Jonathan Fry: TVR Reminds Dealer Network to Comply with EU Regulation

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Motor manufacturer TVR Engineering Ltd (TVR) has stepped in following the OFT's response to a complaint made about TVR and its authorised dealer network refusing to supply independent repairers with spare parts - particularly engine parts.

The OFT immediately contacted TVR and warned that this was a breach of the EU Block Exemption Regulation (BER). As a result, the company has sent a circular to all its dealers reminding them of the network's obligation to supply independent repairers with TVR parts. In view of the company's prompt action to rectify the situation, the small size of the market and the short duration of the conduct , the OFT has decided that it will not be taking any further action against TVR and its dealers.

The BER for motor vehicles exists to provide greater competition in new car sales, the servicing and repair of all cars, and the supply of spare parts. Restricting the sale of spare parts is considered to be highly anti-competitive. Without an unrestricted supply of parts, independent repairers are unable to compete effectively with car manufacturers' authorised dealers and consumers have less choice of where to have their car serviced or repaired.

Vincent Smith, OFT Director of Competition Enforcement said : 'Cars are generally the second largest purchase made by consumers and, after sales, services and repairs are a major cost. Restrictions on competition in this market drive up prices and reduce choice and convenience for the customer.'

'The OFT is determined to enforce the law against anti-competitive agreements. However, an informal resolution was considered to be proportionate in this case because of the company's prompt action , the small size of the market and the short duration of the conduct.'

Research Material:

1. Commission Regulation 1400/2002/EC on the application of Article 81(3) of the Treaty [of Rome] to categories of vertical agreements and concerted practices in the motor vehicles sector, the block exemption regulation for motor vehicles (BER) exists to provide greater competition in new car sales, as well as the servicing and repair of all cars, and the supply of spare parts. One of the main aims of the BER is to enable independent repairers to compete directly with car manufacturers' authorised networks

2. Recital 12 of the BER states that, irrespective of market share, the BER does not cover vertical agreements containing certain types of severely anti-competitive restraints (hardcore restrictions) which, in general, appreciably restrict competition even at low market shares and which are not indispensable to the positive effects of the BER. In particular, it states that agreements which restrict customers to whom a distributor may sell contracts goods, should not benefit from the exemption. The restriction of the sale of car parts to independent retailers falls into this category and is explicitly included under the hardcore restrictions which are blacklisted in Article 4 of the BER.

3. Article 4(1)(i) states that the motor vehicles block exemption regulation (BER) 'shall not apply to vertical agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object - the restriction of the sale of spare parts for motor vehicles by members of a selective distribution system to independent repairers which use these parts for the repair and maintenance of motor vehicles'.

4. On 1 May 2004 the Modernisation Regulation came into force. It decentralises EC competition law enforcement. Under the regulation the national competition authorities and courts of the EU member states are able to apply and enforce Articles 81 and 82 of the EC treaty relating to anti-competitive agreements and abuses of dominance. The OFT is one of a network of competition authorities in Europe able to apply EC competition law to anti-competitive agreements and practices which affect trade between Member States.

5. TVR's annual sale of engine spare parts is approximately £150,000.

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