

For the purpose of calculating total annual

1.
turnover
the turnover
within the meaning of Article 2(3) and 2(5),
achieved during the previous financial year by the relevant
party to the vertical agreement and the turnover achieved by
its connected undertakings in respect of all goods and services,
excluding all taxes and other duties, shall be added together.
For this purpose, no account shall be taken of dealings between
the party to the vertical agreement and its connected under-
takings or between its connected undertakings.

2.
The exemption provided for in Article 2 shall remain
applicable where, for any period of two consecutive financial
years, the total annual turnover threshold is exceeded by no
more than 10 %.

Article 11

Definition of connected undertakings

For the purposes of this Regulation, the terms (cid:145)under-
shall

1.
taking(cid:146),
(cid:145)buyer(cid:146),
include their respective connected undertakings.

(cid:145)distributor(cid:146) and (cid:145)repairer(cid:146)

(cid:145)supplier(cid:146),

2.
For the purposes of applying the market share thresholds
of 30 % and 40 % provided for in this Regulation the following
rules shall apply:

2.

(cid:145)Connected undertakings(cid:146) are:

(a) the market share shall be calculated on the basis of data

relating to the preceding calendar year;

(a) undertakings in which a party to the agreement, directly or

indirectly:

(b) the market share shall

include any goods or services
supplied to integrated distributors for the purposes of sale;

(cid:151) has the power to exercise more than half the voting

rights, or

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(cid:151) has the power to appoint more than half the members
the supervisory board, board of management or

of
bodies legally representing the undertaking, or

Article 12

Transitional period

(cid:151) has the right to manage the undertaking’s affairs;

(b) undertakings which directly or indirectly have, over a party

to the agreement, the rights or powers listed in (a);

(c) undertakings in which an undertaking referred to in (b) has,
directly or indirectly, the rights or powers listed in (a);

(d) undertakings in which a party to the agreement together
with one or more of the undertakings referred to in (a), (b)
or (c), or in which two or more of the latter undertakings,
jointly have the rights or powers listed in (a);

(e) undertakings in which the rights or the powers listed in (a)

are jointly held by:

(cid:151) parties to the agreement or their respective connected

undertakings referred to in (a) to (d), or

(cid:151) one or more of the parties to the agreement or one or
more of their connected undertakings referred to in (a)
to (d) and one or more third parties.

3.
For the purposes of Article 3, the market share held by
the undertakings referred to in paragraph 2(e) of this Article
shall be apportioned equally to each undertaking having the
rights or the powers listed in paragraph 2(a).

The prohibition laid down in Article 81(1) of the EC Treaty
shall not apply during the period from 1 October 2002 to 30
September 2003 in respect of agreements already in force on
30 September 2002 which do not satisfy the conditions for
exemption provided for in this Regulation but which satisfy the
conditions for exemption provided for in Regulation (EC) No
1475/95.

Article 13

Evaluation report

The Commission will draw up a report on the evaluation of
this Regulation not later than 31 May 2008.

Article 14

Entry into force and expiration

This Regulation shall enter into force on 1 October 2002.

This Regulation shall expire on 31 May 2010.

This Regulation shall be binding in its entirety and directly
applicable in all Member States.

Done at Brussels . . .

For the Commission

. . .

Member of the Commission

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Explanatory note on the

Draft

COMMISSION REGULATION (EC) No . . ./. . .

of [. . .]

on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted
practices in the motor vehicle industry

1. INTRODUCTION

1. The position of motor vehicle distribution and servicing
agreements within the common market
in respect of
Article 81 of the Treaty is governed by Commission Regu-
lation (EC) No 1475/95. This Regulation expires on 30
September 2002. The Commission has therefore to take
a decision on the rules applicable to motor vehicle
distribution as from 1 October 2002.

2. The Commission’s evaluation report of Regulation (EC) No
1475/95 (1) launched the debate on the adequacy of such
rules. An informal consultation and evaluation process has
ensued with the organisation of hearings or debates by the
Commission, the EP and the Ecosoc, complemented with
in-depth evaluation studies
various
consultants on request of DG Competition (2).

carried out by

3. This process has led to the conclusion that the rules laid
down in Regulation (EC) No 1475/95, which exempt the
combination of selective and exclusive distribution and
for the distribution of
which prescribe a single model
motor vehicles, are no longer adapted to the objectives
underlying their adoption and that a different and
is necessary. Further details on this
stricter
the existing
evaluation process, on the drawbacks of
regime and how the draft BER addresses these weaknesses
are contained in Annex 1 to this memorandum.

regime

4. A new sector-wide block-exemption Regulation (BER)

is

thus to be proposed.

(1) COM(2000) 743 final of 15.11.2000.
(2) (cid:145)The sales-services link(cid:146), by Autopolis, (cid:145)Price differentials in the EU:
an economic analysis(cid:146), by Prof. Verboven and Degryse, (cid:145)Study of the
impact of
legislative scenarios about motor vehicle distribution(cid:146),
Andersen Consulting and (cid:145)Customer preferences for existing and
potential sales and servicing alternatives in automobile distribution(cid:146),
Dr Lademann. These studies are available at DG Competition
Internet site at http://europa.eu.int/comm/competition/car_sector/.

(chapter 2).

It
the market

5. This note describes first the regulatory approach chosen
and the general approach as regards the substance of the
to the measures
then turns
proposal
the distribution of new
for
proposed for
motor vehicles (chapter 3.1) and for after-sales servicing
(chapter 3.2), before examining the rules relating to inde-
(chapter 4) The note concludes by
pendent
describing the main procedural
leading to the
steps
adoption of the new BER.

repairers

2. GENERAL APPROACH OF THE PRELIMINARY DRAFT BER

2.1. Regulatory approach of the new BER

6. The draft BER is a sector-specific regulation which is based
on the Commission’s new policy for the assessment of
vertical restraints as laid down in the recent general BER
on vertical restraints, Commission Regulation (EC) No
and in Commission notice on vertical
2790/1999,
guidelines (3).
thus based on a more economic
is
It
the
approach and on the principle
that
to
operators
economic
organise distribution according to their own needs. It is
stricter then the general BER and than the existing Regu-
lation for motor vehicle distribution (Regulation (EC) No
1475/95)
in order to remedy the competition problems
identified in this sector. Consequently:

for
is
distributors)

(manufacturers,

it

(cid:151) the sector-specific draft BER is less prescriptive than
Regulation (EC) No 1475/95, with a view to allowing
innovative distribution formats.
the development of
Unlike
the Regulation (EC) No 1475/95, which
prescribed a combination of selective and exclusive
distribution;
impose a single
distribution model; this approach will avoid the (cid:145)strait-
jacket(cid:146) effect observed in the case of Regulation (EC)
No 1475/95. Consequently, for example, the draft BER
gives each manufacturer the choice of using either
selective or exclusive distribution. Furthermore, each
distributor may choose between carrying out after-sales
services himself or subcontracting them,

the draft does not

(3) Commission Regulation (EC) No 2790/1999 on vertical restraints
(OJ L 336, 29.12.1999, p. 21) and Commission notice (cid:145)Guidelines
on vertical restraints(cid:146) (OJ C 291, 13.10.2000, p. 1).

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(cid:151) the draft BER focuses on those practices

restrict

and
behaviours which
competition
seriously
within the common market and which are detrimental
for consumers. To this end, and in line with the
Commission’s new approach of block exemption regu-
lations (4) the draft BER clarifies, by setting out a list of
conditions and hard core restrictions (5), which are not
permitted; this list has been drawn up in order to
drawbacks of Regulation (EC) No
address
the
to take account of specific
1475/95 and in order
issues, in particular as regards after-sales servicing. In
line with this new approach, all practices which are not
mentioned in this list are permissible; therefore unlike
Regulation (EC) No 1475/95, the draft BER no longer
mentions those practices which are permissible,

(cid:151) the draft BER takes account of the new policy that
restrictive agreements up to a
BERs should cover
certain market share threshold, and that the approach
is stricter where market shares are higher.

2.2. General line as regards the substance of the draft BER

7. Motor vehicles are expensive and complex technical goods
with a lifetime of, on average, more than 10 years. They
need repair and maintenance at regular and irregular
intervals and are subject
to regulations which apply
throughout their lifetime and which concern safety and
environmental protection. Most
an
in preserving their value and in making sure
interest
that they are at all times a safe and reliable means of
transport.

consumers have

8. Figures available show (6) that the purchase price and the
cost of after-sales servicing of a car each account for about
40 % of the total cost of ownership, the remaining 20 %
being for financing, insurance and other costs. In view of
these factors, the draft BER has to address competition
issues
and the
regarding both after-sales
distribution of new motor vehicles.

servicing

general vertical block exemption regulation (Regulation
(EC) No 2790/1999) would not
the
problems identified in the evaluation report (8), and
the draft BER therefore introduces more stringent
requirements.

remove all

(cid:151) The approach consists basically of

the following

elements:

(cid:151) banning the combination of selective and exclusive
distribution permitted by Regulation (EC) No
1475/95: manufacturers have to choose between
selective
when
and
appointing their distributors,

distribution

exclusive

(cid:151) reinforcing competition between the distributors in
different Member States (intra-brand competition)
and market integration by permitting active sales
and by prohibiting the use of
so-called
(cid:145)location clause(cid:146) (9) for the sale of passenger cars
in a selective distribution system. In an exclusive
distribution system the same result is achieved by
permitting passive sales, including sales to resellers;
Regulation (EC) No 1475/95 only allowed passive
and to a very limited extent non-personalised active
sales,

the

(cid:151) reorganising the link between sales and after-sales
servicing by allowing a distributor to subcontract
servicing and repair to an authorised repairer who
belongs to the network of
the relevant manu-
facturer and who fulfils the quality standards of
that manufacturer; this is different from Regulation
(EC) No 1475/95, which imposed a link between
both activities,

9. As regards the distribution of new motor vehicles, the

draft BER is built around the following principles:

(cid:151) facilitating real multi-branding, i.e. removing some
of the existing restrictions on the sale of motor
vehicles of different brands by one distributor.

(cid:151) The evaluation of the current Regulation led to some
negative conclusions being drawn (7). Applying the

(4) Commission Regulation (EC) No 2790/1999; Commission Regu-
lation (EC) No 2658/2000 of 29 November 2000 on the
application of Article 81(3) of the Treaty to categories of special-
isation agreements (OJ L 304, 5.12.2000 p. 3); Commission Regu-
lation (EC) No 2659/2000 of 29 November 2000 on the
application of Article 81(3) of the Treaty to categories of research
and development agreements (OJ L 304, 5.12.2000 p. 7).

(5) Restrictions which are never permissible,

like resale price main-

tenance or export bans.

(6) Andersen study p. 43, chapter II.2.1.B.
(7) See Annex 1, chapter 1, to this note.

(cid:151) As can be seen from this list, the draft BER will set up
a more flexible regime which should allow the devel-
opment of innovative distribution methods and thereby
enhance competition.

(8) See Annex 1, chapter 4, to this note.
(9) The location clause allows a manufacturer

that a
distributor only operates from a certain place of establishment;
moreover it allows the manufacturer to agree with the distributor
that no other distributor will be allowed to open a showroom in
that
territory. Active sales by other distributors are however
possible to consumers in that territory.

to request

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10. As regards after-sales servicing of motor vehicles, the
draft BER is to a large extent based on the principles of the
existing motor vehicle block exemption Regulation (EC)
No 1475/95,
since the general block exemption on
vertical restraints, Regulation (EC) No 2790/1999, does
not sufficiently address the relevant issues as regards the
after-sales of motor vehicles (10). It has also to be borne in
mind, as has already been mentioned, that the cost of
after-sales servicing amounts on average to 40 % of the
total cost of ownership of a car. It is therefore important
to ensure that customers can choose between different
servicing alternatives and that all operators
(dealers,
independent repairers including body
official repairers,
shops,
fit chains and service centres) can offer
fast
services of good quality and thereby contribute to the
safe and reliable functioning of motor vehicles.

11. Consequently, as regards after-sales servicing, the draft BER

pursues the following aims:

(cid:151) to allow manufacturers to select qualified authorised
repairers for the repair and maintenance of motor
vehicles,

(cid:151) to ensure that all

that manufacturer’s official

those operators who have the
necessary technical expertise and who fulfil the quali-
tative criteria set by a manufacturer can become a
member of
repairer
network. This approach will enhance competition in
the after-sales
service market between the official
repairers by making sure that operators with the
necessary technical expertise can establish themselves
wherever there is a business opportunity. Opening up
the repair market in this manner can also be expected
to maintain or even increase the density of the official
repairer networks to the benefit of the consumer, at a
time where many manufacturers are carrying out or
announcing restructuring plans
their networks
leading to a major reduction in dealership coverage.
Studies show that consumers do not like to travel far
to have their car repaired; the travel time of a car
owner to a repair shop is ideally 15 minutes, but in
no case more than 30 minutes (11),

for

(cid:151) to improve official repairers’ access to spare parts
which compete with parts sold by the manufacturer,
by reinforcing the relevant principles of Regulation
(EC) No 1475/95,

(cid:151) to preserve and reinforce the competitive position of
these currently carry out on

independent repairers;

(10) See Annex 1, point 11, to this note.
(11) Lademann study, p. 46, section 4.3.2.1.

to have access

average about 50 % (12) of all repairs on motor cars,
and the majority of repairs on vehicles more than four
years old. The draft proposal improves their position
by strengthening and extending the principles of Regu-
lation (EC) No 1475/95; to this end it reinforces their
existing right
to spare parts and
technical information in line with technical advances,
especially in the field of electronic devices and diag-
nostic equipment. The access right is also extended to
tools. A desirable and
training and to all
is
important
to
encourage
repairers’
technical skills in the interests of road safety.

this wider access
in independent

side effect of
improvement

types of

Taking all of these elements into account, it can therefore
be concluded that the draft BER reinforces competition
within the
between official
repairers and independent repairers.

official networks

and

3. THE CONTENT OF THE DRAFT BER

The following sections explain the rules for the distribution of
new motor vehicles and for after-sales servicing. As regards
the rules
this memorandum first goes over
both areas,
setting out how a manufacturer or his importer may choose
the members of his network and secondly describes the new
framework within which the distributors or
authorised
repairers will operate.

3.1. The distribution of new motor vehicles

3.1.1. Selection of distributors

12. According to the general policy on vertical restraints, as
applied in Commission Regulation (EC) No 2790/1999 and
in the guidelines on the treatment of vertical restraints and
followed in the new draft motor vehicle block exemption,
the use of either quantitative (includes qualitative) selective
distribution (13) or exclusive distribution is appropriate for
expensive and complex goods such as motor vehicles and
can also be used for other products. Under both systems a
manufacturer may appoint qualified distributors which
operate in line with its requirements and may limit their
overall number. A manufacturer operating under the draft
regulation will
therefore be able to ensure that his
distribution system covers all areas of Europe, just as he
could under Regulation (EC) No 1475/95.

(12) Andersen study, p. 254, appendix 8; ACEA accenture study, p. 11.
(13) Selective distribution is accepted for less sophisticated products
(perfume) and certain hifi

luxury goods

such as

than cars
equipment.

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3.1.2. Rules for the selection of distributors in a selective distribution

system

the quality of
the full

the
showroom,
the obligation to offer

13. The draft BER covers a system whereby distributors are
selected by the manufacturers on the basis of qualitative
criteria (see definition in Article 1(f)), such as the size and
the
quality of
sales
personnel,
range of
vehicles of the relevant brand or the obligation to have
In addition, a manufacturer can
demonstration vehicles.
use quantitative criteria (see Article 1(e)) for the selection
of its distributors, such as ceilings on the total number of
distributors or minimum sales obligations. Through such
obligations, which need not necessarily to be combined,
vehicle manufacturers keep control over the size, density
and composition of their distribution network and can
directly or
the number of distributors
which they wish to appoint as their selected distributors.
A manufacturer therefore remains in a position to ensure
that his distribution system covers all regions in the
common market.

indirectly limit

3.1.3. Rules of the draft BER for the selection of distributors in an

exclusive distribution system

14. The draft BER will also cover an alternative system
whereby a manufacturer allocates to each distributor an
exclusive sales territory (as well as the allocation of an
exclusive customer group). In such a system, (or for the
relevant customer group) no other distributor may be
appointed within the distributor’s
territory. Certain
minimum qualitative standards may also be imposed on
such distributors.

3.1.4. Common

elements

under

both

selective

and

exclusive

distribution

force a vehicle manufacturer

15. Under neither system would a vehicle manufacturer be
obliged to appoint certain qualified operators as his
distributors.
In particular, a manufacturer could decide
whether or not it wished supermarkets or pure Internet
dealers
light
to distribute its new passenger cars or
commercial vehicles; under
the new BER such new
to
entrants could not
supply them with new vehicles or to appoint them as
distributor. For
Internet distributors who sell vehicles
exclusively over the Internet, such an exclusion could be
justified on the grounds that these distributors are free-
riding on other distributors who have an obligation to
invest
and
in a
trained sales
to consumers.
Consumers, it might be argued, would take advantage of
all of these facilities but would then turn to an Internet
dealer for the actual purchase of their new vehicle. The
evidence available shows that if supermarkets were now
allowed to enter manufacturers’ distribution systems this
could have a certain negative impact on manufacturers and
distributors. Studies claim that this could lead to a concen-

showroom, demonstration vehicles
staff who give

advice

effective

car prices,

tration of players, cause product ranges to shrink, decrease
innovation and could, after a short period of
product
lower
intra-brand
lead to less
competition and ultimately to higher prices (14). In view
of these risks and the fact that a study carried out for
DG Comp shows (15)
that consumers are not much
attracted by the idea of buying a car from a supermarket
or from a pure Internet distributor, it seems for the time
being inappropriate to force manufacturers to allow these
undertakings to become official distributors, as they would
have to under a purely qualitative selective distribution
system.

3.1.5. Rules governing how distributors operate

Internal market aspects

16. The Commission’s biannual car price reports show that car
price differentials are still very high in Europe. Although
Regulation (EC) No 1475/95 tried to underpin the right of
consumers to purchase a new motor vehicle in another
Member State, in practice manufacturers were able to limit
parallel trade to a level which avoided the need for them
to even-out prices even between Member States with low
the draft BER is to
tax levels. One key element of
considerably reinforce the consumer’s single market right
to take advantage of
the price differentials between
Member States and to purchase a new vehicle anywhere
in Europe.

17. Even if

the Euro will

it will remain difficult

increase price transparency for
consumers,
for them to buy a
new motor vehicle from a distributor located in another
Member State. The draft BER therefore creates better
opportunities and more freedom for operators such as
to supply new motor
distributors and intermediaries
vehicles to consumers in other Member States.

Internal market aspects under selective distribution

throughout

the common market

18. Under selective distribution, distributors can carry out
active sales (16)
(see
Article 4(d) draft BER). In practical terms this means that
a distributor based in the Netherlands, where new cars are
normally much cheaper than in Germany, could advertise
in German newspapers and send letters or personalised
e-mails to consumers located outside the Netherlands.
This goes further than the current regime, under which
only passive sales and general advertising outside the
distributor’s territory was permitted.

(14) Andersen study, p. 230, chapter IV.4.3.A., see also p. 234.
(15) Lademann study, p. 41.
(16) Definition: see Commission guidelines on vertical restraints, point

50.

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19. One limit

to active sales could relate to the so called
(cid:145)location clause(cid:146) (17) (see Article 5(f) and (g)), by virtue of
which a manufacturer could oblige a distributor to operate
from a certain place of establishment
(e.g. Place de la
Concorde 100 in Strasbourg). Under the location clause,
this French distributor could not open further sales outlets,
warehouses or depots in other markets, for example in
the location clause also
Lyons or Freiburg. Moreover,
gives
that no other
this distributor
the same make will be
distributor selling vehicles of
appointed for the Strasbourg area by the manufacturer.

assurance

the

20. However,

the ability to impose a location clause in a
selective distribution system has the following effects: on
the one hand it allows manufacturers and distributors to
have full control over the structure and density of their
network, which might be desirable for manufacturers; on
the other hand it has negative effects as regards market
integration, since it allows the manufacturer to reintroduce
local sales territories and compartmentalise the common
market by preventing a selected distributor from opening
further
sales outlets, delivery points or warehouses
elsewhere (e.g. a Dutch VW dealer could not open a
showroom or delivery outlet in Dover). If price differentials
between certain markets are high,
it is very likely that
distributors from a low price country (e.g. the Netherlands)
would take advantage of the business opportunities offered
by the high prices in another Member State (e.g.
the
United Kingdom) and would open sales or delivery
outlets over there. In such a scenario, most end-consumers
would have a real opportunity to benefit from the price
in contrast, the
differentials in the common market. If,
distributor
in other
countries by personalised mail, visits or advertisements,
only very few consumers will be able buy a new car
from a foreign distributor (18).

approach consumers

can only

21. With these considerations in mind, it seems appropriate to
prohibit the use of location clauses for the distribution of
passenger cars (see Article 5(f) draft BER) (19).

22. There

are

several

justifications

for opening-up the

distribution networks:

(cid:151) It will foster market integration.

(17) Article 4(c) Regulation (EC) No 2790/1999 provides

for an
exemption of location clauses within selective distribution systems.
(18) See, for example, Lademann study, p. 63: consumers prefer to buy
a car from a distributor who offers personal advice, test drive and
even service.

(19) For medium and heavy trucks, buses and coaches, which are
purchased by professional buyers, which are in a better position
to purchase a new vehicle abroad than individual consumers, there
seems to be no need for prohibiting the use of location clauses.

incumbent

(cid:151) Distributors from (cid:145)cheap(cid:146) countries could open sales or
delivery outlets in high price countries and undercut
dealers (20). As
the
consequence,
consumers would have a real opportunity of buying
from a foreign distributor or, and this is more likely,
the manufacturer would have to even-out prices across
Europe.

a

(cid:151) Finally,

the absence of a location clause is also
important for the development of multi-branding: for
example a distributor of make A could no longer
object
if manufacturer A concluded a dealership
agreement with a dealer selling make B within the
same territory, who would then become a multi-brand
distributor.

23. This opening-up of markets does not increase the number
of operators that the manufacturers have to deal with,
since the number of distributors remains the same.

24. The draft BER provides that a location clause which is
permissible (21) is only covered for a period of five years,
after which it has to be re-negotiated (see Article 5(g)).
This obligation to re-negotiate the location clause gives
both parties the opportunity to adapt to market devel-
opments, such as the manufacturer’s desire to allow a
multi-brand distributor
to set up in a mono-brand
distributor’s territory or the distributor’s wish to open
further sales outlets.

25. In order to prevent a location clause from being used to
limit
the opportunities for a distributor to expand its
business, the draft BER clarifies that such limitations are
not permissible (see end of Article 4(d)). If, for example,
the warehouse or office space is not large enough to carry
out active sales via for example the Internet, (which may
and storage
require
facilities), the manufacturer has to allow the distributor
to use such infrastructure elsewhere.

certain additional

administrative

(20) A French Opel distributor of Place de la Concorde 100 in
Strasbourg could open additional sales outlets or delivery points
elsewhere in France. He could also open sales outlets or delivery
points in Germany and, for example, sell the Corsa in Germany at
French prices, which are 20,1 % below the German retail price.
(21) For instance, for medium and heavy trucks, buses and coaches, for

which a location clause is always permissible.

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Internal market aspects under exclusive distribution

26. In an exclusive distribution system,

the mechanism to
ensure that consumers can buy a new vehicle anywhere
in the common market is different. Firstly, the distributor
has the right to carry out passive sales to all consumers
who turn up in his showroom. Although manufacturers
may prohibit dealers from engaging in active promotion
outside the exclusive territory, for example in a newspaper
mainly sold in another town or through personalised
e-mails to consumers outside the allocated territory, they
may not prohibit dealers
their own
websites (22). Furthermore, exclusive distributors may not
be prevented from carrying out sales to independent
the
resellers ((cid:145)grey dealers(cid:146)) who are not members of
relevant manufacturer’s distribution network. These inde-
pendent resellers, which could be supermarkets or pure
Internet dealers, would probably take advantage of price
differentials and play an important role in the area of
parallel trade.

from having

Internal market aspects under both selective and exclusive
distribution

27.

In order to give distributors the means to supply cars to all
consumers who approach them, sales targets, product allo-
cation or bonus systems based on a territory (e.g. town or
than the common
district as today) which is smaller
market, are no longer permitted,
in contrast with the
position under Regulation (EC) No 1475/95 (see recital
17 and Article 4(d)).
In the past, manufacturers have
used sales targets based on local or national markets to
keep control over export sales by reducing the supply of
new cars to those dealers who wanted to sell to both
consumers in their own territory and foreign consumers
without any discrimination. Bonus schemes were also used
to make sales to foreign consumers less attractive. The
draft BER therefore puts distributors in a position to
honour
consumers within the
European Union; a manufacturer will no longer be able
to limit active (23) or passive (24) sales. Under the draft BER
a dealer located for example in Ostend, where cars are
much cheaper than in the United Kingdom and where
many British consumers buy new cars, must get all the
cars he needs
from both Belgian
customers and those from other Member States without
being financially penalised.

to satisfy orders

all orders

from all

28. In order to allow consumers to take advantage of price
differentials in the common market, the Commission has

(22) Vertical guidelines, point 50, second indent.
(23) In the context of selective distribution.
(24) In the context of exclusive distribution.

role of

always clarified (25) the role of purchase agents or inter-
mediaries (such as (cid:145)Virgin cars(cid:146)), who are professionals who
help consumers who wish to purchase a new motor
vehicle in another Member State. The draft BER underlines
intermediaries in the common
the important
market and gives them more leeway to organise their
activity efficiently. To this end, it is proposed to abolish
two Commission notices (26) which limit the activity of
intermediaries (27). These restrictions have been another
indirect obstacle to parallel trade and allow manufacturers
to pursue national pricing policies with high price differ-
entials between Member States. The draft BER clarifies that
the only permissible requirement on an intermediary is a
valid authorisation from the end consumer. It follows that
intermediaries can make extensive use of the Internet to
advertise and to carry out transactions.

29. In order to give all consumers a real opportunity to take
advantage of the internal market, the draft BER contains
what is commonly referred to as an availability clause (see
Article 5(b)). This clause obliges manufacturers to supply
their distributors with a vehicle of a model which is
marketed in other countries and which corresponds to a
model normally sold by the distributor. This clause’s most
important role so far has been to enable British and Irish
consumers to purchase a new right-hand drive motor
vehicle on the Continent, where dealers normally sell
only left-hand drive cars. The availability clause of the
draft BER is made simpler than that in Regulation (EC)
No 1475/95 and its scope is extended to all motor
vehicles: distributors can order any corresponding vehicle
distributed in the common market by the vehicle manu-
facturer, and not only those which are needed to fulfil a
pre-existing sales contract.

30. The draft BER makes sure that all distributors can carry
out sales via the Internet by having their own website or
by using a referral site operator (e.g. Autobytel), which
runs an Internet site referring consumers requests to
distributors (see recital 15).

(25) Guidelines on vertical restraints, point 53; Commission notice
(cid:145)Clarification of the activities of motor vehicle intermediaries(cid:146) (OJ
C 329, 18.12.1991, p. 20).

(26) Commission notice concerning Regulation (EEC) No 123/85 of 12
December 1984 on the application of Article 85(3) of the Treaty to
certain categories of motor vehicle distribution and servicing
agreements (OJ C 17, 18.1.1985, p. 4), and the Commission
notice (cid:145)Clarification of
the activities of motor vehicle inter-
mediaries(cid:146) (OJ C 329, 18.12.1991, p. 20).

(27) Based on these notices,

regarding the

intermediaries can be restricted for
example
their business. Another
location of
element hampering their activities is that a car dealer may not
sell more than 10 % of the new vehicles through a given inter-
mediary.

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Multi-branding

31. The new BER makes multi-branding, which studies have
found is increasingly attractive to consumers (28), easier.
Distributors will be allowed to sell new motor vehicles
the
from different manufacturers in different areas of
same showroom in a way which does not harm the
brand identity (see recital 26 and Article 5(a)).
In
practical terms, under the new BER an Audi distributor
could sell cars from Jaguar in brand-specific sales areas of
the same showroom. Other conditions which can be
imposed on multi-branding pursuant to Regulation (EC)
No 1475/95, such as the obligation to have separate
legal entities, separate management and sales personnel
and separate premises, which make multi-branding costly
for the distributors and which were an obstacle to its
widespread development (29), will no longer be covered
by the draft BER.

leasing contract does not provide for a transfer of
ownership or option to purchase a vehicle before the
end of the leasing contract. This text is identical to the
one in Regulation (EC) No 1475/95. As the Commission’s
fine decision of 10 October 2001 against DaimlerChrysler
clarified, this provision not only covers sales to leasing
companies which have already found lessees for cars, but
also covers orders for vehicles for which the leasing
companies will find lessees during the delivery period, or
for vehicles which are intended to be held in stock to be
supplied at very short notice to lessees (e.g. to replace a
car which had an accident). These clauses aim at ensuring
that
leasing companies can effectively
compete with the vehicle manufacturers’ own leasing
companies. Moreover, recital (29) clarifies that distributors
may also distribute new motor vehicles to end users on
the basis of a leasing instead of a sales contract.

independent (30)

to compare models

to inform consumers of

32. Multi-brand dealerships have the advantage of allowing
consumers
from different manu-
facturers and of increasing competition between different
brands. It therefore seems appropriate for the sales staff to
have to be trained for all models they sell: such sales
personnel would be better equipped than brand-specific
sales staff
the advantages and
disadvantages of the different models available. It should
be left to the distributor to decide whether or not he
would like to employ sales personnel who are trained on
all makes, as is common for the sale of for example video
or hi-fi equipment or computers, or make use of brand-
specific sales personnel. The argument that sales staff who
are not dedicated to one make will have an incentive not
to be objective and will sell those cars with a higher dealer
margin seems not convincing: it is open to those manu-
lower margins to raise them and
facturers who grant
if a sales person is
eliminate this problem. Moreover,
brand-specific he/she will
the
brand that he represents even though a car from another
make might better suit the needs of a specific consumer.
The draft BER is based on an approach which avoids
unnecessary costs and which allows the distributor to
decide on how he organises his sales staff.

try to sell a model of

Sales/service link

34. In order to allow distributors to specialise in the sale of
new motor vehicles and in view of the importance of
after-sales servicing for consumers,
the draft BER opts
for a reorganisation of
the sales/after-sales service link.
Thus, distributors may choose to carry out after-sales
services themselves (as today’s dealers do); alternatively,
they may subcontract
them to an authorised repairer
which respects all the qualitative criteria for repairs set
by the vehicle manufacturer and which are also applied
to today’s dealers (see Article 4(g)).
If a distributor has
subcontracted after sales servicing, he has to inform the
customer of
the subcontractor before
concluding a sales contract on a new motor vehicle. It is
also important for would be multi-brand dealers to have
the opportunity to specialise in the sale of new motor
repair shop into a
vehicles:
showroom and subcontract after-sales servicing to official
repairers of the relevant makes. The reorganisation of the
sales/service link thus helps to develop a new type of
distributor: one for which there is consumer demand.

they can transform their

the location of

Supply of leasing companies

33. The draft BER clarifies in the definition in Article 1(u) and
(14 and 15) that distributors may also sell new
recital
vehicles to leasing companies. In order to prevent leasing
companies (who are not members of a manufacturer’s
distribution network) from starting to resell new vehicles,
the
supply to leasing companies is only permissible if

(28) The Lademann study came to the conclusion that, depending on
the Member State, 8 % to 15 % of consumers would buy from a
multi-brand distributor;
(cid:145)Zukunftstudie Automobilverkauf
2003(cid:146) on sales in 2003 indicates that 38 % of all consumers
would prefer to buy a new car from a multi-brand distributor. A
survey carried out by Taylor, Nelson, Sofres for the car industry
indicates a figure of 25 %.

the

(29) Multi-branding has developed only in Nordic countries. In view of
the scarce density of the population, a dealer needs to sell several
makes in order to be profitable.

35. Under the new BER, a distributor will have the choice
either to offer after-sales services himself or to subcontract
them to one or more official repairers which are easily
accessible for his consumers (see Article 4(1)(g)). This
approach will ensure that the customers of each distributor
will be able to turn to at least one official repairer. Under
the new BER the necessary infrastructure consisting of
official repairers, which meet the quality standards of a
manufacturer needed for
the honouring of warranties
and carrying out of recall operations and free servicing,
just as it does today. The
will exist throughout Europe,
only difference between the new regime and today’s
system is that some of the official repairers would in the
future not sell new vehicles. This is however already the
case today:
for example Audi, VW and Ford have a
network of official repairers (e.g. the Audi service centres
in Germany and Belgium or the Ford service outlets)
which also carry out this type of repairs. Problems in

(30) Not linked to a car manufacturer such as Avis Lease or Leaseplan.

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this context have not been brought to the attention of the
Commission’s services.

3.1.6. Thresholds up to which the BER covers distribution systems

for the sale of new motor vehicles

it

36. The draft BER would cover quantitative selective or
exclusive distribution in all relevant sales and service
markets up to the normal market share of 30 % (see
Article 3(1)). Due to the existing price differentials
is very likely that
between the Member States,
passenger car and light commercial vehicle markets at
the retail level are still national. However, since the rules
for quantitative
selective distribution of new motor
vehicles are stricter than those provided by Regulation
(EC) No 2790/1999, it seems appropriate to cover such
systems up to a market share threshold of 40 % (see
Article 3(2)). These market share thresholds, which are
below the market share which would indicate dominance,
would ensure
and
distribution networks in the EC, which are based on
quantitative selective distribution, would be covered by
the draft BER. This is desirable for
legal
certainty. Above these thresholds, the draft BER would
cover qualitative selective distribution (see Article 3(3))
as a minimum, which is a general indication that above
the 40 % market share threshold the regime should be
stricter (31).

all manufacturers

reasons of

virtually

that

3.2. After-sales servicing

3.2.1. General approach

37. As explained in point 10 above, the draft BER is to a large
extent based on the principles of Regulation (EC) No
1475/95 and tries to make these more efficient and to
adapt them to technical progress, inter alia, in the area of
electronic devices.

3.2.2. Rules for the selection of official repairers

Qualitative selective distribution

38. In order

the official

to ensure that

(cid:145)authorised(cid:146))
set by the
repairers meet
the draft BER covers qualitative
relevant manufacturer,
selection of official repairers without any market share
threshold (see Article 3(3)). This approach takes account

(or
standards

the qualitative

of the technical nature of after-sales servicing and of the
very high market share of the official repairers on the
market
for repair and maintenance of motor vehicles
during the warranty period and thereafter for vehicles
up to four years old, which is about 80 % (32). After this
period, consumers turn more frequently to independent
repairers, but
the market share of official repairers is
still, as already mentioned, about 50 % if repairs on all
vehicles are taken into account.
In view of these high
market shares, it is appropriate to only cover qualitative
selective distribution, which is the less restrictive system,
above the normal market share thresholds of 30 % (see
Article 3(2) Regulation (EC) No 2790/1999) which have
been retained in Article 3(2) of the draft BER. This differ-
entiation is in line with the general policy on vertical
restraints to cover restrictive agreements up to a certain
market share threshold and to apply a stricter regime
above the thresholds.

it

in view of

repairers. Moreover,

39. The exemption of qualitative selection has the advantage of
avoiding foreclosure of this market with respect to new
qualified entrants. However,
the investment
which has to be made by an authorised repairer, apart
from existing dealers, whose contract has been ended, it
cannot be expected that many independent repairers will
qualify to become official
is
favourable for existing dealers, whose contract is ended
in the context of the ongoing drastic reduction in the
numbers of dealerships (33). Such dealers can carry on as
(cid:145)official repairers(cid:146) of their brand as long as they fulfil the
qualitative criteria set by the relevant vehicle manufacturer.
Through this approach, the draft BER strengthens to a
the position of authorised repairers
considerable extent
the
towards
general
is
increased and a dense network of official repairers all
over Europe is maintained. A dense network of official
repairers with technical expertise provided by the manu-
facturer will contribute to a high quality of the services
provided and to road safety. It can also be anticipated that
in this respect the draft BER will have positive effects on
employment and small and medium-sized undertakings.

vehicle manufacturers. Meanwhile,

technical expertise on the market

the
level of

40. It should also be noted that the draft BER does not cover
location clauses for authorised repairers (see Article 5(h)).
This allows them to operate wherever it is profitable. As
under Regulation (EC) No 1475/95, an official repairer has
to be allowed to repair vehicles of all manufacturers, since
a non-compete clause is not covered by the draft BER
(Article 5(d)). Under the draft BER the setting up of
multi-brand repairers would thus be possible.

(31) However, since there is no presumption that above a threshold of a
BER a distribution system is illegal (see vertical guidelines point 62)
an individual assessment of such systems based on the guidelines
on vertical restraints would have to be carried out as in any other
regulation and could lead to the conclusion that a less restrictive
type of quantitative selection would be compatible with the
requirements of Article 81(3).

(32) See, inter alia, Andersen study, Appendix 7, p. 252.
(33) General Motors recently announced its intention to reduce its
dealer network in Germany by 50 %; Volkswagen has already
drastically reduced the number of
its dealers and the general
trend is that during the next five years the number of dealers
will diminish by 15 % to 20 % according the Accenture study, p.
117, commissioned by the automobile industry (ACEA) in 2001.

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Quantitative selective distribution or exclusive distribution

41. Based on the new and more flexible approach in the area
of block exemption regulations, the draft BER also covers
the use of more restrictive systems for the selection of
official repairers, mainly quantitative selective distribution
or exclusive distribution, up to the normal market share
threshold of 30 % (see Article 3(1)). However, the draft
BER would in practice cover such systems only for types
of after-sales services where extensive competition exists
from independent repairers and where the market share
of the authorised repairers is low, such as the replacement
of tyres or certain repairs which are carried out by fast-fit
chains. As
servicing
business of an official repairer, who offers (nearly) the
full range of after-sales servicing, the market share will
be well above 30 %.
is therefore likely that vehicle
manufacturers, which have an interest to have a system
of repairers who offer all types of repair services ((cid:145)one stop
shop principle(cid:146)) for reasons of consumer convenience and
in order to take account of consumer preferences will use
qualitative selection for the selection of their authorised
repairers.

the traditional after-sales

regards

It

3.2.3. Rules for the operation of the official repairers

42. As with the existing Regulation (EC) No 1475/95, the draft
BER clarifies that consumers who have purchased a motor
vehicle in another Member State can turn to all official
repairers as regards honouring the warranty, performing
free servicing and carrying out of recall (34) work (see
recital 18). In line with Regulation (EC) No 1475/95, the
draft also clarifies (see recital 18) that under the new BER a
manufacturer has to require all its authorised repairers to
carry out normal repair and maintenance. The recitals
the absence of such an obligation
make it clear that
would amount
to an indirect restriction of active or
passive sales within the meaning of Article 4(1)(b) and
(d) of the draft BER (35).

43. Moreover, official repairers normally also distribute spare
parts supplied to them by the vehicle manufacturer and
use them extensively for repair and maintenance. Taking
into account that about 80 % of all components used for
the assembly of a motor vehicle are produced by
component and spare part manufacturers (e.g. Bosch,
Magneti Marelli, Valeo), and are normally also available
from independent spare part distributors at lower prices,

(34) A recall is initiated by a vehicle manufacturer when a technical
problem is identified with a vehicle model. The manufacturer then
asks the customers to turn to one of
its network dealers or
repairers for a repair which is free of charge for the customer. A
recall is sometimes also announced in the media.

(35) It is unnecessary to mention these rights in the text of the draft
BER. Moreover, it would create the false impression that for other
products, the distribution of which is governed by Regulation (EC)
No 2790/1999, which does not explicitly refer to these rights, such
rights do not exist.

these

repairers

to source

the draft BER (like the existing Regulation (EC) No
to
1475/95) has to create better conditions in order
allow official
spare parts
wherever possible,
from the spare part manufacturer
directly or from independent spare part suppliers (see
Article 4(1)(j) and (k)), which also produce and offer
spare parts with the same quality but at generally lower
prices. Under the draft BER consumers should have a real
choice between spare parts which have been supplied to
the repairer by the vehicle manufacturer and those of
matching quality offered by other suppliers.

44. In order to enhance competition as regards spare parts
sold by an authorised repairer, the draft BER defines the
term (cid:145)original(cid:146) spare part (see Article 1(s)). According to
this definition, original spare parts are those spare parts
which are produced by the undertaking which also
produces the components for a new vehicle and which
are manufactured on the same production line. This new
definition is necessary in order to avoid the confusion
which currently exists among consumers. Consumers
believe that original spare parts are only those parts
which are supplied by the motor vehicle manufacturer,
they are better than
often at higher prices, and that
parts which come directly from the part manufacturer.
However,
in reality in many cases both (cid:145)categories(cid:146) of
parts are produced by the same part manufacturer on
the same production line (e.g. windscreen wipers manu-
factured by Bosch and used by VW for the production of
the Golf). It is for the spare part producer to prove that
the original spare parts match the quality of those used for
the assembly of a new vehicle.

45. In line with Regulation (EC) No 1475/95, official repairers
must also be given access to spare parts which are of the
same quality as the original spare parts used for the
assembly of a new motor vehicle, but which have been
produced on another production line by the producer of
the components used for the assembly of a car or by
another producer (e.g. a windscreen wiper produced by
Valeo for the VW Golf).

46. For

repair under warranty,

recall operations and free
servicing arrangements (all of which the vehicle manu-
facturer offers to the customer for free) the vehicle manu-
facturer can request its authorised repairers to only use
spare parts supplied by the vehicle manufacturer (Article
4(1)(j)). This exception is justified for economic reasons
and by the fact that the vehicle manufacturer has either
to reimburse the authorised repairer if spare parts are used
or at least to replace them for free. This flexible approach
would be lost if the authorised repairer were allowed to
use spare parts supplied to him from other sources.

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3.3. Rules regarding ending dealer contracts and solving

disputes

47.

In order to prevent a manufacturer from terminating a
contract because a distributor or a repairer engages in
pro-competitive behaviour which may not be restricted
under the draft proposal, every notice of
termination
must clearly state the reasons for the termination (Article
3(5)). In addition, the draft BER provides (see Article 3(6)),
in line with Regulation (EC) No 1475/95, that for contracts
one year’s notice has
to be given if a network is
re-organised or if compensation is paid to the dealer,
and two years’ notice has to be given in all other cases.
In the context of the consultation of the Member States
third parties, the Commission will also analyse
and of
whether a distributor, which fulfils the qualitative criteria
set by a supplier, should be entitled to acquire a distribu-
torship from another distributor within the supplier’s
network.

48. In the case of termination of a contract, but also where
disputes arise regarding the fulfilment of contractual obli-
gations,
the parties have to agree in their distribution
agreement that such disputes can be referred to an inde-
pendent expert third party or arbitrator (Article 3(6)). This
provision is based on the relevant provision of Regulation
(EC) No 1475/95, which applied to a limited number of
types of dispute, for example on sales targets. Since this
provision has proven its usefulness, the draft BER extends
its scope to all disputes on contractual obligations.

4. INDEPENDENT REPAIRERS

49. Independent repairers (e.g.

repair

training,

information,

independent garages,

fast-fit
chains, autocentres like Midas, body repairers) account
on average for about 50 % of all repairs throughout the
European Union. In order to be able to compete with the
(cid:145)official(cid:146) authorised repairers, they need to have access to
technical
diagnostic
equipment and tools (Article 4(2)). Without such access
they could for example not carry out
the normal
10 000 km maintenance of a Smart, since a certain type
of software is needed which is provided by Mercedes
online or on CD-ROM. To this end the draft BER
strengthens
the existing obligation on vehicle manu-
facturers to make available to independent repairers all
information which is also made available to
technical
official repairers. This access should be given without
delay on a non-discriminatory basis,
(between dealers
and independent
taking into account affor-
dability and the principle of proportionality. In the past,
under Regulation (EC) No 1475/95 which already provided
for a certain degree of right of access, the access right was
often rendered unaffordable because vehicle manufacturers
were only willing to sell complete packages of the repair
information at a very high price, which independent
multi-brand repairers
if
could not
official repairers have to pay for information or training,
the principle of non-discrimination means that the inde-
pendent repairers will also have to pay a corresponding
fee.

afford. However,

repairers)

(as

to put

50. The access right provided by the draft BER, which now
clearly also covers the relevant software and access codes,
tools, including diagnostic tools, equipment and training, is
independent repairers in a
necessary in order
these
position to repair modern motor vehicles
become older, their owners will increasingly turn to inde-
pendent repairers), to offer good quality services and to
contribute to the safe and reliable functioning of all motor
vehicles. Without this access, the technical skills of these
operators, which carry out about 50 % of all after-sales
services, would tend to decrease, especially as regards
modern motor vehicles, which are equipped with more
electronic devices.
is noteworthy that surveys show
that independent repairers offer after-sales services of the
same quality as authorised dealers and that consumer satis-
faction with the services provided by both groups is at a
similar level (36). There are only two limits to this access:
access cannot be required to technical information which
permits on-board anti-theft devices to be bypassed or
disarmed (see recital 25); moreover,
software which
allows re-calibration of the computers on a vehicle (e.g.
to change the engine program in order to make the engine
more powerful) has also not to be provided.

It

repairers, but

51. The group of operators who can request access is also
widened (see recital 25 and Article 4(2)): not only inde-
repair
pendent
equipment and tools, publishers of technical information,
automobile
and
operators offering inspection and testing services or
training for repairers should also be given access to the
above items.

also manufacturers of

assistance operators

roadside

clubs,

52. Independent repairers need access to spare parts. For
example, a body repair shop has to be able to buy body
panels or headlamps from a vehicle dealer or official
repairer,
since these parts are generally not available
from the independent spare part distributors. The draft
BER explicitly mentions that official repairers have the
right to sell spare parts to independent repairers, which
need them for
the repair and maintenance of motor
vehicles (Article 4(1)(b), fourth indent). This approach is
identical to that of Regulation (EC) No 1475/95 and should
be maintained.

5. DURATION OF THE BER AND TRANSITION PERIOD

53. The new BER should enter into force on 1 October 2002.
It seems appropriate to limit its duration to that of Regu-
lation (EC) No 2790/1999, which expires on 31 May 2010
(total duration seven years and eight months). This will
allow the Commission to review the general situation in
2010 for all industries. This duration is similar to that of
Regulation (EC) No 1475/95 (duration seven years).

(36) Autopolis study, pp. 13-14, section 3.6. with reference to a
statement of CECRA in a reply to the EU Commissions ques-
tionnaire in August 2000; for further details and references see
the Commissions evaluation report on Regulation (EC) No
1475/95, point 396.

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54. In order to allow market participants to adapt to the new
situation, the new BER should, as usual, provide for a
transition period. Under Regulation (EC) No 1475/95, the
transition period was one year, whereas the transition
period under Regulation (EC) No 2790/1999 was one
year and seven months.

55. However, different elements have to be taken into account:

(cid:151) the new regime represents a considerable departure
from the principles of Regulation (EC) No 1475/95
even if some of the elements of the previous regulation
are maintained and strengthened,

6. IMPACT OF THE NEW BER ON ALL PLAYERS

57. The chosen approach aims at removing the competition
problems identified in the evaluation report by introducing
a more flexible system which gives all operators more
flexibility and more leeway for their activities. The manu-
facturers’ opportunities to select
their distributors and
repairers based on qualitative criteria are preserved,
without forcing them to open the distribution systems to
new operators, such as supermarkets or pure Internet
distributors, if they do not consider this to be appropriate.
For independent after-sales service providers, the approach
is to increase their level of skills and to allow them to offer
consumers after-sales services of good quality.

(cid:151) the evaluation report clearly establishes that Regulation
(EC) No 1475/95 has not achieved all its aims; changes
are
by
consumers,

indispensable

requested

therefore

and

(cid:151) all players know that after 1 October 2002 new rules
will be applicable; some manufacturers have already
given notice of
their dealers in
termination to all
order to be able to adapt the contracts to the new
regime as of 1 October,

(cid:151) the draft BER is favourable to distributors and auth-
orised repairers since they get windows of opportunity
to compete which do not exist under the current Regu-
lation.

56. A general

transition period of one year,

i.e. until 30

September 2003 is therefore proposed.

7. CONCLUSION

58. The procedure to be followed for the preparation of block
exemption Regulations is set out in Articles 5 and 6 of
Regulation 19/65/EEC of the Council. In accordance with
these provisions, when the Commission proposes to adopt
it must publish the draft and invite
a Regulation,
comments from interested parties within a specified time
limit which may not be less than one month. Moreover,
the Commission must consult the Advisory Committee on
restrictive practices and dominant positions twice:
first
before publication of the draft Regulation and secondly
before its adoption.
the Commission
particularly welcomes comments indicating any potentially
detrimental impact that the regulation might have on road
safety and the environment.

In this context,

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REASONS FOR A NEW BER FOR MOTOR VEHICLE DISTRIBUTION

ANNEX I

1. Negative outcome of the Commission’s evaluation of the existing BER, Commission Regulation (EC) No

1475/95, in the evaluation report of 15 November 2000

1. A renewal of the existing motor vehicle block exemption Regulation (EC) No 1475/95 is not a real option.
Regulation (EC) No 1475/95 was based on Regulation (EEC) No 123/85, which preceded it. The evaluation
report adopted by the Commission on 15 November 2000 concluded that Regulation (EC) No 1475/95 did not
achieve certain of its principal aims. The evaluation came in particular to the following conclusions as regards the
distribution of passenger cars:

(a) Regulation (EC) No 1475/95 has a certain (cid:145)straightjacket(cid:146) effect, since all new motor vehicles are distributed in

the same way: that is, through systems which cumulate exclusive and selective distribution;

(b) parallel trade between Member States does not play its role and is still marginal; as the Commission’s bi-annual
car price reports highlight, price differentials in Europe are still high. Parallel trade is not strong enough to have
an impact on manufacturers’ pricing policies; a study commissioned by DG Comp. on the reasons for price
differentials shows that price differentials are not only due to tax differences between (1) Member States, but also
to pricing strategies adopted by the vehicle manufacturers; moreover, intermediaries cannot play their role
efficiently as regards the purchase of new motor vehicles in other Member States;

(c)

the use of new marketing methods, in particular the Internet, and the sale of new vehicles via multi-brand
dealerships are both difficult under Regulation (EC) No 1475/95;

(d) there is no natural link between the sale of new motor vehicles and after sales services. This link was assumed in
Regulation (EC) No 1475/95, and the regulation therefore imposed an obligation to appoint only dealers that
also offered after sales services. Moreover, the evaluation report also found that the specialists needed for the
repair of motor vehicles need not necessarily be dealers; this finding was confirmed by a study commissioned by
DG Competition (2);

(e) access to technical information for independent repairers is not sufficiently assured;

(f)

spare part producers do not have sufficient access to dealers and dealers do not use spare parts directly sourced
from the spare part suppliers to a sufficient extent; instead most spare parts used by dealers are sourced via the
vehicle manufacturer, although about 80 % of the spare parts are not produced by the vehicle manufacturer and
could to some extent be sourced at lower prices from the spare parts producers directly;

(g) dealers’ independence has not been significantly strengthened by Regulation (EC) No 1475/95. Although the
regulation provided for greater recourse to agreed, rather than imposed sales targets, gave dealers the right to
sell vehicles from different manufacturers under strict conditions, and imposed longer minimum notice periods
(in most cases two years instead of the one year provided for under the previous Regulation (EEC) No 123/85),
dealers are still very much dependent upon their manufacturers.

2. Regulation (EC) No 1475/95 is not respected by the car industry and consumers are not satisfied with its

operation

2. Although Regulation (EC) No 1475/95 is very generous to the automobile industry, car manufacturers have often
not respected its terms, obliging the Commission to adopt four decisions involving the imposition of fines. On 28
January 1998, Volkswagen was fined EUR 102 million for impeding parallel trade in Italy (reduced by the CFI to
EUR 90 million). On 20 September 2000 the Commission fined Opel Nederland EUR 43 million for restricting
parallel trade in the Netherlands. On 30 May 2001, Volkswagen was fined a second time for price fixing in
Germany, this time involving the VW Passat (fine EUR 30,96 million), and on 10 October 2001 DaimlerChrysler
was fined EUR 71,825 million for impeding parallel trade in Germany, restricting sales to leasing companies and
engaging in price fixing in Belgium (3).

3. The high number of consumer complaints received by the Commission over the last few years indicates that

consumers also perceive Regulation (EC) No 1475/95 to be unsatisfactory.

(1) (cid:145)Car price differentials in the European Union, an economic analysis(cid:146) by Prof. Verboven and Degryse.
(2) (cid:145)The sales-service link(cid:146) by Autopolis.
(3) Details of these cases can be found at DG Competition Internet site.

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3. Positions and reports from national competition authorities

4. Most Member States which have expressed their views have indicated that the rules laid down by Regulation (EC)
No 1475/95 should be reviewed, although views may differ about the extent of the review. The competition
authorities of the UK and Denmark have also evaluated the operation of Regulation (EC) No 1475/95. They
have come to the following conclusions:

(cid:151) In its April 2000 (cid:145)Report on the supply of new motor cars within the UK(cid:146) The UK Competition Commission
criticises the effects of the selective and exclusive distribution system permitted by Regulation (EC) No 1475/95
on new car prices, on innovation, and on consumer choice. The Competition Commission believes that
substantial changes are necessary to remedy these adverse effects. It recommends among other things that
manufacturers should not be allowed to grant exclusive territories, and should be prohibited from refusing to
supply new cars to any retailer. It also recommends that car makers should not be permitted to require their
dealers to sell the whole of a model range and that the link between sales and after-sales servicing should be
broken. Consequently, it recommends that Regulation (EC) No 1475/95 should not be renewed.

(cid:151) In spring 2001, the Danish Competition Authority produced a report on (cid:145)Agreements and prices in the car
sector(cid:146). The report concludes that in Denmark, intra-brand competition, i.e. between members of the same
network, is absent on the markets for new cars and for spare parts. The Danish Competition Authority identifies
Regulation (EC) No 1475/95 as the main reason for the lack of competition, especially on the market for
after-sales
(cid:145)a possible future
distribution system for new cars should not be based on quantitative and exclusive criteria, but only on
certain qualitative requirements(cid:146).

servicing. The Danish Competition Authority therefore recommends

that

4. The general BER for vertical restraints, Commission Regulation (EC) No 2790/99, does not remedy the

problems identified in car distribution

5. Regulation (EC) No 2790/99, which was adopted on 22 December 1999, establishes a block exemption which
applies for all distribution agreements in all economic sectors which are not subject to the application of specific
rules, such as motor vehicles (see Article 2(5) of Regulation (EC) No 2790/99). Regulation (EC) No 2790/99
represents the new approach for vertical restraints and should therefore constitute the starting point for determining
the new regulation for car distribution. However, as it stands, the application of the new legal framework on vertical
restraints would not result in any substantial modification of the current situation for car distribution. This short-
coming is due on the one hand to the competition problems that homogeneity in distribution systems brings about,
and on the other hand, to the fact that specific provisions are needed to address problems identified by the
Commission in the evaluation report.

6. The Commission may exclude the benefit of Regulation (EC) No 2790/99, where access to a given market or
competition within that market is significantly restricted by the cumulative effect (1) of parallel networks of similar
vertical agreements, and where these cover more than 50 % of a relevant market and are practised by competing
suppliers or buyers. The guidelines on vertical restraints make it plain that appreciable anti-competitive problems
may occur where the market coverage ratio of the selective distribution system exceeds 50 %, and where the
aggregate market share of the five largest suppliers (CR5) is also above 50 % and suppliers apply quantitative
selection criteria directly limiting the number of authorised dealers. Such networks of selective distribution systems
intra-brand competition, and in a possible foreclosure of more efficient
may result
final consumers, and increasing the risk of
distributors,
collusion between the major suppliers.

in a significant
thereby limiting distribution to the detriment of

loss of

7. All brands of new cars in every Member State are currently sold through similar networks of franchised dealers
combining exclusivity and selectivity (qualitative and quantitative) and other vertical restraints. As a consequence,
the cumulative effect resulting from this covers considerably more than 50 % of the relevant market (in fact nearly
100 %) and the aggregate market share of the five largest suppliers (CR5) also exceeds 50 %. Such thresholds are
exceeded in the EC as a whole and in all Member States.

8. A further problem affecting the sales and after sales market is that Regulation (EC) No 2790/99 covers vertical
restraints up to a market share of 30 %. Based on all reasonably possible market definitions, it is likely that certain
manufacturers’ distribution networks exceed the threshold of 30 %, as do their activities in the markets for
after-sales services and repairs, which are likely to be brand-specific markets where car manufacturers would
have high market shares, particularly in view of the fact that during the term of the manufacturer’s warranty,
cars are almost exclusively serviced by an authorised dealers. Regulation (EC) No 2790/99 would therefore not cover
a major proportion of sales and repair networks in the EC.

(1) Commission notice (cid:145)Guidelines on vertical restraints(cid:146) (OJ C 291, 13.10.2000, p. 1), point 119(7).

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9. As regards in-store inter-brand competition (multi-branding), the application of Regulation (EC) No 2790/99 to the
car sector would amount to a step backwards as compared to Regulation (EC) No 1475/95, since a non-compete
obligation, i.e. the obligation not to sell more than 20 % of vehicles from another manufacturer, is permissible for a
period of 5 years, after which it has to be renegotiated. If the dealer uses premises which are owned or leased by the
manufacturer, the non-compete obligation is not limited in time. Under Regulation (EC) No 1475/95, full multi-
branding is permissible on condition that it is carried out through separate legal entities, management and sales
premises.

10. Regulation (EC) No 2790/99 does not contain the so called (cid:145)availability clause(cid:146), which allows dealers to order a car
for sale to a foreign consumer who wishes to buy a car abroad which has identical specifications to the same model
sold in their own country (e.g. as many British consumers do when they order a right-hand-drive car in mainland
Europe). This clause is however an important element for achieving the single market objective for motor vehicle
distribution.

11. Moreover, the rules provided for by Regulation (EC) No 2790/99 in order to protect competition in the after-market
do not seem appropriate. It is noteworthy that while 40 % of the total cost of ownership of a passenger car is
attributable to the purchase, 40 % relates to after-sales servicing carried out through official repairers and inde-
pendent repairers (the rest being finance and insurance costs). Both activities are therefore equally relevant for
consumers. Currently, the problem of access to technical information and of the possible anti-competitive effects of
the exercise of IPR rights appears to be more serious in this sector, especially in view of the technical complexity
and the high degree of diversity of the electronic systems built into motor vehicles. Regulation (EC) No 2790/99
also fails to ensure that spare part suppliers can sell their spare parts to dealers; this would allow dealers to offer
consumers a choice between different spare parts.

12. In these circumstances, based on the approach explained in the Commission’s guidelines on vertical restraints (1),
stricter rules have to be put in place. The draft BER incorporates most of the contents of Regulation (EC) No
2790/99 while providing for such stricter rules.

(1) See, for example, points 73 and 81 of Commission notice (cid:145)Guidelines on vertical restraints(cid:146).

Communication (cid:151) Notification of titles of qualifications in specialised medicine

(2002/C 67/03)

(Text with EEA relevance)

Council Directive 93/16/EEC to facilitate the free movement of doctors and the mutual recognition of their
formal qualifications as amended recently by Directive
diplomas, certificates and other evidence of
2001/19/EC and particularly Article 42(a) thereof foresees that Member States shall notify the Commission
the laws, regulations or administrative provisions they adopt as regards the award of diplomas,
of
formal qualifications in the field covered by this Directive. The
certificates and other evidence of
the European Communities,
Commission shall publish an appropriate notice in the Official
listing the names adopted by the Member States for the training qualifications concerned and, where
applicable, for the corresponding professional title.

Journal of

Italy has notified the designation of thoracic surgery to be amended for that Member State in the list of
specialist medicine peculiar to two more Member States.

Sweden has notified the designation of nuclear medicine to be amended for that Member State in the list of
specialist medicine peculiar to two or more Member States.

Annex C of Directive 93/16/EEC as amended by Directive 2001/19/EC is hereby amended as follows:

(a) under thoracic surgery, the entry for Italy should read:

(cid:145)Chirurgia toracica; Cardiochirurgia(cid:146);

(b) under nuclear medicine, the entry for Sweden should read:

(cid:145)Nukle(cid:228)rmedicin(cid:146).