The Competition and Markets Authority (CMA) has published a consultation document on the Motor Vehicle Block Exemption Regulations (MVBER) to seek views and determine whether or not the existing retained Motor Vehicle Block Exemption should be renewed or varied when it expires next year (31 May 2023). It was retained in UK law following the UK’s withdrawal from the European Union (EU). The consultation ran from 21 July to 22 August 2022.
What is MVBER?
The retained MVBER exempts vertical agreements relating to the purchase, sale or resale of spare parts for motor vehicles, and to the provision of repair and maintenance services for motor vehicles.
The benefits of block exemptions
Block exemptions have several benefits for businesses in the leisure vehicle industry.
- They provide legal certainty to businesses as they enable them to know how to ensure that their agreements comply with competition law.
- They avoid placing on businesses the burden of scrutinising a large number of agreements that are likely to satisfy the requirements for exemption.
- The existence of a block exemption ensures consistency of approach by providing a common framework for businesses to assess their agreements against the Chapter I prohibition. The Competition Act 1998 (the Act) prohibits anticompetitive agreements between businesses (known as the Chapter I prohibition).
Block exemptions also help to ensure that the CMA does not need to spend time scrutinising what are essentially benign agreements.
What is the CMA proposing?
Following a preliminary review of the various issues, the CMA is proposing to recommend that the Secretary of State replace the retained MVBER with a Motor Vehicle Block Exemption Order (MVBEO).
The consultation document covered:
(a) an overview of the CMA’s general recommendation
(b) the key features of the UK motor industry and aftermarket sector
(c) the analysis and specific recommendations re the key substantive issues
(d) the proposed duration of the new block exemption and
(e) the proposed provisions relating to the transitional period, cancellation in individual cases and obligation to provide information.
Vehicle warranties and repairs
In respect of vehicle warranties and repairs carried out by independent providers, the CMA’s proposed recommendation is to produce additional and updated guidance to make clear that the clauses contained in all the documents proposed to consumers by OEMs / authorised dealers or repairers should clearly state the consumer’s right to use the services of an independent repairer without losing the benefit of the warranty.
The CMA considers that consumers should have the choice of having their vehicles serviced or repaired by independent providers without running the risk of seeing their warranties invalidated as a result of this. The CMA agrees with the findings of the Evaluation and the views expressed by some NCAs that the current guidance may not be sufficiently clear and comprehensive, and that this may have contributed to the issues mentioned above.
In respect of creating limits on the numbers of authorised repairers within a brand network, the CMA considers that the views expressed by NCAs (National Competition Authorities) and vehicle manufacturers demonstrate that there is a degree of uncertainty around the question of whether certain restrictions which indirectly limit the number of repairers fall within scope of the Chapter I prohibition in the first place. The CMA is therefore minded to provide guidance on this issue in the context of the MVBEO Guidance in order increase legal certainty.
Duration of the MVBEO
The current duration of the MVBEO is ten years and is due to expire on 31 May 2023. The CMA is provisionally minded to recommend a duration of six years for the MVBEO. This would enable the CMA to carry out a review of the block exemption at an early stage taking account of likely significant ongoing developments in the sector (see Part 3) ahead of the phase-out date for the sale of new petrol and diesel cars and vans in 2030.
The CMA also considers that a six-year duration has the merit of enabling the review of the UK Vertical Agreements Block Exemption Order 2022 (VABEO) (due to expire on 1 June 2028) to be completed ahead of the expiry of the extended MVBEO (which assuming the CMA recommends this duration to the Secretary of State – and this is accepted – would expire on 31 May 2029).
Transitional period
The CMA is proposing to recommend that the MVBEO has a transitional period of one year to allow businesses that wish to take advantage of the ‘safe harbour’ to review and (if necessary) revise their agreements.
Obligation to provide information
The CMA proposes that the MVBEO should impose an obligation for parties to provide the CMA with information in connection with those vertical agreements within the scope of the MVBEO to which they are a party, if requested to do so, and that failure to do so without reasonable excuse should result in cancellation, i.e. withdrawal of the block exemption.
Click here for the consultation document – the list of 42 questions starts on page 56.
Commenting on the proposals the NCC took the view that, overall, the recommendations to create a Block Exemption Order to replace the retained Regulations – rather than letting them lapse without replacement or review – was a sensible approach.
Equally, the recommendations to provide specific guidance on the number of authorised repairers withing a brand, updating the current definition of ‘spare parts’ to take account of technological developments and creating a definition of technical and vehicle information would be welcomed.