As reported in October 2021, there were concerns expressed by independent repairers that any UK version of motor vehicle block exemption regulations had the potential to threaten the protection against anti-competitive practices surrounding the sale or re-sale of spare parts for motor vehicles and the provision of repair and maintenance services previously enjoyed under EU law (see also www.is.gd/dicuze).
On 1 June 2023 the UK MVBEO entered into force. On 5 June 2023 the Competition and Markets Authority (CMA) published guidance to accompany the MVBEO, which is intended to help businesses to assess whether a particular agreement falls within the scope of the block exemption (see also www.is.gd/iwekayi).
To the relief of the UK’s vehicle repair and maintenance sector, the MVBEO, which will be in force until 31 May 2029, will ensure the continuation in the UK of an important automatic exemption from the prohibition on anti-competitive arrangements in respect of vertical agreements which meet certain prescribed conditions and relate to the purchase, sale or resale of aftermarket goods for vehicles – including spare parts – and the provision of vehicle repair and maintenance services. There are also some important additions to the legislation.
As ever, the devil is in the detail, and owners and managers of independent vehicle repair workshops will be asking what has changed under the new MVBEO, and whether there are any hidden pitfalls.
Ruth Allen is a London-based professional support lawyer in the competition, regulation and trade team at international law firm Herbert Smith Freehills.
She says: “It has long been the case that competition law applies to vertical agreements – by which I mean agreements between companies active at different levels of the supply chain, such as distribution agreements or repair network agreements. The new UK MVBEO, while containing some differences compared with the corresponding EU Regulation, is fundamentally similar.
“Other than some hardcore infringements, such as price fixing, which are considered to infringe competition law ‘by object’, generally companies are required to self-assess whether any agreements infringe prohibitions on anti-competitive agreements by considering their effect on the market, and asking whether the benefits to consumers outweigh any anti-competitive effects.
“What the MVBEO does is remove the need to carry out those individual self-assessments. That’s because the conditions set out in the block exemption create a safe harbour, and, providing the agreement meets the set conditions, you don’t have to do anything more in terms of assessing its actual effect on competition. The intention behind block exemptions is to reduce the burden of competition law compliance.
“In simple terms, the MVBEO only applies to vertical agreements relating to the purchase, sale or resale of aftermarket goods – which is a new term compared with the EU regulation, which only referred to spare parts – for vehicles. If the agreement meets the conditions set out in the MVBEO, it will be deemed not to infringe competition law.
“The MVBEO does not apply to the distribution and sale of new motor vehicles. Nonetheless, the CMA’s guidance on the application of the MVBEO also covers certain elements of vertical agreements relating to the purchase, sale or resale of new motor vehicles, even though the MVBEO does not apply to them. This includes additional guidance on single-branding/exclusive supply agreements and selective distribution agreements.
“The new term ‘aftermarket goods’ in the MVBEO includes spare parts and the provision of vehicle repair and maintenance services, but also includes software required to repair or replace a part or a system on a motor vehicle, any computer code required to update that software and any associated tools and training.
“Also, agreements relating to the supply of fluids used in braking systems, engines or cooling systems, plus cleaners – but not fuel – are now covered by the block exemption if they meet the relevant conditions, as those fluids also fall within the definition of ‘aftermarket goods’. These amendments were recommended by the CMA.”
Allen points out that the inclusion of fluids effectively means, for example, that where an OEM requires a branded lubricant to be used in an engine that is within a warranty period, it cannot insist that the lubricant is only available from one of its proprietary service providers.
She adds that there is also a new so-called ‘excluded restriction’ in the MVBEO that prevents an agreement from benefiting from the safe harbour of the block exemption if it includes restrictions on the ability of an independent operator to access technical or vehicle information that is required for the service and maintenance of the vehicle.
She adds that this doesn’t mean that there can never be restrictions limiting an independent operator’s access to technical data, but they wouldn’t be covered by the block exemption. That means that an OEM would have to assess the case for it on a separate basis to establish whether the benefits of the restriction outweigh the negative effects, and whether those benefits are being passed on to consumers.
If the OEM can show that this is the case, the restriction could be permissible, but this would need to be carefully assessed on a case-by-case basis, and where the technical or vehicle information is necessary for service and maintenance of the vehicle this is likely to be difficult to justify.
IAAF PERSPECTIVE
The Independent Automotive Aftermarket Federation (IAAF) says that it played a part in securing critically important gains in the new MVBEO as part of the UK AFCAR, the lobbying coalition comprising UK trade federations and commercial organisations.
Technical director Neil Pattemore, says: “There are some good things in the new MVBEO, and it’s worth mentioning that there are items in the new order that aren’t in the EU’s counterpart, so the revised MVBEO supports the needs of the independent UK aftermarket to reflect the changes to the technical design of vehicles and the consequent changes to the service and repair methods.
“The CMA recognised the way the market has changed, particularly in the way technicians can communicate with a vehicle in the workshop. Within that communication, the access to data and information for a whole range of repair services is fundamental.
“Importantly, the revisions also recognise the increasing need to be able to access replacement parts, along with the associated software and codes needed to integrate them into the vehicle system.
“There are new as well as revised definitions. A supplier can be a supplier of a vehicle, such as a manufacturer, importer, or dealer, but equally, be a parts supplier, which now has the right to buy original equipment parts from the vehicle manufacturers (VMs), which allows the independent distributor to become a one-stop shop for all the parts required for a vehicle.
“The MVBEO also gives further clarification on aftermarket parts being used during a vehicle’s warranty period. As long as the parts correspond to the specification and production techniques of the VM, the VM can’t arbitrarily void the warranty due to the use of aftermarket parts; they have to show that the aftermarket part was the direct cause of a failure.
“The CMA is actively seeking evidence of either non-compliance with the MVBEO, or new scenarios that may be blocking the ability to compete effectively in offering repair and maintenance services when compared to the vehicle manufacturers themselves, as well as their authorised networks, wherever this may occur in the complete repair process.”
So, generally, the new UK MVBEO is good news for independent repairers and their supply chains. The CMA’s guidance is lengthy, but is a must-read to fully understand the nuances of the UK’s new legislation.