EU Initiatives
Commission evaluates the functioning of the Block Exemption Regulation for the motor vehicle sector
On 28 May 2008, the European Commission’s competition service published its long awaited evaluation report on the operation of Block Exemption Regulation 1400/2002 concerning motor vehicle distribution and servicing (car BER).
The report is the result of a fact-finding exercise launched by the Commission in 2007 with a view to decide on the regime applicable to the motor vehicle sector after the Regulation expires on 31 May 2010. It does not contain any indications as to the form and content of the future regime; this will be decided at the next stage of the review process, probably towards the end of this year. Stakeholders are invited to submit their comments on the evaluation report until 31 July 2008.
In a nutshell, the report concludes that the general framework of the block exemption has had positive effects overall given that the conditions for competition have improved in recent years on the markets for both new cars and repair and maintenance.
For the lubricant industry, the most relevant conclusion of the Commission’s report can be found on pages 8 and 9 and in summary consists in the following statement:
Point III.E., page 8: Although one of the objectives of BER 1400/2002 was to encourage authorised repairers to purchase alternative spare parts brands (e.g. lubricants), authorised repairers continue to purchase most of their needs from vehicle manufacturers (VM). This is due to the fact that a purchase from more than one source would necessitate duplication of logistics and increased IT costs. Given that VMs oblige authorised repairers to use the VMs parts for warranty repairs, it is easier for repairers to get all parts requirements from the VM (who in addition is able to offer the whole range of parts). In some cases, however, VMs use bonus and rebate schemes to enhance authorised repairers’ fidelity. The anti-competitiveness of such behaviour can only be assessed on a case by case basis. BER 1400/2002 is therefore not really needed.
Point III.F., page 9: One of the objectives of BER 1400/2002 was to ensure that Original Equipment Suppliers (OES) and producers of matching quality spare parts would have equal access to independent and authorised repairers. This objective can also be achieved without the BER, namely through existing provisions in other EU policy areas (regarding the definition of “original part”). As to parts which are not original, even in the absence of the BER the VM cannot prevent its authorised repairers to use alternative spare parts brands as such a prohibition would amount to a direct non-compete obligation which would not be covered by the Vertical BER.
The Commission’s reflections with respect to the spare parts market are the following:
- In 2002, the Commission was of the view that spare part producers did not have sufficient access to authorised dealers and repairers. These latter did not use spare parts from sources other than the VM to any significant extent, although many parts could be sourced at often lower prices from independent suppliers.
- Therefore, the Commission established BER 1400/2002, in particular Articles 4(1)(j) and (k), which prohibit any direct or indirect non-compete obligation.
- Today, the Commission realises that these provisions have not been effective, as authorised repairers still obtain between 87 and 95% of their spare parts from VMs. The new provisions were not taken up by industry players as the Commission had hoped for.
- Therefore, the Commission believes that there is no need for these provisions, and hence BER in its entirety, anymore.
These statements reflect quite clearly that the Commission has doubts whether there is still a need to maintain the car BER beyond 2010. What will the likely consequence be for the lubricant industry?
- If the car BER will not be prolonged, then the car sector will be governed by the provisions of the more general Block Exemption Regulation 2790/1999 (vertical BER), which covers the distribution agreements of all other industry sectors. However, these provisions are not at all adapted to the needs and requirements of the lubricant industry.
- Therefore, there is a clear risk that under the vertical BER, as it is to date, the situation for the lubricant industry will aggravate. In particular, one can expect that the power balance will shift in favour of VMs. There will not be any effective protection of smaller players against the market power of VMs anymore.
- However, one needs to bear in mind that the vertical BER, which also expires in 2010, is likewise currently under review by the Commission. The UEIL will strive to ensure that this vertical BER is shaped in such a way to accommodate the lubricant industry’s interests and concerns.
More information on the Commission’s review process can be found on http://ec.europa.eu/comm/competition/sectors/motor_vehicles/news.html
Waste Framework Directive agreed
On 17 June, Members of the European Parliament (MEPs) gave the official approval to the agreement reached with the Council on the Waste Directive. The EU’s waste policy has been debated in the Council and the European Parliament (EP) since the European Commission’s proposal in 2005 to revise the old 1975 Waste Directive. When the EP first reviewed the Directive in 2007, it asked for tougher recycling targets, while the Council preferred a more 'flexible' approach. On 2 June, after several informal meetings between the Parliament and the Council, an agreement on the text was reached.
The main implications of the revised Directive are:
- The measures are not strictly binding, but the Commission has confirmed that if the targets are not met by Member States by 2020, the Commission will be able to take them to Court for non-compliance.
- Governments will have to recycle 50% of household waste and 70% of construction waste by 2020.
- There will be a waste hierarchy that will set up the order of preference for waste processing: prevention, re-use, recycling, recovery, disposal.
- Regeneration of waste oils will continue to receive priority over incineration. Although not clearly specified, a new amendment on the preference of waste oils has been introduced in the recitals. It reaffirms the need for waste oils management to follow the priority order of the 5 step waste hierarchy, prioritising recycling over energy recovery.
- The Governments will have up to 5 years (after the Directive’s entry into force) to set up national waste prevention programmes.
- The Commission will submit interim reports on waste prevention and generation by 2011 and 2014, , outlining proposals for waste prevention targets and their enforceability "if appropriate".
There are conflicting feelings over the agreement reached. The rapporteur of the Parliament, UK MEP Caroline Jackson, said that the Parliament got the best deal possible on the Waste Directive, and that the package “represents a very significant achievement”, as for the first time there are recycling targets for household waste and construction and demolition waste in the EU legislation. However, the Green group has criticised the waste recycling targets as being "too low and too difficult to enforce”.
The Directive will enter into force after its publication in the European Union Official Journal. Member States will have two years to implement it into national law.