Dealers could be given seven years to adapt to Block Exemption changes

Dealers could be given seven years to adapt to changes to Block Exemption, under proposals being put forward by the European Parliament.

The suggestion came during a hearing into the future of new car retailing organised by the European Parliament's monetary and economic policy committee attended by manufacturer, aftersales, internet retailing and consumer group representatives yesterday afternoon.

Amid intense pressure from Sir Richard Branson, chairman of Virgin Cars, and Phil Evans, Consumers' Association principal policy adviser, to scrap the current legislation, German MEP Christoph Konrad, responsible for drawing up the parliament's recommendations on the future of Block Exemption, advocated a transitional period of “perhaps seven years to allow industry time to adapt to the new situation”.

He said that during this period dealers would be allowed to market more than one brand of car advertised outside their specific region and use direct email-based marketing.

“In addition servicing should be open to competition allowing independent garages access to the technical information and thus a place in the manufacturers' system of guarantees.”

Mr Konrad gave no hints on the future form of the exemption or even whether it would survive its 2002 review.

But Sir Richard called for a “elimination” of Block Exemption, giving greater leverage to the consumer. He called for a seven month transition period, not seven years, an opinion supported by the European consumers' organisation, BEUC.

The Consumers' Association put forward its own draft regulation for the renewal of the order. It, the CA, says would allow retailers the freedom to choose the cars they want to sell and how to sell them, give them the power to decide whether or not they want to offer repair facilities, give independent repairers “fair access” to technical information and spare parts, and the freedom to choose the cars they want to service and the parts they want to use and “allow normal market forces to come into play in the car market, by giving consumers the power to choose the best retailers, garage services and spare parts”.

Mr Evans said: "The European car industry is on the brink of an historic opportunity; it can choose to side with the consumer, and change the way it does its business; or it can stick to an outmoded, inefficient, anti-competitive system of distribution."

Jean-Martin Folz, chief executive officer of PSA Peugeot-Citroen, speaking on behalf of manufacturers, accepted the system needed to be changed, but rejected the idea of a dramatic overhaul. In his opnion it was essential to maintain a link between sales, aftersales and services. Also, geographical restrictions on dealers were important, he said, to guarantee an adequate return on investment to dealers.

Mr Konrad's proposals, based on yesterday's hearing, will be voted on by the monetary and economic policy committee before being sent to the EC for consideration. An EC-commissioned study by Arthur Andersen is also due to be released soon.