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Wednesday, 17 July, 2002, 12:08 GMT 13:08 UK
Brussels attacks car monopoly
Autos Cardoyen
Discount cars could be sold through supermarkets
Cars and the cost of running them could get cheaper across Europe, thanks to European Commission proposals announced on Wednesday.

The plans, unveiled in Brussels by Competition Commissioner Mario Monti, look set to end carmakers' ability to insist that dealers can only sell their products and not those of their competitors.

Monti proposals
Dealers can...
Sell cars from any manufacturer
Subcontract repairs and after-sales to whoever they want
Open branches anywhere in the EU

Mechanics can...

Source parts from other vendors than carmakers' middlemen
Insist on technical specs from carmakers
The hope is that the wide differentials between car prices across Europe - prices in some places, particularly the UK, can be as much as 50% more expensive than others - will be reduced.

The plan, Mr Monti said in a statement, is "a bold and balanced reform aimed at injecting competition at all levels of car distribution and repair".

Shake-up

From October onwards, all dealers must choose whether to be selective or exclusive, the plans say.

Selective dealers cannot sell to independent resellers, but can stock any marque of car they want and sell to any end user they like.

Dealers wishing to retain exclusive relationships with carmakers will now be able to sell to resellers and to customers from outside their assigned territory.

The proposals, which cover the period to 2010, should also cut the cost of repairs and servicing by allowing even franchised dealers to buy parts from whoever they want.

The rules change from October this year, and carmakers have a year's grace to comply.

One key liberalisation of dealerships has been delayed at the last minute.

The introduction of controversial measures giving dealers the right to open showrooms anywhere in the 15-nation European Union, from Aberdeen to Athens, has been put back a year to October 2005.

Long time coming

The Monti plan follows years of negotiation between the commission, carmakers and consumer groups.

For 20 years the automobile industry has had a "block exemption" from normal EU competition rules, on grounds that safety and other concerns made the car market a special case.

But the exemption runs out on 1 October 2002, and the pleas of the auto industry for an extension appear to have fallen on deaf ears.

The commission long ago warned the industry that if price differentials between otherwise identical cars exceeded 12%, the exemption would go.

Head to head

Industry chiefs still insist that ending the exemption will hurt consumers.

The development of "car supermarkets", they say, would drive out smaller dealers and reduce choice.

The pre-tax price of a Mazda 323
10,525 in the UK
7,404 in Greece
6,266 in Denmark

Source: European Commission, July 2001

Allowing non-official parts into the repair business will make cars more dangerous, car makers say.

Opposition to the plans has been particularly fierce from countries such as France and Germany, which boast important car industries.

But consumer groups and parts-makers have urged the commission to stand firm against industry lobbying.

Wednesday's proposal are "a first step in unblocking the car market", said the European Consumers' Organisation, urging further liberalisation.

Empowering consumers

The change has been on the cards for a long time.

In May 2000, Mr Monti told a conference that it should be the consumer who is in the driving seat.

"Most motor vehicles are distributed in the same way, via exclusive and selective dealers who are subject to the same types of restrictions," Mr Monti said.

"In competition jargon, this is tying, which is normally considered a serious restriction on competition," Mr Monti said.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Evan Davis reports
"In the future will we be buying from the cheapest source in Europe?"
Krish Bhaskar, Motor Industry Research Unit
"The face of retailing of cars is going to fundamentally change"

Companies

Background
See also:

17 Jul 02 | Business
31 May 02 | Business
02 May 02 | Business
05 Feb 02 | Business
05 Feb 02 | Business
15 Jan 02 | Business
04 Jan 02 | Business
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