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Business

Brussels Moves to Fuel Competition Among Car Dealers

The EU Commission is said to present its long-awaited reform of car markets on January 30, in a move aimed at boosting competition among dealers and putting consumer interests first.

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The EU Commission plans to present its long-awaited proposals for a reform of the car markets across the European Union on January 30, in a move aimed at stepping up competition among dealerships and putting consumers first.

"We finally want to see more competition in markets that have been lacking vigor in the past," people close to the Commission said in Brussels on Wednesday.

The current regulations governing the sale of cars, which expire in September having been in force for 15 years, provides a block exemption for the entire car industry, freeing it from broad antitrust rules that ban price-fixing and the carving up of sales territories.

But EU Competition Commissioner Mario Monti does not intend to put companies fully at the mercy of market forces.

His proposals are aimed at creating new framework conditions for car dealers that are to lead to increased competition. A decision on the proposals is to be taken in Spring.

"There will be greater pressure on prices and consolidation in the market," Hanns Glanz, a DaimlerChrysler representative in Brussels, forecast.

Under the expected proposals, contract car dealers will be allowed to compete for customers outside the sales regions to which they are at present limited.

"We intend to give dealers greater independence and to open up new distribution channels," the EU Commission source said.

But Jürgen Creutzig, president of the European association of car dealerships, does not share this enthusiasm for the proposals. "This could enable a distribution partner in Brussels to open an outlet in Düsseldorf and vice versa. It won't increase the number of contract partners but only the number of outlets," he argued.

Car manufacturers have abandoned their initial resistance, knowing that the days of their exclusive relationships with car dealers are numbered.

Dealers will in future be able to sell cars from different manufacturers in the same showroom, albeit in separate parts.

"We accept this, though competition between car marques has to be upheld. But it must not give rise to a situation where dealers sell only the marque that offers them the highest margin at a given time," a car industry representative said in Brussels.

"In sparsely populated areas, multibranding will surely lead to consolidation among dealers. But there's no reason to expect individual dealers to start offering several luxury car marques," he added.

The EU Competition Commissioner also plans to abolish current regulations that oblige car dealers to provide after-sales services, a move that would help boost the standing of independent repair and service workshops.

Dealers will be given the choice to offer after-sales services or outsource them to a contractor.

Dealers and manufacturers fear that this will undermine customer confidence in the dealerships.

Industry representatives said they expect most dealerships to maintain their after-sales service since it generates much higher margins than new car sales.

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