17 Jul 2024
The voice of the independent garage sector

It’s just not fair

I love competition. No really, I do. Competition abounds in a wide variety of aspects of everyday life. It helps to formulate innovation or is often the basis of experience, in both good and bad ways. Competition creates choices when you have money to spend or forms the basis of just about every sport, whether you are participating or watching. Competition is at its best when there is a level playing field,  both metaphorically and literally.
There are many more examples of competition, but from the UK aftermarket’s position, it is the very foundation of its existence. The aftermarket only exists because it offers vehicle owners and operators a choice. If they choose to use the aftermarket, which they predominately do, then it remains the vibrant, innovative and service-centric sector that it is.

The aftermarket has evolved for well over more than a century, but in the 21st century the level playing field has become increasing distorted. This is due to the rapid rise in vehicle technology, particularly the vehicle’s electronically controlled systems and functions. In recognition of the corresponding reliance on the vehicle manufacturer being the sole source of the technical information needed to diagnose, service, repair or maintain the vehicle, aftermarket associations lobbied the legislator to act and create the level playing field. As I alluded to in an article earlier this year, this was done as part of the Vertical Block Exemption Regulation (V-BER) created in 2002 that exempted a variety of industry sector distribution models from the requirements of competition law that would otherwise have made these distribution models illegal. The specific needs of the automotive sector were then covered in a sub-regulation – the Motor Vehicle Block Exemption Regulation (MV-BER) that allowed main dealers to operate as a monopoly within a set geographical area. For the aftermarket, this also included the non-discrimination between workshops, so that independent operators were able to access the same repair and maintenance information (RMI), replacement parts, tools and training as the vehicle manufacturer’s main dealers. The MV-BER was updated in 2010, valid in both the EU and UK  and importantly for the aftermarket, included some new hardcore restrictions concerning the access to captive parts and the ability of Tier 1 suppliers to sell their parts into the aftermarket. Also importantly, it included supplementary guidelines that help to define many detailed aspects of the original Regulation. However, the current MV-BER will expire on 31 May 2023.
More recently, many in-vehicle ‘software driven’ aspects have evolved and created an increasing number of ways that the vehicle manufacturers themselves can now directly provide aftermarket services to the driver, vehicle owner or vehicle operator in direct competition to the independent aftermarket.
This has led to new service centric business models, especially using the remote wireless access to the vehicle when it is being driven. Monitoring of the vehicle’s functions, as well as how the driver is using the vehicle, using embedded diagnostics and predictive analysis of the vehicle’s data, as well as bespoke service and maintenance offers directly to the driver via the in-dash display are now where it is happening. The basis of competing business models now starts in the car when it is being driven. By the time it gets to a workshop, half the work has been done (the identification of the problem, what work is required, and the parts needed have been identified) so that workshop costs can be reduced by up to 50%.

As only the vehicle manufacturers have remote access to the vehicle, their own embedded applications, and the ability to bi-directionally communicate with the driver, the aftermarket is at a severe disadvantage.

So, where is the level playing field and non-discrimination unless independent operators can also have equal abilities? (I choose my words carefully).
The MV-BER is very important to retain the principles of effective competition for the aftermarket but needs to work in parallel with the vehicle type approval regulations, as these contain much more detail about both the technical and the access requirements that the vehicle manufacturers must support. Vehicle type approval legislation also allows non-compliance claims to be challenged through the type approval authority, as opposed to the more difficult and expensive route through the courts under the MV-BER.
Post-Brexit, the role of the UK legislator in the guise of the Competition and Mergers Authority (CMA) is most important. The CMA have consulted on the continued relevance of the MV-BER and plan to issue a two-stage consultation during the summer, so it seems that they plan to renew MV-BER, but it is not clear how new requirements needed to address “technical progress” would be included, if at all. This would require either change to the wording of the MV-BER itself, or an update to the wording of the supplementary guidelines, which although easier to do from the legislative viewpoint, has less direct legal basis in the event of a “non-compliance” by a vehicle manufacturer.
Aftermarket associations in the EU, but equally importantly in the UK, have submitted key proposals for updates to the MV-BER supplementary guidelines. The UK government has stated that they will also take into consideration what the European Commission propose to do. The European Commission issued its proposal in early July which explained their approach and their draft proposals.
These documents confirmed that MV-BER will be renewed until 31 May 2028, but their proposal also stated that there needed to be an update to “reflect the importance that access to vehicle-generated data was likely to have as a factor for competition.” However, although the European Commission felt that “some parts of the sector would evolve rapidly over the coming years and that this would have an impact (not yet quantifiable) on the conditions of competition,” they also stated that the extension of the MV-BER will “allow some of the currently emerging technologies to consolidate and will put the Commission in a better position to re-assess the situation under the new market reality.”
The Commission also explained that access to vehicle-generated data would be included in the revised wording of the Supplementary Guidelines, but although this seeks to establish that “withholding the item in question will have an appreciable impact on the ability of independent operators to carry out their tasks and exercise a competitive constraint on the market” as the basis, this does not clarify many other important related aspects, for example how vehicle generated data would be accessed, what can be accessed, at what cost and what registration/declaration conditions would be imposed by the vehicle manufacturers.
The UK government will need to consider what the European Commission has proposed, but for truly effective competition in the UK aftermarket where the vehicle manufacturers are now increasingly and directly competing with independent operators and where the basis of vehicle-related service offers starts remotely when the vehicle is being driven, the UK government will have to do much more. Given the time frame before the current MV-BER is set to expire, the reality is that the ‘rules of the game’ are likely to be insufficient to ensure that the playing field remains level, meaning that the next few years are likely to be increasingly challenging for the UK aftermarket to have the equal abilities needed to compete.