Automotive Industry: A new Motor Vehicles Competition Law Block Exemption is now in force

The new Competition Act 1998 (Motor Vehicle Agreements Block Exemption) Order 2023 (‘MVBEO’) came into force on 1 June 2023.

Typically, agreements that hinder competition are prohibited under UK competition law; however there are certain exemptions available where the agreements provide sufficient benefits to offset any anti-competitive aspects.

The new MVBEO will provide a UK block exemption for certain vertical agreements in the automotive aftermarket related to the purchase, sale or resale of aftermarket goods or the provision of repair and maintenance services (‘MVA agreements’).

The MVBEO replaces the similar EU Motor Vehicle Block Exemption Regulation (‘MVBER’) which was retained following the UK’s withdrawal from the EU. The replacement of the MVBER follows a review of the existing EU regulation by the Competition and Markets Authority (‘CMA’). The CMA found that the recent advancements in diagnostic and repair technologies, and the increasing number of manufacturers also acting as service providers, contribute to a growing anti-competitive risk when manufacturers restrict access to their technologies. 

The CMA therefore recommended a new block exemption order, the MVBEO, which retains the scope of the retained MVBER but introduces updated definitions and amendments to reflect UK market conditions and capture technological developments in the automotive industry.

To benefit from the MVBEO, MVA agreements must meet the market share conditions of the UK’s Vertical Agreements Block Exemption Order (‘VABEO’) and must not include any of the ‘hardcore’ or ‘excluded’ restrictions listed in either the VABEO or the MVBEO (see our alert on the introduction of the VABEO here).Key elements to be aware of:

Wider scope: The MVBEO applies to motor vehicle agreements in ‘aftermarket goods’ which has a wider scope than the ‘spare parts’ definition under the retained MVBER. Notably, it encompasses:

• spare parts;
• fluids (coolants, lubricants, cleaners etc. but not fuel) necessary for the effective operation of the motor vehicle; and
• software required to repair or replace a part or system, together with any code or other information necessary to use the software.

Hardcore restrictions: The hardcore restrictions in the MVBEO are similar to the hardcore restrictions in the retained MVBER and prohibit agreements with any restrictions on (1) the sale of aftermarket goods by members of a selective distribution system to independent repairers (2) the ability of an aftermarket goods or repair and maintenance tools supplier to sell to distributors, repairers or end-users (3) the ability of a supplier of parts to place its trademark or logo on any original or spare parts.

New excluded restriction: A new ‘excluded restriction’ applies to restrictions imposed by vehicle suppliers on independent operators’ access to certain information, tools or training for providing repair and maintenance services. These sorts of restrictions could harm the ability of independent operators to compete effectively with authorised repairers. If such a restriction is included in an agreement it will not be permitted but the remainder of the agreement may still benefit from the MVBEO, subject to severance provisions.

Information provision obligation: Parties to an agreement where the MVBEO exemption is claimed must provide to the CMA any requested information (generally within 10 working days).

CMA’s power to cancel: The CMA has the authority to cancel the block exemption for a specific MVA agreement if it is found to be non-compliant with the general anti-competitive agreement exemption in Section 9 of the Competition Act 1998.

Transitional period until 31 May 2024: Any existing agreement which is exempt under the retained MVBER will continue to be exempt for one year after the implementation of the MVBEO. This will not apply to agreements entered into from or after 1 June 2023.

Expiry: The new block exemption provided by the MVBEO will remain in effect until 31 May 2029.

Businesses operating in the automotive industry should familiarise themselves with the provisions of the Motor Vehicle Block Exemption Order. It is particularly important to review any existing agreements to ensure compliance and make any necessary adjustments. 

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For more information on the introduction of these new provisions, or for any advice in relation to specific agreements, please do contact a member of our Competition or Automotive teams.