The National Franchised Dealers Association (NFDA) is adopting a wait-and-see stance after the Competition and Markets Authority (CMA) removed rules governing how manufacturers deal with car dealers and fleet buyers.
The Supply of New Cars Order 2000 was revoked on November 4, ending specific protections covering fleet discounts, pre-registration incentives and pressure relating to dealers’ advertised prices.
However, the NFDA said the order was too loosely drafted to give dealers meaningful protection against unfair commercial terms or manufacturer supply pressure.
Sue Robinson, chief executive of the NFDA, said: “The New Cars Order was frequently criticised as an ineffectual protection for dealers, failing to result in fair terms being offered to dealers, whether as a means of delivering equivalent terms or avoiding supply pressure.
“The drafting of the Order was simply too loose. It could have been improved, of course, had government been minded to do that, but the reality is that although the removal of the Order might appear negative for dealers, the Order did not adequately address the problems it was meant to resolve anyway.”
Dealer safeguards removed
The order prohibited unjustified price discrimination between dealers and fleet customers buying similar volumes of vehicles over comparable periods.
It also required manufacturers to provide dealers with information about terms offered to fleet buyers and prevented bonuses, targets or preferential treatment from being linked to pre-registered cars.
Manufacturers could not withhold supply or vary credit, discounts, bonuses or delivery terms according to the price advertised by a dealer.
Those specific restrictions have now been removed, giving manufacturers greater scope to redesign their commercial terms and incentive programmes.
Existing dealer agreements will not necessarily change immediately and wider competition law continues to apply. Manufacturers are still prohibited from unlawfully imposing fixed or minimum resale prices.
NFDA will watch manufacturers
Robinson said the association would continue to monitor the market for any adverse consequences arising from the change.
She said: “While the NFDA would remain focused on any market distortions that might arise in light of macro-economic and market developments, the Order, in its current form, would not have resolved these concerns effectively anyway were they to arise.
“Indeed, while NFDA would reserve its position, removing the Order might remove some of the confusion around the Order’s remit and some of the burden of associated regulatory compliance. Much will depend on how manufacturers react and the NFDA will maintain a watching brief.”
The practical effect for dealers will therefore depend on whether manufacturers use their greater freedom to change fleet discounts, tactical registration programmes, advertised-price policies or vehicle supply arrangements.
The CMA concluded that increased competition from new manufacturers and the development of online sales channels meant the market no longer required the order.
It acknowledged, however, that the wider regulatory framework does not reproduce the specific restrictions that have now been removed.
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