Explained: Vehicle Block Exemption Regulation changes

Group of cars

The European Commission is reviewing how the industry operates, and it could have a significant impact on the UK

You may not have heard of the Motor Vehicle Block Exemption Regulations (BER), but they’re incredibly important to the industry.

The introduction of BER in 1995 meant the industry was exempt from certain aspects of EU competition law. It allowed the continued operation of a franchised dealer network, controlling who could sell manufacturers’ products and where they could do so.

But nothing stays the same for long and the BER has been under review. New outlines are due to come into force for general competition law in May 2022, and the more specific Motor Vehicle law in May 2023, with a focus on new technologies and competitive data, according to the European Commission which has recently published its findings into the evaluation of the current regulation.

And while the UK may have left the EU, it’s still expected that the BER will be adopted here.

What’s the review found?

The review of the existing regulations, which will form the starting point for the new law, took place between October 2020 and January 2021 through a public consultation which took submissions from a wide range of industry stakeholders.

The review found the competitive environment in the motor vehicle markets has not significantly changed since the European Commission last evaluated these markets in 2010, but that the sector is now under intense pressure to adapt in line with the green and digital transformations.

EC Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Our evaluation has shown that the Motor Vehicle Block Exemption Regulation has made it easier for businesses in the automotive sector to assess whether their agreements are in line with the EU rules on competition. At the same time, it showed that we need to consider the emergence of new technologies and the increasing role of data in competitive dynamics in this industry. The Commission will therefore reflect on how to address these issues to ensure that the rules remain fit for a rapidly changing automotive industry.”

What’s being looked at?

The review examined three sub-sections of the automotive market; vehicle distribution, vehicle repair and maintenance and the sale of spare parts.

While the EC’s evaluation found that for distribution and parts the markets the existing regulation set in 2010 was “appropriate”, the servicing and repair market needs attention.

The report stated: “The evaluation has shown that many authorised repairers enjoy considerable local market power and that intra-brand competition within the authorised networks appears to be limited by strict and detailed quality criteria. However, the evaluation has shown that independent repairers will only be able to continue to exert vital competitive pressure if they have access to key inputs such as spare parts, tools, training, technical information and vehicle-generated data. The evaluation has shown that the current regime is suitable for these markets, but may require certain updating to take account of the increasing importance of data.”

This section is particularly referring to the “increased use of on-board digital technologies and the development of alternative fuel vehicles that require specific expertise, tooling and spare parts.”

In its report the European Commission recognised the industry has a complex supply chain with a mix of different businesses interacting at various levels.

The new regulations will now have to balance the interests of all parties while also making sure the customer is not put at a disadvantage. Franchised retailers and repairers, and their manufacturer partners are likely to argue that the free-flow of technical information should be linked to the correct training and facilities so that consumers are safeguarded when booking work on their vehicles from either independents or franchised workshops.

To find out more about the Vehicle Block Exemption, head to the European Commission’s published findings.