European car dealers have won a major victory against car manufacturers who imposed rules that restricted them from selling cars made by other manufacturers.
Following an investigation by the European Commission, two manufacturers have relaxed rules in their dealer contacts, which should result in an increase in dealers selling more than one marque in their showrooms.
Franchised car dealers across Europe were unhappy with the rules some manufacturers imposed on them when the European Commission introduced the latest Block Exemption Regulation in 2002. They said the EU's hopes for greater competition in the motor industry were being stifled by the car firms in the form of these new rules.
Under the 2002 regulation, car manufacturers were permitted to demand that their dealers meet strict standards in order to remain within the franchise network. In Ireland, as across Europe, this resulted in dealers upgrading their premises and services, often at a cost of millions of euro.
While investing to meet these new standards, dealers selling some marques felt that the car manufacturers had included anti-competitive clauses in their contracts that were preventing them from selling other manufacturers' cars. Eventually several European dealer groups, including the French, Italian, Spanish and German Opel dealer associations as well as the European BMW dealer association, complained to the European Commission about their dealer contracts.
Following the investigation, the two manufacturers withdrew or rewrote rules centring on dealers selling cars made by other manufacturers, which is known as multi-franchising.
"Consumers across the EU stand to benefit from the steps taken by GM to allow innovative car retailing and more competitive aftersales service. I am pleased that the company has demonstrated such a constructive attitude," said EU Competition Commissioner, Neelie Kroes. As more dealers take up the opportunity to multi-franchise, customers should see more marques being sold from what they had traditionally assumed to be a single-brand outlet.
As well as selling other marques, following both carmakers acceptance of the principle of "co-existence of competing brands", dealers can now also display other manufacturers' signs inside and outside a dealership.
However, a spokesman for Saab in Ireland said GM's changes to its dealer contracts were little more than housekeeping. "Saab contracts have not changed. This was just tidying up and any changes have been dealt with under an annex," he said. "In reality it was found that some areas [of the dealer contracts] were not workable, such as wanting all dealers to use the same dealer management system. But these are minor changes and will not be noticeable to customers."
This is a stand shared by BMW Ireland. Its managing director, Sean Green, said motorists here are unlikely to see any changes to either the number of BMW dealers or what cars they will be selling. "We didn't have to rewrite our dealer contracts but we did send out clarification letters to our dealers," he said. "This is not going to mean a great deal of change either to our dealer or service network."
Cyril McHugh Chief Executive of SIMI, the Irish motor industry representative organisation, said he was surprised it took the European Commission three years to get to this point. "For the most part the clarification is now academic as dealerships have invested in manufacturer standards, particularly in premises," he said. "The objections of some Irish dealer groups have tended to focus on standards that appear unreasonable. In this area the EU clarification should be helpful."