On 11 April 2012, the French Competition Authority ("Autorité de la Concurrence", hereafter "AC") launched a public consultation on the preliminary results of its sector inquiry concerning motor vehicle maintenance and repair.
In July 2011, after observing a significant increase in the prices of spare parts and of repair and maintenance services charged since 1998, the AC decided to open a sector inquiry to examine the competitive state of the sector and to identify any competition concerns (see VBB on Competition Law, Volume 2011, No. 7, available at www.vbb.com).
Before it releases its final conclusions - which are expected sometime during the summer of 2012 - the AC is now submitting its initial assessment report to a public consultation in order to allow stakeholders to provide their feedback on the issues identified.
Of particular interest to the AC is whether independent repairers effectively compete with authorised repairers belonging to the official repair networks of vehicle manufacturers, and there are initial indications that this may not be the case.
According to the AC, prices in France for maintenance and repair services between 2000 and 2010 increased by 28% in real terms, and 13% for spare parts over the same period. This situation differs markedly from other EU countries such as Germany, Spain and Italy, which may suggest that the markets are more competitive in these countries. The report also indicates that price differentials in overseas departments are even more pronounced in comparison to mainland France.
In addition, the report notes the continued market leadership of authorised repair networks. Despite increased competition from independent repairers, authorised repair networks control 80% of the market for the repair of vehicles less than two years old, and 70% of the market for the repair of vehicles less than four years old.
As a possible explanation for these market concerns, the AC has identified five regulatory or behavioural factors which may limit the level of competition in the automotive aftermarkets:
- The high level of legal protection given to visible spare parts (e.g. bonnets, bumpers, windshields, lights and mirrors) by industrial design rights, which results in vehicle manufacturers holding a legal monopoly over 70% of these parts, and a duopoly with automotive equipment manufacturers over the remaining 30%. In contrast, other countries such as Germany, Spain and the US have to a certain extent liberalised the supply of visible spare parts by introducing so-called "repair" clauses. Whilst in these countries the design of visible parts is still protected by IPRs for first-fit operations (i.e., their installation in new vehicles), visible parts are no longer legally protected when used for the purpose of repairs. Various impact studies indicate that the use of repair clauses helps to reduce prices for visible spare parts as competition increases overtime.
- The limited availability of spare parts to independent repairers compared to authorised network repairers. This can be the result of certain contractual restrictions agreed between vehicle manufacturers and first-fit equipment manufacturers which either discourage the latter from selling spare parts to independent repairers, or, where they do make such sales, cause them to sell at higher prices. Under "tooling" agreements, for instance, vehicle manufacturers which own the tools used by equipment manufacturers to manufacture parts for them, frequently prohibit the latter from selling these parts to third parties or charge them royalties if they do so.
- The limited access for independent repairers to technical information necessary for maintenance and repair under conditions similar to those enjoyed by authorised network repairers.
- The inclusion of restrictions in the terms of vehicle warranty which discourage consumers from turning to independent repairers. These include linking the validity of the vehicle warranty to the carrying out of regular maintenance within the authorised repair network and the use of original parts.
- The widespread practice of issuing "recommended retail prices" for spare parts, which is applied rigorously in practice by repairers.
With the exception of the scope of design right protection, certain guidance concerning all the above issues has been provided by the European Commission in its 2010 Vertical Guidelines and Supplemental Guidelines applicable to the motor vehicle sector. In its preliminary analysis, however, the AC addresses some of these issues in greater detail than is done by the Commission in its guidance. It remains to be seen whether, in its final report, the AC will limit itself to advocating a more rigorous application in practice of these existing principles established by the European Commission or whether it will go further and advocate a novel stricter approach on some points. In any event, it seems likely that the vehicle aftermarket will remain under intense regulatory scrutiny for the foreseeable future, as the European Commission also expressed dissatisfaction with the level of competition when adopting its new legal regime in 2010.
The AC is inviting the views of stakeholders on its market concerns and on possible ways to remedy them. The public consultation contains a series of questions and will be open for submission of responses until 24 May 2012.
For more information, the public consultation document is available (in French) at:
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