New Cars Monopoly Enquiry (1): Competition Commission consults on possible remedies

United Kingdom
As a part of its monopoly inquiry under the Fair Trading Act 1973 into the supply of new cars, the Competition Commission is seeking comments on the possible remedies for matters which it may find to operate against the public interest. On 5 October 1999, the Commission issued a remedies statement for consultation. The Commission seeks comments on the following:- (a) the possibility that suppliers should be able to select the retailers they will supply but not to allocate exclusive territories; (b) which conditions suppliers should be allowed to require retailers to meet; (c) whether sellers should be prohibited from requiring retailers of new cars to also offer servicing and repair services, so that retailers could choose to concentrate on either sales or servicing/repair; (d) which conditions suppliers should be allowed to require servicing/repair operators to meet in order to gain the supplier’s approval of their suitability to carry out warranty and recall work; (e) whether suppliers should be prohibited from requiring retailers to sell only the one supplier’s new cars (solus dealerships). The issues for consultation above relate largely to the workings of the selective and exclusive distribution system (SED) set up by the EC motor vehicle block exemption. The Competition Commission also welcomed views on remedies which might be implemented in the UK, irrespective of any future block exemption:- (a) whether suppliers should be required to offer dealers terms no less favourable than those offered to fleet customers buying cars in the same volumes; (b) whether suppliers should be prohibited from recommending retail prices. Comment: The outcome of the Competition Commission's review on the sale of new cars could be the beginning of the end of selective and exclusive distribution (SED) of motor vehicles in the EU. The Competition Commission's preliminary view is that the current SED system results in higher car prices in the UK than would otherwise be the case, and that the disadvantages of the system outweigh the claimed advantages. The press release states that to the extent that the Commission's report makes recommendations concerning EC law, this will be in the form of advice on the line which the UK Government should take in the European Commission's review of the EC motor vehicle distribution block exemption, due for renewal in 2002. Source: CC Press release 21/99 - 5 October 1999