BLOCK EXEMPTION allows the auto industry to be exempt from normal European competition rules. It allows manufacturers to control their own distribution channels, and appoint specialist dealers to cover defined sales territories. In the past, it has allowed automakers to defend exclusive franchise points - and even to stop dealers taking on other franchises in the same sales territory.
If block exemption is abolished, then the car industry may have to fall in line with new EC 'vertical restraints' legislation, due for 2000. This legislation will apply to all retailers, from hamburger outlets to perfume shops. It regulates levels of exclusivity between manufacturers and retailers, in order to control such aspects as quality standards, brand image, supply and product knowhow at sales outlets.
It would end regional exclusivity for single auto brands.