On 1 June 2023, the new Competition Law (Motor Vehicle Agreement Block Exemption) Order 2023 (“MVBEO”) came into force.
Agreements that hinder competition are normally prohibited by UK competition law; however, certain exemptions are available where the agreements provide sufficient benefits to offset any anti-competitive aspects. The new MVBEO will provide a UK block exemption for certain vertical arrangements in the automotive aftermarket relating to the purchase, sale or resale of aftermarket goods or the provision of repair and maintenance services (‘MVA arrangements’ ).
The MVBEO replaces the similar EU Motor Vehicle Block Exemption Regulation (‘MVBER’) which was retained after the UK’s withdrawal from the EU. The replacement of the MVBER follows a review of current EU regulations by the Competition and Markets Authority (‘CMA’). The CMA found that recent advances in diagnostic and repair technologies, and the growing number of manufacturers who also act as service providers, contribute to a growing anti-competitive risk when manufacturers restrict access to their technologies. The CMA therefore recommended a new block exemption order, the MVBEO, which retains the scope of the retained MVBER but introduces updated definitions and amendments to reflect UK market conditions and capture technological developments in the automotive industry.
To benefit from the MVBEO, MVA arrangements must meet the market share conditions of the UK Vertical Block Exemption Order (‘VABEO’) and must not include any of the ‘hardcore’ or ‘excluded’ restrictions listed in the VABEO or the MVBEO. (see our alert on the introduction of VABEO here).
Key elements to consider:
Wider Scope: The MVBEO applies to motor vehicle agreements in “replacement products” that are broader in scope than the definition of “replacement parts” under the retained MVBER. In particular, it includes:
- spare parts;
- fluids (coolants, lubricants, cleaners, etc. but not fuel) necessary for the effective operation of the motor vehicle; i
- software needed to repair or replace a part or system, along with any code or other information needed to use the software.
Hard restrictions: The core restrictions of the MVBEO are similar to the core restrictions of the retained MVBER and prohibit agreements with any restrictions on (1) the sale of aftermarket goods by members of a selective distribution system to repairers independent (2) the capacity of a secondary market commodity. or supplier of repair and maintenance tools to sell to dealers, repairers or end users (3) the ability of a parts supplier to place its trademark or logo on any original or aftermarket part.
New restriction excluded: A new “excluded restriction” applies to restrictions imposed by vehicle suppliers on independent operators’ access to certain information, tools or training to provide repair and maintenance services. Such restrictions could harm the ability of independent operators to compete effectively with authorized repairers. If this restriction is included in an agreement, it will not be allowed, but the rest of the agreement can still benefit from the MVBEO, subject to the indemnification provisions.
Obligation to provide information: Parties to an agreement where the MVBEO exemption is claimed must provide the CMA with any information requested (generally within 10 working days).
Power of cancellation of the CMA: The CMA has the authority to cancel the block exemption for a specific MVA agreement if it is deemed not to meet the general anti-competitive agreement exemption in section 9 of the Competition Act 1998.
Transitional period until May 31, 2024: Any existing agreements that are exempt under the retained MVBER will continue to be exempt for one year after the implementation of the MVBEO. This will not apply to agreements entered into after June 1, 2023.
Expiration: The new category exemption provided for by the MVBEO will remain in force until May 31, 2029.
Companies operating in the automotive industry should familiarize themselves with the provisions of the Motor Vehicle Block Exemption Order. It is especially important to review existing agreements to ensure compliance and make necessary adjustments.
For more information on the introduction of these new provisions, or for any advice in relation to specific arrangements, please contact a member of our competition or automotive teams
The content of this page is a summary of the legislation currently in force and is not exhaustive, nor does it contain definitive advice. Specialized legal advice should be sought in relation to any queries that may arise.
