New Changes - New Challenges
Seventy delegates again attended this year's conference which was held on 23 February 2006 at the The Royal Automobile Club, London to listen to and exchange views with leading European and UK motor industry representatives.
The keynote speech was given by Paolo Cesarini, Head of Unit in the European Commission’s Competition Directorate, who outlined the Commission's view of the impact of the block exemption changes three years on.
Varied impact of BER three years on
Price harmonisation not Commission’s objective
Decisions soon on dealer standards and multi-franchising
There had been significant changes on the supply side too, though these were not driven by the block exemption. Rover had dropped out of the picture, and Korean manufacturers had entered the market or taken a larger share. Overall, demand for cars remained fairly static.
‘testing the limits’ in aftersales
Access to information still a concern
As for parts distribution, it is still the case that authorised repairers rely on vehicle manufacturers for their spare parts. In some Member States, independent wholesalers have taken some business from manufacturers, but vehicle manufacturers have responded (as the Commission would no doubt wish) by bringing our economy-priced ranges of parts.
The initial impact of the regulation is to be examined in a study by London Economics, and a full impact assessment will be done by the Commission by May 2008. The exclusion of location clauses from the block exemption from last October is expected to have a significant impact and will have to be monitored carefully. Which leaves us with the most tantalising question of all: will there be another sector-specific regulation in 2010, when this one expires? It’s a little early to expect an answer to that one yet.
Automotive restructuring is a fact of life
Drawing on examples from the US as well as recent events with MG Rover in the UK to show that automotive restructuring is a fact of life but that risk can be reduced by forward planning and creative thinking, Stephen highlighted the different issues that can arise from the perspectives of consumers, dealers, component suppliers and vehicle manufacturers. Consumers’ rights under vehicle warranties are not likely to be enforceable against the dealer, and the absence of a warranty might justify a consumer cancelling an order for a car if the manufacturer goes out of business. The consumer could also find himself responsible for end of life disposal of the vehicle. Dealers’ issues would include their repair liabilities, requirements under their dealer agreements to take allocated stock, and their continuing obligations under the General Product Safety Regulations to monitor and notify safety defects. For component suppliers, terms of business are fundamental, in particular the inclusion of effective retention of title clauses, and intellectual property issues. Contract terms are also the key to being prepared for the possible insolvency of one of its component suppliers for vehicle manufacturers, and taking steps such as dual sourcing to protect the supply chain.
Motor industry still a target of enforcement
Anthea highlighted the recent case brought by the Office of Fair Trading against the Officers’ Club, as it illustrated that compliance with the Code of Practice on Price Indications was not necessarily sufficient if an advertisement was generally misleading. This was a message that all staff responsible for advertising and marketing had to take to heart.
The forthcoming implementation of the Unfair Commercial Practices Directive (UPCD) was of particular interest to the industry, but it was often difficult to assess what the impact of new legislation would be until it was in operation. It had been predicted by the trade back in 1968 that the effect of the Trade Descriptions Act – a very similar piece of legislation - would be to make the sale of used cars impossible, whilst comments from enforcement officers had played down its likely impact. In fact, whilst the sale of used cars has clearly continued, there has been, and continues to be, significant numbers of car dealers prosecuted each year for breaches of the Act.
DTI wants to simplify consumer protection laws
There are some 28 pieces of legislation affected by the Directive and which will probably need at least some amendment ranging from core consumer measure like the Trade Descriptions Act 1968, to rather more esoteric legislation like the Fraudulent Mediums Act 1951.
The consultation deals with interpretation, enforcement and existing legislation. Enforcement of the new legislation is a particular issue to consider, as if this is not implemented correctly the benefits of the Directive would be lost. Four enforcement possibilities are being considered: injunctive actions, criminal sanctions, private rights of action, and self-regulation. Injunctions must be an option, but criminal sanctions can also be retained or introduced, and one of the matters to be considered was whether the new provisions of the Directive, e.g. aggressive commercial practices, should carry criminal sanctions. The DTI is also considering whether consumers should have a specific right to seek redress where they have suffered actual economic loss. The DTI is considering whether in some areas, such as advertising and banking, recourse should be required to codes of practice before other enforcement action is taken.
Christopher explained the future timetable: the current consultation closes on 8 March, the Government’s response to the consultation will be published in the Spring, and draft regulations and guidance for further public consultation in the Autumn. The new regulations are scheduled for publication in Spring 2007.
As might be expected, these topics produced some lively discussions, and, according to the table leaders who gave the feedback, some of the debates went much wider than the specific question asked. Interesting points made included:
(on the block exemption) the consumer is now very much “in the driving seat” so far as the industry is concerned, but this is due more to consumer protection laws than to the block exemption, and dealers are perhaps not using all the tools they have available under the block exemption;
(on intellectual property rights) safety issues mean that on counterfeiting issues consumer and manufacturer interests are very much the same, but it is more difficult to convince consumers of that in respect of parallel imports;
(on standards in the industry and regulation) trading standards think that self regulation hasn’t worked, but there are serious doubts as to whether any licensing scheme would actually deal with rogue traders effectively while the cost would have to be borne by consumers in the end;
(on the cost of EU harmonisation for the industry) more regulation simply impacts on reputable manufacturers, other markets may have less regulation ;
(on long term liability for manufacturers) will manufacturers’ structures (e.g. IT) survive long term to provide the information needed ? Honda’s anti-counterfeiting experience Christopher Morgan from Honda Motor Europe gave the conference an intriguing and entertaining picture of the sort of world-wide counterfeiting and IP infringement issues that Honda has to deal with across its range of products. Problems they have encountered range from counterfeit of components and complete products, to infringement of registered designs and trademarks to copies of complete cars and motorbikes. The company monitors exhibitions all over Europe, and takes legal action as well as supporting lobbying and education activities with enforcement authorities.
“Toto, I don’t think we’re in Kansas any more”
The coming-into-force date for the Consumer Credit Bill which is expected to complete its final stages in the Lords soon before receiving Royal Assent is not yet certain, but may be from April 2007. Meanwhile a number of pieces of secondary legislation have already come into force dealing with advertising, up-front information, clearer and fairer contracts, early settlement, distance contracts and online agreements. Important measures in the Bill itself include those relating to “unfair relationships”, which replaces the rules on extortionate credit. The problem here is that there are no criteria in the Bill for defining an unfair relationship, and this has been left entirely to the courts. It will therefore be vital for companies to have the right processes and procedures in place. In addition, not only will all lending to consumers be caught by the legislation but the OFT will have unfettered powers in respect of licensing arrangements, and new guidance is expected as to how they will exercise these powers.
Meanwhile in Europe, the provisions of the draft EU Directive on consumer credit are causing concern, particularly the standard 14 day cooling off period which is currently proposed.
Payment protection insurance is also under scrutiny. The PPI market has been the subject of a super-complaint by Consumers’ Advice, and the OFT is currently considering this - a reference to the Competition Commission may follow. The FSA too is concerned about PPI and has written to the trade associations seeking assurance that they are going beyond legislative requirements to ensure that the market is working.
Plea for input from trade to trading standards
Peter accepts that working with the trade will more likely to bring successful outcomes and still would like to hear any views from the trade.
He says “It may be that the OFT working with the SMMT supported by the RMIF may find an acceptable solution to redress the consumer detriment and dissatisfaction with standards in vehicle repair and servicing. However, I still have concerns in respect to the second hand car market; there are far too many examples of unscrupulous dealers hiding behind false identities. This means that it is at times almost impossible for us to identify who is responsible for clocking cars and selling unroadworthy cars.
Honest car dealers ought to see the damage done to consumers and their own businesses by those who sell clocked cars. Many of these unscrupulous traders do not have forecourts, they have no need to. They buy their stock one or two at a time and sell them back to the trade or to consumers via small ads or the internet. Perhaps it is time to consider a scheme that requires those in the car trade with no fixed business premise to register their activities.
I hope there are those amongst you that can find time to respond with your views and ideas. Anything, to progress ways of helping trading standards officers be able to ensure that legitimate business operate on a level playing field and consumer are not cheated will be welcomed.”
Peter can be contacted on 01245 341981 or email@example.com
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Conference reports from previous years