A new block exemption regulation

Mr MSJ Steenhuis – Franchise lawyer 

Most recently, on 1 October 2002, the European Commission issued a new block exemption regulation. This is a block exemption regulation for the car industry. The European Commission has chosen not to include this form of distribution agreement, namely the distribution of motor vehicles, under the (general) regime of the vertical agreement block exemption regulation. Instead, a regulation has been issued that is more specifically tailored to the car industry. 

Given the strong similarities between distribution agreements on the one hand and franchise agreements on the other hand, it is considered relevant to discuss this new regulation here.

The objective of this new block exemption regulation is twofold. First of all, the Commission is of the opinion that consumers should be able to benefit more from mutual competition between the various market players. In addition, the Commission considered that dealers should be able to operate more independently of manufacturers. 

More substantively, there are a number of striking changes in the new block exemption regulation compared to the old block exemption regulation. These will be briefly discussed below. First of all, the new block exemption regulation allows a distributor to sell different brands side by side. The condition that is set here is that there is no infringement of the so-called brand identity. It appears from the provisions of Article 1(b) of the Block Exemption Regulation that the so-called brand identity is linked to the “non-compete clause”. In short, this means that the supplier may impose an obligation on a distributor to sell different brands in separate sales areas. Furthermore, the sale of cars on the one hand and the service, i.e. maintenance, of the car on the other hand has been separated in the sense that it is now possible for a distributor to focus exclusively on the sale of cars and to outsource the service to an authorized company. Furthermore, while it was possible under the old block exemption regulation to combine both exclusive and selective distribution in one agreement, this is no longer possible under the new block exemption regulation. A clear choice must therefore now be made whether one enters into an exclusive distribution agreement or whether one enters into a selective distribution agreement with each other. 

Exclusive distribution means “any direct or indirect obligation of the supplier, for a particular use or resale, to sell the contract goods or services only to one buyer in the common market.” In contrast, a selective distribution system means: “a distribution system in which the supplier undertakes to sell the contract goods or services, directly or indirectly, only to distributors or repairers selected on the basis of specified criteria, and where those distributors or repairers undertake not to sell such goods or services to unauthorized distributors or independent repairers, without prejudice to the ability to sell spare parts to independent repairers or the obligation to provide all technical information, diagnostic equipment, tools and training necessary for the repair and maintenance of environmentally measures, to independent operators.” 

It is also relevant in this context that it is no longer possible in this context to include so-called location clauses in the agreement, at least this applies from 1 October 2005. In short, such a location clause means that a manufacturer imposes an obligation on a distributor to perform its activities from a certain place of business. Finally, under the new block exemption regulation, the dealer / distributor is allowed to use so-called intermediaries who can sell cars for the dealer in question without restriction. 

Mr MSJ Steenhuis is a lawyer in Rotterdam. The law firm Ludwig & Van Dam is specialized in franchising.

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