The French competition authority (FCA) released on 8 October 2012 an opinion in relation to the car repair and maintenance sector. The opinion is the result of a public consultation that was launched in Spring 2011.
The opinion, which is more than 200 pages long and available only in French, contains several statements and proposals aimed at increasing competition in the car repair and maintenance sector that will may substantial implications for market participants.
In response to the opinion, the French Minister of Industrial Renewal, Arnaud Montebourg, said that while the French Government will consider the FCA’s proposals, keeping prices low for consumers is not currently a top priority. It can therefore be assumed that the French Government will not be making significant changes to legislation imminently. The opinion may, however, have some immediate implications for the sector.
The FCA states that the investigations carried out in the context of the preparation of the opinion revealed the existence of certain behaviours and practices in the car repair and maintenance sector that are likely to violate competition.
The FCA further states that if these alleged anti-competitive behaviours and practices are not dealt with rapidly, they may lead to investigations by the FCA and possible sanctions.
On this basis, participants in this sector should therefore assume they are under the close scrutiny of the FCA and should ensure their practices conform with existing French legislation.
Proposals for Changes to Legislation
The main purpose of the opinion is to suggest changes to relevant legislation applicable to the car repair and maintenance sector, in order to stimulate the sector and decrease prices in favour of consumers.
The FCA presents five issues that it identified as presenting problems within the sector and suggests ways to deal with each of them.
Liberalise the Spare Parts Market
The FCA considers that the current French legislation applicable to the car repair market for visible parts reduces competition by allowing only car makers to distribute visible parts to repairers. The consequence is that the car makers retain a “legal monopoly” over more than 70 per cent of the sale of visible parts, and a “duopoly” with spare parts manufacturers over the remaining 30 per cent.
To remedy this situation, the FCA recommends strongly that the French Government liberalises the sale and distribution of visible parts, as has already been done by 11 other EU Member States. This would benefit both independent repairers and consumers.
The FCA suggests that the best way to achieve this would be to lift the monopoly gradually, and predicts that this would result in a price decrease of between 6 per cent and 15 per cent. This decrease would have the dual benefit of creating significant consumer savings and allowing equipment manufacturers to trade on a European level.
Release Spare Parts From Design Rights
With the same objective of reducing the car makers’ monopoly and favoring competition and consumer choice in granting more freedom to independent operators, the FCA calls on the French Government to introduce legislation that would restrict car makers’ industrial design rights over visible parts. The FCA advocates that design rights should cover only “original equipment” that is used when the new cars are assembled, thereby freeing up design rights over spare parts destined for repairs.
The FCA also states that contractual clauses preventing original equipment manufacturers from offering spare parts freely constitute a potential infringement of competition rules. These should therefore be examined on a case-by-case basis under the specific exemption regulation applicable to the automotive industry.
Give Independent Repairers Access to Technical Information
The FCA calls for independent repairers to be given access to technical information required for repair and maintenance because uneven access to necessary information creates “significant” obstacles to competition on the downstream market.
As a result, the FCA stresses the importance of verifying whether restrictions exist and, where necessary, of applying sanctions to them.
It should be noted that granting “multi-make” independent repairers wider and easier direct access to technical information may result in significant adverse consequences for specialist intermediaries that currently offer multi-make solutions to independent repairers for carrying out repair work on any type of cars.
Manufacturers’ Warranties Should not be Dependent on Car Maintenance Being Undertaken in the Manufacturer’s Network
The FCA acknowledges that certain clauses in manufacturers’ warranties or warranty extension contracts make the warranty conditional on the consumer using the car maker’s network, even for repairs or services that fall outside the warranty.
The FCA claims that these warranties need to be clear and explicit with respect to the consumers’ option of using a repairer outside the network without losing the benefit of the warranty. The FCA warns that warranties that do not comply could be subject to a case-by-case investigation.
Recommended Retail Prices for Spare Parts Should not Hinder Competition
The FCA acknowledges that recommended retail prices for spare parts, and the access to them given by the car makers to certain independent retailers or intermediaries, can hinder price competition.
The FCA warns, therefore, that the exchange between manufacturers and suppliers of recommended pricing information might risk hindering price competition and, as such, could fall under its jurisdiction.