'We are of the opinion that the block exemption in its current format is not operating in the consumer interest, and that the benefits it is intended to produce are outweighed for consumers by its drawbacks. We see no justification for retention of the block exemption and recommend that it be not renewed,' it said.
The block exemption is a European Union dispensation which allows manufacturers to enter 'selective and exclusive' distribution agreements with dealers. This effectively endorses an otherwise anti-competitive situation on the grounds that it brings economic advantages, which exceed the disadvantages for competition.
The National Franchised Dealers Association conceded that the block exemption in its current format was not operating in the interest of either the consumer or dealer, but understandably wants it continued in some form. 'The motor industry like many other sophisticated sectors requires high levels of investment by retailers and repairers in return for which suppliers grant relatively large and exclusive marketing territories,' it said.
But the select committee found no sign that this investment was benefiting customers in either pricing or service standards. 'There is general dissatisfaction with the services provided by garages and we have seen no evidence that franchised dealers are making any contribution to providing better customer service,' it said.
It highlighted the comparison with the motorcycle industry where dealers represent several makes within one showroom, which weakens the position of manufacturers and increases competition, and argued that the block exemption should not be renewed when it comes up for review in 2002.