It says changes to the regulations are 'designed to increase competition and bring tangible benefits to European consumers for both vehicle sales and servicing'.
Competition Commissioner Mario Monti said: 'What the Commission has adopted is a bold and balanced reform aimed at injecting competition at all levels of car distribution and repair. The cost of repair and maintenance of a car is as high as the purchase price.
'It is therefore appropriate to provide equally effective measures for both sales and servicing. As from October 2002, dealers – directly or indirectly – will be able to reach consumers whether in the EU without constraints, and consumers will benefit from greater diversity and choice. They will also benefit from improved after-sales servicing.'
Under the new regulation, car manufacturers may choose either exclusive distribution or selective distribution.
Exclusive distribution means each dealer approved by the manufacturer is allocated a sales territory but can sell to operators that are not members of the official network set up by the manufacturer.
Selective distribution is where dealers are selected according to a set of criteria but are not allocated a sales territory and are not allowed to sell to operators that are not members of the official network set up by the manufacturer.
With regards to servicing and repair, under current rules anyone who sells new cars is obliged to carry out repair.
Under the new regulation, dealers can choose whether to carry out repairs themselves or sub-contract them to another authorised member of the manufacturer's network, be it another 'integrated dealer/repairer' or a repair-only outlet,' the Commission said.
'The new regulation also provides that, providing they meet the quality standards set by a manufacturer, both independent repairers and today's car dealers may become authorised repairers within that manufacturer's network, without being obliged to sell new cars.'
The new rules come into force from October, but a reform giving dealers the right to set up anywhere in the EU has been put back - under transition arrangements - by one year, to 2005.