Block Exemption

The UK Motor Vehicle Block Exemption Order (MVBEO) replaced the EU's Motor Vehicle Block Exemption Regulation (MVBER) in the UK after Brexit. It came into effect on June 1, 2023, and is valid until May 31, 2029.

The MVBEO aims to ensure that businesses can enter agreements that are considered beneficial and not anti-competitive, potentially promoting efficiencies and innovation. It covers agreements in the motor vehicle aftermarket, including those related to parts, repair and maintenance services.

The original EU block exemption allowed car manufacturers to create networks of selective and exclusive dealerships.

The system of selective and exclusive distribution was strongly criticised by the UK Competition Commission in its April 2000 report on the market for new cars in the UK.

In November 2000, the European Commission published a review of the workings of the block exemption, which concluded that the system had failed to meet important objectives set for it when it was established in 1995. In particular, the review concluded that:

• buyers were still facing difficulties when they tried to purchase new vehicles from another Member State
• the “natural link” between sales and after-sales service seemed no longer to exist
• the objective of increasing the commercial independence of dealers had been achieved only to a limited extent; and
• independent repairers were being denied access to technical information.

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.

These changes will mean more competition in the servicing and repair market leading to lower costs and higher standards for consumers. Inline with advancing technologies.

The after-sales market will be opened up, with a change to the rules linking new car sales and servicing. Dealers will still have to ensure that customers’ cars are serviced and repaired to manufacturer-approved standards, but they will no longer have to do it themselves; and, independent garages and roadside assistance organisations will have much greater access to technical information, including diagnostic equipment and software.

Dealers will be freer to determine how they run their businesses. The better the service they offer, the more they will be rewarded. Poor performers will find it harder to survive.

The Supply of New Cars Order 2000 was introduced following the Competition Commission (CC) monopoly inquiry into the supply of new cars. The CC found that private car buyers in the UK were paying about 10% to much for the average car, taking account of discounts, trade-ins and finance deals.

The CC found the operation of the selective and exclusive distribution system permitted by the European Union’s Car Block Exemption rules to be the root cause of the increased cost of new cars in the UK, and made a number of recommendations for fundamental changes to this system.

The CC also made a number of recommendations for immediate action, which resulted in the introduction of the Order in September 2000. One of the main provisions of the Order requires suppliers to offer dealers who purchase volumes of cars outright equivalent discounts to those offered to fleet customers who purchase similar volumes. The intention of this provision is to close the price gap between cars offered to fleet customers and those offered through dealers to private buyers.

The new EC Cars Block Exemption should help reduce UK prices, or at least lead to a levelling out across Europe of pre-tax prices, by increasing competition and providing greater freedom to import cars from other member states. There is evidence that the process of levelling prices across the EU has been proceeding.

The responsibility for enforcing UK competition law falls to the Office of Fair Trading (OFT). The Regulation is therefore directly enforced in the UK by the OFT under the new modernisation of enforcement of European Union Competition rules.

Responsibility for enforcing across borders remains with the European Commission. The Regulation places responsibility on the Commission to monitor its operation on a regular basis and to report in May 2008. The Commission will take the lead on UK cases which have a Community wide dimension. OFT assists the Commission as necessary.

In general, the Department for Business, Enterprise and Regulatory Reform (BERR) takes the lead in the UK on competition policy issues and on the development of new legislation including EC regulations such as the cars block exemption.

Neither BERR or the OFT can advise individuals on the merits of a specific EC case or make representations on their behalf but the OFT can provide advice on procedures for approaching the Commission.

The text of the new block exemption, explanatory brochure and other information can be found on the UK Motor Vehicle Block Exemption Regulation (MVBER) web page.

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