CMA recommends new UK-specific automotive sector Block Exemption regulations

The Competition and Markets Authority (CMA) has written to the Secretary of State recommending the introduction of new, UK-specific block exemption regulations for the automotive sector.

The CMA announced details of its proposed plan after a period of consultation over changes to the existing retained Motor Vehicle Block Exemption (MVBER) – initially carried over from EU law following Brexit – came to an end at the end of August.

The current MVBER is due to expire on May 31, 2023.

In total 14 industry bodies, including the National Franchised Dealers Association (NFDA), Society of Motor Manufacturers and Traders (SMMT) and Independent Garage Association (IGA) made submissions suggesting updates.

But the NFDA has already said that it may seek direct representation over the CMA's proposals amid concerns that they do not go far enough to address the potential  impact car manufacturer's incoming agency model retail agreements for franchised car retailers.

A statement from the CMA said: “Having carefully considered the various issues, the CMA is recommending that the Secretary of State replace the retained MVBER with a United Kingdom (UK) Motor Vehicle Block Exemption Order (MVBEO) updated to reflect market developments. The CMA is recommending that the UK MVBEO be in place until 31 May 2029.”

Broadly similar regulation

In its recommendations the CMA said that it was important to implement new regulations which were “broadly similar to the retained MVBER that expires on 31 May 2023, in order to ensure the continuity” but ultimately “tailored to the specific needs of businesses operating in the UK and UK consumers”.

The CMA said that it saw no reason to make changes to regulations for the distribution of vehicle parts in the UK.

However, detailing the core concept of its proposed changes to rules which aim to maintain competition in automotive aftersales and parts businesses, it noted that intra-brand competition within authorised networks is limited by strict and detailed quality criteria and the large investments that authorised repairers are required to make.

It said independent repairers must be allowed to “continue to exert vital competitive pressure on authorised repairers” to ensure consumers enjoy choice in provision and prices, adding: “These operators can only continue to exert such pressure if they have access to key inputs such as spare parts, tools, training, technical information and in-vehicle generated data.”

In notes attached to the CMA’s recommendations it said that the NFDA had been of the opinion that any UK MVBEO should be expanded to cover automotive sales.

It suggested that some of recommended changes had been implemented to reflect this, but NFDA chief executive Sue Robinson suggested that the recommendations fall short of the changes required to account for OEMs' incoming agency model car retail agreements. 

NFDA considers Secretary of State appeal

She said: “It is worth noting that the CMA has acknowledged in its recommendation (not only the increasing sophistication of automotive telematics and issues around access to, and use of, vehicle-generated data but also) the evolving distribution models within the UK such as OEMs shifting towards an agency model or introducing direct sales platforms.

"The CMA appears to recognise that these are likely to impact the competitive dynamics of the sector in the coming years, and that more guidance may be necessary to accompany any proposed MVBEO when it is published later this year/early next year; however, this would suggest it considers that it is still too early to intervene in terms of hard regulation (although the guidance may be very useful).

"Of course, the key question is whether competition law guidance (and the threat of intervention) will be enough to address some of the concerns already identified by the NFDA. 

“The CMA’s recommendation is detailed and the NFDA is still absorbing it; however, the NFDA is not only framing further recommendations for the accompanying MVBEO guidance; it is also considering direct representations to the SoS.

“Further updates will be issued in due course once the NFDA has considered the changes further, with its specialist competition advisers, TLT LLP.”

Independent Garage Association (IGA) chief executive Stuart James said he was pleased that the CMA had shown it "understands there are issues with the existing MVBER which need to be addressed for a new UK MVBEO, including access to technical and in-vehicle information".

He added: “The consultation outcome report recognises that the independent sector is vitally important for allowing consumers the choice of who maintains and repairs their vehicles at a competitive price.

“It also draws attention to the difficulty that independents currently have accessing the technical and vehicle data they need to repair and maintain vehicles, and that without it, consumers will ultimately be detrimented due to higher prices for repair and maintenance services, a reduction in choice of repair outlets and potential safety problems.

“Over 70% of all service and repair work is carried out by independent repairers and the MVBEO will ensure their continued access to vehicle data, safeguarding consumers’ rights to repair their cars where they choose for a fair price.”

To read the CMA's full Motor Vehicle Block Exemption Regulation recommendations document, click here.