Europe to change auto pricing and distribution rules

The European Commission is proposing swift changes to rules governing uniform pricing of cars in European Union countries and the distribution and servicing of vehicles sold in the EU. The new rules have yet to be approved by the individual EU member governments and the European Parliament, with final approval expected in July.

Current rules allow auto makers special anti-trust privileges in which prices for identical vehicles can vary as much as 30% from one country to another. Manufacturers can grant dealers exclusive territories and dictate pricing practices.

The commission's Feb. 5 draft rules drew criticism from the industry and some politicians, notably Germany's Chancellor Gerhard Schroeder, who says the changes threaten Germany's already weak labor market.

“The destruction of the block exemption would bring huge competitive disadvantages to the German car industry,” he tells reporters at the opening of General Motors Corp.'s new Adam Opel AG plant in Russelsheim, Germany.

The new rules call for the removal of the long-cherished “block exemption” status, which enabled auto manufacturers to dictate where dealers could be located in specific geographic regions of the continent. Under the exemption, manufacturers also were able to restrict sales of their repair parts at higher prices.

The new rules enable dealers to sell cars anywhere in a country where the brand they sell has more than 10% of the market. The rules could dramatically impact Volkswagen AG, as well as Fiat Auto SpA and Renault SA, which hold more than 10% market share in their home markets.

The industry is vehemently opposed to the moves, calling them “radical.” Auto makers contend the new rules will disrupt the link between the dealer, manufacturer and consumer and cause chaos to dealer/manufacturer relations.