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Press releases 2002 -

OFT publishes report into new car discounts and gives views on EC block exemption

PN 05/02    29 January 2002   

An OFT investigation into complaints about discounts offered by car suppliers to dealers has concluded that anti-discrimination rules have not been broken.

The investigation related to alleged breaches of the Supply of New Cars Order 2000, which was put in place following an inquiry by the Competition Commission. This prohibits manufacturers from unjustifiably discriminating between discounts for fleet customers and dealers for the supply of similar volumes of new cars.

An OFT report published today finds that:

  • overall, the value of the terms and conditions offered to dealers are broadly similar to those offered to fleet purchasers, when all additional benefits are taken into account - examples of benefits included free insurance and interest free credit for dealers' customers
  • there is no evidence that car suppliers have colluded in setting discounts for dealers
  • although dealers are unable to obtain, in general, the very best offers made to fleet customers, they are offered - in keeping with the Order - at least the equivalent of the average fleet customer discount for a particular model after taking into account all the benefits.

The investigation focused on three major UK car suppliers and followed complaints from the National Franchised Dealer Association and The Consumers' Association that the Supply of New Cars Order was being breached.

On a wider front, the OFT remains concerned that unexplained EU price differentials persist. New car prices in the UK have come down by around 10%, since March 1999, when the OFT referred the market to the Competition Commission. But allowing for exchange rate movements the price gap between the UK and others parts of the EU has not narrowed proportionately.

To ensure that the market for new cars works better for consumers, the OFT believes the EC block exemption on the distribution of new cars, which is currently under review by the European Commission, should be reformed in the following areas:

  • exclusive sales territories for dealers should be abolished
  • suppliers' dealer selection criteria should be as open as possible
  • the requirement for dealers to sell only one make of car from their showrooms should be removed
  • the link between sales and servicing should be broken
  • independent garages should be able to compete on a fair basis with authorised dealers for servicing and repair work, for example, by manufacturers giving them better access to parts, equipment, information and training.

John Vickers, Director General of Fair Trading, said: 'While none of the suppliers investigated had discriminated unjustifiably between fleet and dealer discounts for the purchase of new cars, we believe major changes are necessary to the EC block exemption to ensure the UK market for new cars works better for consumers.'

NOTES

1. Download 'Report on Alleged Breaches of the Supply of New Cars Order 2000: Article 2(1)' in pdf format (32 kb).

2. The Supply of New Cars Order 2000 came into force on 1 September 2000. The Order set out remedies to the adverse effects on the public interest specified in the Competition Commission report on New Cars published in April 2000. Article 2(1) of the Order made it unlawful for a supplier of new cars to discriminate unjustifiably between fleet customers and dealers purchasing outright with respect to discounts for the supply of similar volumes of new cars.

3. The Competition Commission report 'New Cars: A report on the supply of new motor cars within the UK' is available on the Competition Commission website

4. EC Regulation 1475/95 (the 'EC block exemption') came into force in 1 July 1995 and is due to expire on 30 September 2002. It allows car manufacturers to supply only selected dealers, to grant exclusive territories to them, to require them not to sell any other brand of new cars from the same premises and to require them to provide servicing facilities.




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