"A car is the most expensive thing that a citizen owns apart from his home," said EU Competition Commissioner Joaquin Almunia, presenting the new rules on Thursday (27 May). "It is therefore vital to get the competition rules right in this area."
Since the European Commission last updated rules for the sector in 2002, Almunia said "experience has taught us that competition on the repair, maintenance and spare parts markets is not very strong".
According to Almunia, repair bills account for 40% of the total cost of owning a car, with consumers particularly affected during the current economic crisis as they are more price-sensitive. And unlike car prices, he said, "the cost of the average repair and maintenance job has actually risen over the past few years".
The danger, he said, is that if prices are too high, "drivers will go to the garage less often and their cars may become dangerous or pollute the environment".
Independent garages set to win
With the new rules in place as of 1 June this year, independent garages should be able to gain better access to alternative spare parts as well as access to technical information from car manufacturers.
"Given the complexity of cars on the road today, virtually no repair job - even at the roadside - is possible without having access to the full range of technical information owned by the various vehicle manufacturers," said the Fédération Internationale de l’Automobile (FIA), Europe's leading organisation for motoring consumers.
It added that access to technical information by independent garages was "vital if consumers are to benefit from vibrant competition, choice and lower repair and maintenance costs".
In the Commission's firing line are exclusivity agreements passed between carmakers and their authorised garages, which allows them to keep a stronghold on the repairs market, for example by refusing warranties if motorists have their cars repaired at independent garages.
In the past few years, the Commission said it has brought four cases against DaimlerChrysler, Fiat, Toyota and GM to ensure that they allow independent garages adequate access to repair information.
Under the new regulation, manufacturers whose market share on the repair and maintenance markets exceeds 30% will cease to benefit from exemptions under the EU's competition rules.
"This in turn will make it easier to deal directly with refusals to release technical information or the misuse of warranty terms aimed at excluding independent repairers," it said.
Spare parts
The new rules also seek to ensure that parts from independent brands can reach the market and can be purchased by both independent and authorised repairers.
Spare parts can account for a major slice of the repair bill, argued the Commission, saying that garages could save a lot of money for their customers by shopping around.
"In those cases where there is no alternative to the carmaker's own brand, independent garages should be able to get hold of these parts," Almunia said.
More flexibility for new cars market
On the other hand, Almunia took a more flexible approach to the market for new cars by aligning EU competition rules with those that apply in other sectors.
In contrast to the repairs market, the Commission argues that prices for new cars have been falling steadily due to globalisation, resulting in increased choice of models for consumers.
"By allowing more flexibility for the distribution of vehicles, the proposed changes will restore manufacturers' incentives to invest in their dealer networks and to reduce the cost of selling cars," Almunia said.
"As it is, distribution costs make up on average 30% of the price of a new car. This increased flexibility should also allow European carmakers to respond to new competition coming from the emerging markets of East and South Asia."
Dealers were given a three-year transition period in order to allow them to adapt.
Multi-brand dealers under scrutiny
However, the Commission took a specific approach for multi-brand dealers, saying the old regulation had favoured large dealerships, mainly in remote areas, which have buyer power.
"The result was an overall increase in distribution costs, which are estimated to have gone up by 20% to the disadvantage of car dealers and consumers," the Commission said.
To ensure the distribution of smaller brands, the EU executive introduced a number of safeguards, such as guarantees that dealers can terminate the ties with manufacturers after five years.
"If the widespread use of single-branding obligations leads to competing brands being shut out from the market, the competition authorities may withdraw the benefit of the block exemption for individual car manufacturers," the EU executive said.
But Almunia insisted that this does not spell the end of multi-brand dealerships. "Multi-branding will continue to exist," he said, but "there will not be specific encouragement" for them because they tend to lead to rising prices.
