New Order extends competition in motor repair market

Published 16 junio 2023

From 1^st June 2023, the Motor Vehicle Block Exemption Order (MVBEO) replaces the EU Motor Vehicle Block Exemption Regulation (MVBER), which was retained as part of UK law after the UK formally left the EU, with increased protections for independent repairers.

The Competition and Markets Authority (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. It recommended that the Secretary of State replace the MVBER with a block exemption order under the Competition Act 1998.

The MVBEO gives effect to the CMA’s recommendation to replace MVBER broadly in line with the status quo. It introduces some important amendments tailored to the needs of UK consumers and businesses to improve the block exemption provisions and the current legal framework. The Order's wording is open enough to cover changes in technology between now and its expiry in 2029.

The MVBEO applies to motor vehicle agreements in "aftermarket goods", which has a wider scope than the "spare parts" definition under the MVBER. 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.

The MVBEO largely copies the MVBER's "hardcore restrictions" as defined, but also provides that agreements cannot restrict appropriate access to information and tools and training used for the purpose of repair and maintenance services. The Order's intended effect is to place independent operators on a level playing field with authorised repairers, authorised distributors and other authorised partners.

Any existing agreement which is exempt under the MVBER will continue to be exempt for one year after the implementation of the MVBEO, i.e. until 1^st June 2024.

Impact

DACB's assessment is that at least in theory, the Order could lead to lower repair costs. It will give independent repairers access to the parts, tools and information they need to compete with manufacturers and their authorised repairers. As independent operators tend to charge less than manufacturer authorised repairers, the extra competition could drive costs down for consumers.

In practice, however, we are likely to see limited impact. Independent operators will have to spend substantial amounts on the tools, machines, computers and software to keep up, driving up costs; and the rate of technological innovation in the automotive field means these will be ongoing expenses rather than a one-off. Additionally, independent operators will need more, better trained employees, who will need regular training updates – and will expect higher wages.

All these costs will be passed on to customers including insurers, meaning the price difference between independent operators and manufacturer authorised repairers will narrow. Increased numbers of EVs and continuing development of ADAS and self-drive technology will put further pressures on independent operators, by increasing labour costs for newly required services such as sensor calibration and software maintenance. We can expect repairers to raise their prices even more as a result.