The death knell appears to have been sounded for the block exemption system allowing the EU motor industry to sell its vehicles through tied dealer networks, a closed system of distribution that is illegal for most other industrial sectors, where free competition amongst retailers prevails. A long awaited report has been issued by the European Commission, which has concluded: "The block exemption has not achieved part of the aims stated by the Commission in 1995 when it renewed its permission to use selective distribution networks for the sale of motor cars. Consumers in particular do not seem to derive from this distribution system the fair share of the benefits of the creation of a European single market in 1993."

Comments will now be sought from the industry and a public hearing will be staged next February. Following that, the Commission will formally propose whether or not to extend the motor industry's existing block exemption from standard EU competition rules from September 30, 2002, the date when this legal loophole expires.

Judging by the report's conclusions, it can be expected that the Commission will favour the establishment of an unfettered market for the EU auto sector.

To link to the European Commisson report, please click here.