Consultation outcome

Motor Vehicle Agreements Block Exemption Order: government response

Updated 2 May 2023

1. Executive summary

1.1 Introduction

The Motor Vehicle Agreements Block Exemption Order (MVBEO) will give effect to the recommendation^{[footnote 1]} by the Competition and Markets Authority (CMA) that certain vertical agreements in the motor vehicle after-market sector should be exempt from law prohibiting agreements between businesses that prevent, restrict or distort competition. The MVBEO will ensure that businesses are able to gain the benefit of the block exemption by making it clear what conditions must be met in order for their motor vehicle agreements to be exempt.

The MVBEO replaces a similar block exemption, the retained Motor Vehicle Agreements Block Exemption Regulation (retained MVBER)^{[footnote 2]}, which was made under EU law and retained in UK law after the UK’s withdrawal from the EU. The retained MVBER expires at the end of 31 May 2023

1.2 Technical consultation

The Department for Business and Trade (DBT) launched a technical consultation on the legal drafting of the Order in February 2023^{[footnote 3]}. This consultation ran from 8 February to 1 March 2023 and sought views on the draft MVBEO to make sure it delivers the policy correctly and effectively. DBT expresses its appreciation for the nine responses received. A list of all respondents can be found at Annex A.

Respondents welcomed the introduction of the MVBEO and the opportunity to provide comments on its draft. While generally content that the MVBEO achieved the intended outcome, certain improvements to the technical drafting were proposed. Having carefully considered all returns, this response outlines the technical issues raised by respondents and how DBT intends to proceed. It does not discuss in detail matters raised by some respondents that will be addressed in accompanying CMA guidance.

This response does not comment on issues of policy reviewed and addressed by the CMA’s recommendation, which has been accepted in full by the Secretary of State. For example, it was suggested by a stakeholder to extend the scope of the block exemption to include two wheeled vehicles^{[footnote 4]}. The CMA considered this matter in detail previously, including during the consultation on its recommendation to the Secretary of State.

1.3 Next steps

Following this consultation, DBT is proceeding with The Competition Act 1998 (Motor Vehicle Agreements Block Exemption) Order 2023.

2. Motor Vehicle Agreements Block Exemption Order 2023

2.1 General comments

Stakeholders noted that the drafting of the order was in line with CMA recommendation which the Secretary of State accepted. However, they noted that certain provisions setting out the definitions could be improved in articles 2, 5 and 6. Noting these reflections, drafting changes have been made to clarify and refine the text, where appropriate. This includes amendments to definitions in article 2 on ‘Interpretation’ and article 6 on ‘Excluded restrictions: MVA’. In addition, non-substantive drafting changes to article 5 on ‘Hardcore restrictions: MVA’, article 7 on ‘Effect of breach of conditions’, article 8 on ‘Timing of cancellation: breaches of conditions’, and article 12 on ‘Transitional provision’ have been introduced for legal clarity.

3. Citation, commencement and extent (Article 1) and Interpretation (Article 2)

No changes have been made to article 1.

Several suggestions have been received for article 2 definitions; these included a revision of existing definitions which are considered in turn below. The addition of new terms covering policy matters are outside the scope of the CMA recommendation and, therefore, they have not been considered.

3.1 Amended definitions

Respondents^{[footnote 5]} suggested that the definition of ‘aftermarket goods’ should be amended to include references to software and data and a limb added for ‘repair and diagnostic tools’. It was argued that this would streamline the text, allow for deletion of references in other sections and futureproof for changes in use of in-vehicle data and advance vehicle systems. The definition of ‘aftermarket goods’ has been amended to include a reference to software.

The definition of ‘liquids’ was amended to ‘fluids’, with liquids being a type of fluids, and ‘use’ to ‘effective operation’^{[footnote 6]} following comments on the drafting.

The definition of ‘goods’ was amended to make clear that it included ‘software and information’ but not ‘tools required for the decryption of data’^{[footnote 7]}.

Definitions of ‘part’, ‘original part’ and ‘spare part’ have been refined to simplify them and to make clear that each term includes software, in line with stakeholder comments^{[footnote 8]}.

The definition of ‘supplier’ was expanded to include references to software and to clarify the appropriate supplier for software and any information required to use that software.

One respondent^{[footnote 9]} suggested expanding the definition of ‘system’. The respondent proposed that the current definition should include a reference to an ‘in-vehicle platform for access to data, functions and resources’ as software environment hosting location. DBT considers that the amendments to other definitions and clauses to include references to ‘software’, ‘information’ and ‘codes’ is sufficient.

3.2 Definition of ‘authorised distributor’

A stakeholder^{[footnote 10]} suggested that a definition of ‘distribute(s)’ or ‘distributing’ should be added to clarify that this includes ‘to market, sell or supply goods or services (irrespective of whether this involves resale) on behalf of another undertaking’. The stakeholder argued this would ensure consistency with the definition of ‘buyer’ in the Vertical Agreements Block Exemption Order 2022 (VABEO). DBT does not consider such a change necessary.

3.3 New definitions

A definition of ‘MVA agreement’ was introduced to clarify that the meaning given in article 3(2) applies throughout the Order.

Definitions of ‘repair and maintenance services’ and ‘repair and maintenance tool’ were introduced to replace the use and definition of ‘technical information’ and to address a range of stakeholder suggestions^{[footnote 11]}. The new definition of ‘repair and maintenance services’, in particular, should provide for increased legal clarity of the scope of the block exemption.

4. Block Exemption (Article 3), Block exemption subject to conditions and obligation (Article 4), and Hardcore restrictions (Article 5)

Article 3 had references to concerted practice removed. No changes have been made to article 4. Minimal drafting changes have been made to article 5 following the review of terms in other articles.

5. Excluded restriction: MVA (Article 6)

5.1 Manner of access

Article 6 has been amended to clarify the operation of the excluded restriction. The reference to information, tools and training being ‘necessary’ for the repair and maintenance of motor vehicles has been deleted and the article now requires access to information, tools and training on a level playing field for the excluded restriction not to apply (article 6(4)). Consequential amendments have been made to other parts of the article to reflect this change.

5.2 Definitions: ‘technical and vehicle information’ and ‘repair and maintenance information’

The draft MVBEO referred to ‘technical and vehicle information’ and included definitions of these terms. To enhance simplicity and ease of understanding, this term has been replaced by ‘repair and maintenance information’ which includes vehicle information. ‘Repair and maintenance information’ is defined as information that suppliers or their authorised partners use for repair and maintenance services (which, as noted above, has now also been defined in the Order). The change is not intended to modify the scope of the information covered or the excluded restriction as such but is purely a drafting change.

5.3 List of independent operators

As noted by a stakeholder^{[footnote 12]}, the draft MVBEO’s definition of ‘independent operators’ did not specifically include owners or operators of a fleet of motor vehicles as recommended by the CMA. The final order does now include this specific reference.

6. Effect of breach of conditions (Article 7), Timing of cancellation: breaches of conditions (Article 8)

Articles 7 and 8 have been redrafted for legal clarity. However, the substance of the provisions has not changed.

7. Obligation to provide information (Article 9), Cancellation in individual cases (Article 10) and Notices in writing (Article 11)

7.1 Deadline for information requests

One respondent^{[footnote 13]} suggested amending the 10-day deadline for responding to information requests from the CMA. An amendment to Article 9 was suggested to extend the response period to ‘not less than 20 working days’ for more extensive information requests.

DBT considers that ten days should ordinarily provide sufficient time to respond to information requests with the CMA’s recommendation not to depart from the periods for response provided for in VABEO and the Horizontal Block Exemption Orders 2023. The MVBEO will therefore provide the CMA with the ability to agree a longer deadline, having regard to the particular circumstances of the case. The CMA will also set out in guidance how it will request information and ensure that parties are given sufficient time to respond (including through engagement in advance of a formal information request).

Finally, it should also be noted that the potential sanction for failing to comply with an information request (cancellation of the block exemption for the relevant agreement) requires the absence of a reasonable excuse.

Minor drafting changes have been made to articles 9-11.

8. Transitional provision (Article 12) and Expiry (Article 13)

8.1 Duration

Respondents^{[footnote 14]} supported the proposed expiry of the MVBEO after six years, with one suggestion of a review at the end of year three to consider the Order’s effectiveness and reflect changes in technology. No further comments were received on the matter.

DBT agrees with the CMA’s recommendation for an expiry date after six years. This will allow the CMA to conduct a further review and consider ongoing market developments, including the growth in online sales and any other future challenges in the UK or internationally.

Article 12 has been amended for legal clarity. Article 13 has not been changed.

Annex A: List of respondents

1. Anonymous

2. Belron International

3. IGA - Independent Garage Associations

4. IMI - Institute of the Motor Industry

5. LKQECP - LKQ Euro Car Parts

6. NFDA - National Franchised Dealers Association

7. SMMT - The Society of Motor Manufacturers and Traders Limited

8. UK AFCAR - The UK Alliance for the Freedom of Car Repair

9. UKLA - United Kingdom Lubricants Association Limited

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1. https://www.gov.uk/government/consultations/retained-motor-vehicle-block-exemption-regulation-consultation ↩

2. https://www.legislation.gov.uk/eur/2010/461 ↩

3. https://www.gov.uk/government/consultations/draft-order-the-competition-act-1998-motor-vehicle-agreements-block-exemption-order-2023-mvbeo ↩

4. IGA ↩

5. IGA, UK AFCAR ↩

6. UKLA ↩

7. UK AFCAR ↩

8. IGA ↩

9. UK AFCAR ↩

10. NFDA ↩

11. Belron UK Limited, UK AFCAR ↩

12. Anonymous ↩

13. NFDA ↩

14. IGA, SMMT ↩