Block exemption: flood of complaints soon?

Antitrust law professor predicts more trouble regarding dealer contracts

Munich. Juergen Ensthaler, professor for antitrust law at Kaiserslautern University, is convinced that the EU commission in Brussels will soon have to deal with further complaints by car dealers about the new block exemption.

Ensthaler said the biggest problem with the new contracts is the enormous amount of control the carmakers are imposing. He said Brussels will not accept that because it goes against the spirit of competition.

Currently Europe's car industry is free from normal European competition legislation under a so-called block exemption. This block exemption is replaced by new rules governing car retailing on October 1.

Competition Commissioner Mario Monti has always said his aim in reforming car sales regulations was to free dealers from the tight restrictions imposed by auto manufacturers.

Instead, said Ensthaler, carmakers have tightened the straitjackets imposed on dealers.

Ensthaler also believes that there are violations by companies such as VW regarding pricing tactics.

They are lowering the basic dealer margin in an attempt to reintroduce controls over the prices offered by retailers. This is prohibited by both German and European antitrust laws, said Ensthaler. If manufacturers get their way dealers won't be able to offer flexible pricing policies.

Ensthaler said Monti has no choice but to demand that manufacturers reduce their requirements and revise their contracts with dealers.

If carmakers refuse, Monti could cancel the new block exemption again, he predicted.

This drastic move would also penalize the carmakers who are complying with the block exemption regulations. As an alternative the commission could decide to make the block exemption laws apply only to selected manufacturers.