UK: More Action In Automotive Aftermarkets

Last Updated: 25 October 2012
Article by Peter Andrews

Most of the competition law action in the automotive sector is on servicing and repair.

The market for selling new cars is very competitive. So the authorities have increasingly focused on aftermarkets, where they believe that vehicle manufacturers and their authorised repairers (ARs) have more scope for higher margins. The authorities aim to open up the market to independent repairers and parts producers.

The European Commission recently published FAQs on aftermarket issues. These sit alongside (but don't replace) the 2010 Motor Vehicle Block Exemption and Guidelines.

There are no great surprises. But there are a few contentious points. This may only make sense to you if you're involved in the sector. But, picking out some of the more interesting and / or important issues:

Warranty ties

It's already clear that vehicle manufacturers cannot say that warranties will be voided if customers choose to have their car serviced at an independent repairer, or using parts other than the vehicle manufacturer's own brand. (This doesn't apply where the work is paid for by the vehicle manufacturer itself - for example, under warranty or recall work).

The FAQs confirm that the ban on warranty ties covers extended warranties offered by a dealer (or a third party, like an insurer) on vehicle purchase. But, interestingly, there is no problem with a 'warranty tie' on an extended warranty bought by a customer 'some years' after the vehicle is sold - because, for older vehicles, customers are more likely to use independent repairers, and the tie would not 'foreclose' the market to the same extent. There's no guidance on what 'some years' means, but there is enough data 'out there' to make an educated guess.

Warranty terms sometimes differ between Member States, and manufacturers price that in when selling a vehicle. So a customer who buys a vehicle in a Member State with a lower quality warranty, and exports it to a Member State with a higher quality warranty, is only entitled to protection at the lower standard.

Leasing

Where a business linked to the vehicle manufacturer leases a vehicle to a customer, the lessor can require the customer to use the vehicle manufacturer's authorised repair network, and branded parts, but only up to the point where it becomes clear that the vehicle will transfer to the customer at the end of the contract term. That is because the lessor has a legitimate interest in the vehicle's residual value up to that point, but not beyond it.

Parts

A vehicle manufacturer can require its ARs to store its branded parts separately from alternate brands, to avoid confusion - but only where this doesn't make life so difficult for the AR that they are discouraged from using alternative brands.

ARs are free unilaterally to decide not to sell captive parts to independent repairers. But the vehicle manufacturer can't influence their decision. And they can't agree with other ARs not to do so. Slightly controversially, the FAQs suggest that, in some circumstances, if independents can't get access to captive parts, the vehicle manufacturer can be forced to supply them direct. But we believe, those cases would be pretty exceptional.

Diagnostic tools and Technical Information (TI)

A vehicle manufacturer can ask its ARs to use a particular brand of electronic tool, even if there are equivalent tools available. And a manufacturer doesn't have to supply TI to parties who'd use it for anything other than direct servicing and repair (such as people who want it to make tools). Where the vehicle manufacturer is the only source of the full range of TI, refusal to supply will hardly ever be justified on safety and security grounds, because independents have a good safety record, and if there are safety concerns over genuinely new developments, the independents could be offered training.

A complete service history is important, so independents must be given access to the service record (whether this is paper or electronic), and be able to update it.

Authorised repairer status

Finally the FAQs confirm that a vehicle manufacturer can't turn down an applicant for AR status simply because the applicant is already an authorised repairer for a competitor.

Overall, no game-changers, but a useful contribution to this area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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