Navigating UK Automotive Competition: CMA's MVBER Review

The UK automotive sector is a dynamic and essential part of the nation's economy, encompassing everything from vehicle manufacturing and sales to aftermarket services like repairs and spare parts distribution. Ensuring fair competition within this vast industry is paramount, not only for the health of businesses but also for providing consumers with choice, quality, and reasonable pricing. At the heart of this regulatory landscape lies the Competition Act 1998, which prohibits agreements that restrict competition. However, certain agreements can be exempted if they generate sufficient efficiencies and benefits to outweigh any anti-competitive effects. This is where 'block exemption' regulations come into play, offering a crucial framework of legal certainty for businesses operating in specific sectors. For the automotive industry, the Motor Vehicle Block Exemption Regulation (MVBER) has long served this purpose, and its recent review by the Competition and Markets Authority (CMA) marks a significant development for everyone involved.

Following the UK's departure from the European Union, a number of EU 'block exemption' regulations, including the MVBER, were retained in UK law at the end of the Transition Period on 31 December 2020. These retained regulations were never intended to be permanent fixtures, necessitating a thorough review to assess their continued suitability for the UK market. The MVBER, specifically, covered agreements related to the purchase, sale, and resale of spare parts for motor vehicles, as well as the provision of repair and maintenance services. Its expiration on 31 May 2023 prompted the CMA to undertake a comprehensive review, culminating in a new regulatory framework designed to ensure the UK automotive sector remains competitive, innovative, and beneficial for all stakeholders.

Understanding the Motor Vehicle Block Exemption Regulation (MVBER)

To fully grasp the significance of the CMA's review, it's essential to understand what the MVBER entailed. A 'block exemption' regulation, in essence, automatically exempts certain categories of agreements from the Chapter I prohibition of the Competition Act 1998, provided they meet specific conditions. This mechanism offers invaluable legal certainty for businesses, allowing them to operate without the constant fear of infringing competition law, as long as their agreements fall within the parameters set by the regulation.

For the automotive industry, the MVBER was particularly vital. It carved out exemptions for a wide array of agreements, including those governing the distribution of new vehicles, the sale and resale of spare parts, and the provision of repair and maintenance services. This meant that vehicle manufacturers could establish selective distribution systems, and authorised repair networks could operate, without automatically falling foul of competition rules. The underlying principle was that these arrangements, under certain conditions, could foster efficiency, innovation, and service quality that ultimately benefited consumers, despite potentially limiting competition in some respects.

The MVBER aimed to prevent manufacturers from unduly restricting independent garages or spare parts suppliers, thereby ensuring that consumers had a choice beyond the authorised network for servicing and repairs. It sought to maintain a level playing field, promoting competition between authorised and independent repairers and ensuring access to essential technical information and spare parts for all. This balance was crucial for a healthy and diverse automotive aftermarket.

The CMA's Comprehensive Review Process: A Deep Dive

The CMA's review of the retained MVBER was a meticulous and multi-faceted process, driven by the need to ensure that the regulatory framework remained fit for purpose in a post-Brexit UK and responsive to rapid technological advancements within the automotive industry. The review's primary objectives were clear:

• Assess its intended purpose: To determine if the MVBER was still achieving its original goals of promoting competition and efficiency.
• Account for UK specifics: To ensure the regulation served the interests of UK businesses and consumers, taking into account the unique features of the UK economy.
• Consider technological and business model developments: To address the profound impact of evolving technologies (e.g., electric vehicles, advanced driver-assistance systems) and changing business models (e.g., online sales, subscription services for features) on the automotive sector.
• Evaluate European Commission guidelines: To assess the supplementary guidelines that accompanied the existing MVBER, particularly those concerning vertical restraints in agreements for vehicle sales, repair, and spare parts distribution.

The CMA also drew upon evidence from the European Commission's own review of the MVBER, which concluded in May 2021 that while the regulation remained useful and relevant, its effectiveness and coherence could be improved. This international perspective, combined with detailed UK-specific consultations, formed the bedrock of the CMA's recommendations.

Key Milestones in the MVBER Review Journey

The path to the new automotive competition framework involved several critical stages, marked by public consultations and expert analysis. Understanding this timeline provides insight into the thoroughness of the CMA's work:

This meticulous schedule ensured that the CMA gathered extensive feedback, considered all angles, and provided well-informed recommendations to the Secretary of State for Business, Energy and Industrial Strategy. The culmination of this process was the introduction of the Competition Act 1998 (Motor Vehicle Agreements Block Exemption) (No. 2) Order 2023 (the MVBEO) and accompanying guidance, which came into force on 1 June 2023.

The Impact of the New MVBEO and Guidance on the UK Automotive Sector

The new MVBEO and its accompanying guidance represent a tailored approach to competition regulation for the UK automotive sector. This legislation aims to address not only the enduring principles of fair competition but also the unique challenges and opportunities presented by modern vehicle technology and evolving market dynamics.

For businesses, particularly vehicle manufacturers, dealerships, independent repairers, and spare parts suppliers, the new guidance provides clarity on permissible agreements and practices. It outlines the conditions under which vertical agreements – those between businesses at different levels of the supply chain – can benefit from an automatic exemption from the Chapter I prohibition. This is vital for operational planning and investment decisions.

Key areas of focus for the new regulation include:

• Access to Technical Information: Ensuring independent repairers continue to have access to the diagnostic tools, software, and technical information necessary to service and repair modern vehicles, which are increasingly complex and software-driven. This prevents manufacturers from creating a monopoly on repairs.
• Spare Parts Market: Maintaining competition in the market for spare parts, ensuring that genuine, original equipment (OE), and equivalent quality parts are available through various channels, promoting choice and competitive pricing.
• Online Sales and New Business Models: Addressing the rise of online vehicle sales and innovative service models, ensuring that traditional distribution channels and new digital platforms can coexist competitively.
• Electric Vehicles (EVs) and Advanced Systems: Considering the specific implications of EVs, autonomous driving features, and other advanced technologies on repair and maintenance, and how competition rules apply to these emerging areas.

For consumers, the ultimate goal of these regulations is to safeguard their interests. By fostering fair competition, the MVBEO should contribute to:

• Greater Choice: Consumers should continue to have a wide array of options for purchasing vehicles, obtaining spare parts, and selecting repair and maintenance services, whether from authorised networks or independent providers.
• Competitive Pricing: Healthy competition tends to drive down prices and improve value for money in both vehicle sales and aftermarket services.
• Quality of Service: A competitive environment incentivises businesses to offer higher quality services and customer care to attract and retain clientele.
• Innovation: Businesses are encouraged to innovate in their products, services, and business models when faced with robust competition.

The CMA's guidance specifically helps businesses understand where the risks of anti-competitive behaviour lie and how to structure their agreements to comply with the law. It reinforces the message that while certain vertical agreements can be beneficial, they must not unduly restrict competition, especially to the detriment of consumers or smaller businesses.

Distinguishing the MVBER from Other Block Exemptions

It's important to note that the MVBER is one of several block exemption regulations that the CMA has been reviewing. The CMA has a broader role in advising the Secretary of State on various retained block exemptions. For instance, the CMA completed its review of the retained Vertical Block Exemption Regulation (VBER) and published its recommendation in November 2021. Similarly, a review of the Horizontal Block Exemption Regulations (HBERs) is also underway, with an initial Call for Inputs closing in January 2022.

While all these regulations aim to facilitate pro-competitive agreements, they apply to different types of business relationships:

• MVBER (now MVBEO): Specifically targets agreements within the motor vehicle sector, covering sales, spare parts, and repair/maintenance.
• VBER: Applies more broadly to vertical agreements across various sectors, i.e., agreements between businesses operating at different levels of the supply chain (e.g., manufacturer-retailer).
• HBERs: Focus on horizontal agreements, i.e., agreements between businesses operating at the same level of the supply chain (e.g., competitors collaborating on research and development).

This contextualises the CMA's ongoing commitment to ensuring a robust and adaptable competition framework across the entire UK economy, with the MVBEO representing a vital piece of the puzzle for the automotive industry.

Frequently Asked Questions (FAQs)

Here are some common questions regarding the CMA's review of the Motor Vehicle Block Exemption Regulation and its outcome:

What is a Block Exemption Regulation?

A Block Exemption Regulation is a legal instrument that automatically exempts certain categories of agreements between businesses from the general prohibition on anti-competitive agreements (Chapter I of the Competition Act 1998). This provides legal certainty, allowing businesses to enter into common types of agreements without needing to seek individual exemptions, provided their agreements meet specific conditions outlined in the regulation.

Why did the CMA review the Motor Vehicle Block Exemption Regulation (MVBER)?

The CMA reviewed the retained MVBER because it was an EU regulation that was kept in UK law post-Brexit and was set to expire on 31 May 2023. The review was necessary to assess its continued relevance, ensure it served UK interests, and account for significant developments in automotive technology and business models, ultimately leading to a new, UK-specific regulation.

What happens now that the MVBER has expired/been replaced?

The retained MVBER expired on 31 May 2023 and has been replaced by the Competition Act 1998 (Motor Vehicle Agreements Block Exemption) (No. 2) Order 2023 (the MVBEO), which came into force on 1 June 2023. Businesses in the automotive sector must now comply with the MVBEO and the accompanying guidance published by the CMA.

How does this affect my local independent garage?

The new MVBEO and guidance aim to continue promoting competition in the aftermarket. This means independent garages should still have fair access to essential spare parts, technical information, and diagnostic tools, enabling them to compete effectively with authorised dealer networks. This helps ensure consumers have a choice of where to get their vehicles serviced and repaired.

Where can I find the new guidance on the Motor Vehicle Agreements Block Exemption Order?

The CMA has published comprehensive guidance to accompany the new MVBEO. This guidance is publicly available on the CMA's official website, typically under their 'Competition' or 'Block Exemptions' sections. It is highly recommended for all businesses involved in the automotive sector to familiarise themselves with this guidance.

Will the new regulations increase or decrease vehicle repair costs?

The primary goal of the MVBEO is to foster fair competition. By ensuring a level playing field, particularly in the aftermarket for spare parts and repairs, the regulation should help prevent monopolies and encourage competitive pricing. While specific cost impacts can vary, the underlying intention is to benefit consumers through choice and competitive market forces, which generally works to keep costs in check.

Conclusion

The CMA's thorough review of the Motor Vehicle Block Exemption Regulation and the subsequent introduction of the MVBEO and its accompanying guidance mark a pivotal moment for the UK automotive industry. This comprehensive process, rooted in extensive consultation and analysis, underscores the government's commitment to maintaining a robust and competitive market. By addressing the complexities of vehicle sales, spare parts distribution, and maintenance services in the context of a rapidly evolving technological landscape, the new framework aims to foster innovation, ensure fair practices for businesses, and ultimately deliver significant benefits to UK consumers through greater choice, quality, and competitive pricing. As the automotive sector continues to transform, regulations such as the MVBEO will be crucial in safeguarding the principles of fair competition and ensuring a dynamic and healthy market for years to come.

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