The way carmakers distribute and sell cars in Europe is likely to change radically after September 2002 when Europe's block exemption is expected to be abolished.
Criticism of industry practices, not just by consumers but by a growing number of European governments, is mounting.
Block exemption gives carmakers the right to control their distribution networks in Europe.
Last month, the European Court of First Instance confirmed that the Volkswagen group had violated competition rules by discouraging dealers in one country from selling cars to customers from another country (see story below). VW had appealed against a fine originally imposed on it by the European Commission in 1998.
The EU court upheld the penalty, but reduced it by E12 million to E90 million. This was still the highest-ever fine imposed on a European company.
Mario Monti, who heads the European Commission's competition unit, said the ruling proved that carmakers are abusing the power that exemption from competition rules gives them.
Monti has accused carmakers of stifling new-car and aftermarket competition, and controlling their dealers.
The European Commission is still reviewing the block exemption and is due to issue a report at the end of the year. Monti will not say whether the exemption will be eliminated or changed. But in a speech at an industry forum this spring, he said block exemption, adopted in 1985 and amended in 1995, has 'not had the desired effect on dealers or competition.'
Eric Van Ginderachter, head of the motor vehicles unit at the Competition Commission, hinted the EU may no longer want to give automakers protection from normal competition laws, because 'the industry is in a better situation financially and competitively' than before the exemption was granted.
Van Ginderachter said the industry's structure has also become 'more monopolistic.' With changes in delivery and inventory, dealers are also under even 'greater control' by automakers, he said.
The the Internet will also have an effect on the EC's recommendations because its use was not considered when the 1995 renewal was adopted.
Possibly the most main reason for eliminating or changing the block exemption is a shift in the EU's policy toward regulation, he said. An industry is not entitled to an exemption from EU competition laws if it has a share of more than 30 percent of the market, he said. 'Fewer than 2 percent of all cars sold in the EU are parallel imports.'