The EU proposals on the car sales block exemption. jpoc opinion



In the EU, new car sales are covered by a block exemption from normal competition and free trade rules. This was requested by car manufacturers because, they said that it was necessary to have a system of tied dealers in order to be able to ensure that cars are correctly serviced. When this exemption was granted, the manufacturers were challenged with accusations that they really only wanted it so that they could maintain high prices in certain markets and restrict the ability of EU car buyers to shop outside their countries for the best prices.

The manufacturers promised that they would ensure that prices were uniform across the EU and that they would not do anything to prevent cross border sales. They were telling lies and they proceeded to do exactly what they had promised not to do and even the threat and subsequent imposition of fines totalling hundreds of millions of dollars did nothing to deter them. The car manufacturers have been breaking both their promises and the law. Somebody who breaks his promises is not to be trusted and somebody who breaks the law is a crook. We need to remember this when putting a new regime in place. We need also to recall that telephone number fines do not deter car manufacturers from breaking the law. This is because the potential profits from swindling the car buying public are so great that it is worth paying a hundred million pounds in order to steal a billion pounds from the car buying public. It's simple, if you sell two million cars in Europe each year and you can raise the price of half of those cars by one thousand pounds then you have netted an extra billion pounds.

In the US, competition law recognises that financial penalties do not discourage racketeering and so company bosses are sent to prison for breaking competition laws.

If we sent a few of the top men at some car manufacturers to prison for five years, I bet they'd decide to stop breaking the law.

It is also worth bearing in mind that there is precious little evidence that the block exemption serves to improve the quality of car servicing. Everyone has their own garage horror tale to tell. If you want to see one of mine, check out my page on the subject of the brakes on my Toyota Celica.

In desperation some manufacturers are now threatening European governments with the mass layoff of staff in car sales networks. Well, excuse me but exactly what is the purpose of the car industry? Is it supposed to produce personal transport devices which will enhance the lives of the people or is it meant to provide subsidised joys to car salesmen at the expense of the general public. The use of this argument shows just how detached from reality the car company bosses have become. Joe Public does not like car salesmen. In fact he dislikes them intensely. Now he hears car company bosses saying that he should pay thousands of pounds over the odds so that these salesmen can have cushy jobs. Oh yes, that argument will win hearts and minds, not.

So, what should be done? Clearly we must have a new law that consigns the block exemption to history. But not only that, we would be fools to believe that car manufacturers will obey the new law. It needs to be backed up with enforcement and punishment so swinging that the car company bosses will obey the law. Transgressors should face fines in the billions of pounds and company directors should face lengthy terms in prison. Only then might we see a car market in Europe where the prices are uniform and low.

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