Block Exemption Regulation2
Block Exemption Regulation is an exemption in a business line or industry, which debars organizations in the industry from some business activities in order to create competition. The regulation is highly known in the automobile industry due to the effect caused by the Block Exemption Regulation (BER) from the European Commission. BER has changed the automobile industry in the last decade. Prior to 2003 automobile owners in the EU region risk nullifying their vehicle warranty when the vehicles were serviced or repaired in workshops not belonging to the vehicle manufacturer or its dealers. This barrier was broken in October 2003, when the European Commission (EC) passed a law allowing vehicle owners the freedom of having their servicing and repairs done at their chosen workshop.
According to the UK Department of Business Education & Skills, the empowerment created by this law provides competition in the automobile industry as vehicle owners now have the opportunity to repair and service their vehicle at alternative workshops to the automobile manufacturers. BER provides automobile users the flexibility and benefit to reduce the amount spent on servicing, thereby providing consumers more choice and better value for money.
Definition
According to the law-Glossary.com library, Block Exemption Regulation (BER) is defined as "an exemption granted to a large business or group of businesses exempting them from some obligations under competition law".
New Block Exemption Regulation
The block exemption regulations are updated regularly to create competition among the Member State of the European Union. According to a White Paper by Dr.Jai Ganesh, Dr. Srinivas Padmanabhuni and Anandhi r, "Changes to the block exemption regulations (BER) are meant to increase competitiveness in the automobile retail industry in Europe".
In October 2002 a BER was passed into law and it came fully into effect in October 2003. The regulation was passed into law because the preceding law did not cover adequately some key point. The October 2002 BER focused on new automobile sales, after-sales and distribution. The preceding BER did not cover the following points adequately:
- Competition between dealers of the same brand
- Problems occurring for cross-border sales
- Competition in the after-sales servicing
- The need to strengthen dealers’ position vis-à-vis manufacturers
In May 2010 a new law has passed by the European Commission Competition legislatives and it came into effect from June 1, 2010.
The automobile industry
Several countries in the EU region responded to the EC block exemption regulations with strategies to enforce them, making competition better among automobile users and manufacturers in their countries. An example of this is the ‘Car Notice’ passed by the Swiss Competition Commission in 2002.
A transition period was provided by the European Commission extends the previous 2002 for three years, till 2013. During this three years only the sales of new cars are affected by the new BER passed by the EC which came into effect on 1 June 2010.
In conclusion
The new regulation creates a healthier environment in terms of competition between authorized and non-vehicle maintenance workshop. Manufacturers will no longer have the right to unilaterally set terms regarding warranties, spare parts and technical information.
Independent garages not covered in the official network of a company gain better access to the supply of spare parts, technical manuals, tools, diagnostic programs and teaching materials needed to repair the car.
Automakers have the option to set quality criteria to anyone wishing to repair their cars, but can not limit the number of official repairers, which, according to the EU will create a denser network of service points.
All the above create benefits for the consumer, both in price and in quality of service and products.