Changes to Block Exemption and Key Considerations for the UK Automotive Industry

The Competition and Markets Authority (CMA) has released guidance on how it applies the Chapter I prohibition in the Competition Act 1998 (CA 1998) (Motor Vehicle Agreements Block Exemption) (No.2) Order 2023 (MVBEO) to agreements in the motor vehicle sector and agreements on the purchase, sale or resale of aftermarket goods for motor vehicles. The guidance will help businesses examine these agreements, assess whether they fall within the scope of the MVBEO and to analyse certain vertical restraints under the Chapter I prohibition in CA 1998. This guidance also interprets certain provisions of the Vertical Agreements Block Exemption Order 2022 (VABEO) and how they apply to agreements in the motor vehicles sector.

The MVBEO replaces the EU Motor Vehicle Block Exemption Regulation (MVBER) which was retained following the UK’s withdrawal from the EU. There is a transitional period until 31 May 2024 which means that any existing agreement which is exempt under the retained MVBER will continue to be exempt for one year after the implementation of the MVBEO. Please note that this will not apply to agreements entered into from or after 1 June 2023.

The new block exemption provided by the MVBEO will remain in effect until 31 May 2029.

The MVBEO applies to motor vehicle agreements in ‘aftermarket goods’ which has a wider scope than the ‘spare parts’ definition under the retained MVBER in that it covers:

1. any software required to repair or replace a part or system of a motor vehicle, but which is not a spare part;
2. any code or other information necessary for the use of software falling within (a) or (b); and
3. fluids used in the braking system, steering system, engine or elsewhere in a motor vehicle as a coolant, lubricant, cleaner or otherwise, in so far as the fluids are necessary for the effective operation of the motor vehicle, but not fuel.

The hardcore restrictions in the MVBEO are similar to those hardcore restrictions in the retained MVBER in that they prohibit agreements with any restrictions on:

1. the ability to sell components as spare parts;
2. the sale of aftermarket goods by members of a selective distribution system to independent repairers;
3. the ability of an aftermarket goods or repair and maintenance tools supplier to sell to distributors, repairers or end-users; and
4. the ability of a supplier of parts to place its trademark or logo on any original or spare parts.

Article 6 of the MVBEO includes a new ‘excluded restriction’ which excludes a particular type of obligation found in MVA agreements from the benefit of the block exemption provided by the MVBEO irrespective of whether not the market share threshold in Article 6 of the VABEO is exceeded. The MVBEO excluded restriction is a restriction of the ability of an independent operator to access information, tools or training which a supplier of motor vehicles of a particular make: (a) uses for the purposes of providing repair and maintenance services, or (b) provides to authorised repairers, authorised distributors, or authorised partners for those purposes.

An independent operator should have access information, tools or training to which Article 6(3) MVBEO applies in the specified manner set out in Article 6(4) MVBEO for the purposes of providing repair and maintenance services for motor vehicles of a particular make. The specified manner is a manner which does not put the independent operator at a disadvantage as regards the provision of repair and maintenance services compared to authorised repairers, authorised distributors and authorised partners. The objective of this provision is to ensure a level-playing field between all the relevant players.

Excluded restrictions are those obligations for which it cannot be assumed with sufficient certainty that they fulfil the conditions for exemption under the section 9 exemption. There is no presumption that the excluded restriction specified in Article 6(2) of the MVBEO falls within the scope of the Chapter I prohibition or otherwise fails to fulfil the conditions for the Section 9 exemption. The exclusion of this restriction means only that they are subject to an individual assessment under the Chapter I prohibition on a case-by-case basis. Moreover, unlike for hardcore restrictions, the exclusion from the block exemption provided by Article 6 of the MVBEO is limited to the specific restriction in question. If that obligation is capable of being severed from the rest of the vertical agreement, then the remainder of the MVA agreement continues to benefit from the VABEO. The ordinary rules of severance will apply.

Parties to an agreement where the MVBEO exemption is claimed must provide to the CMA any requested information (generally within 10 working days).

The CMA has the authority to cancel the block exemption for a specific MVA agreement if it is found to be non-compliant with the general anti-competitive agreement exemption in Section 9 of the Competition Act 1998.

Given the changes that have come into force, it is prudent for businesses in the automotive industry to review existing agreements to ensure compliance with the new MVBEO provisions and make amendments as necessary.