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Motor Car Parts (Monopoly Report)

Volume 24: debated on Wednesday 26 May 1982

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asked the Minister for Trade when the monopolies and mergers report on the supply of motor car parts is to be published; and if he will make a statement.

The report is published today. In its investigation of the possible existence of a monopoly situation in relation to the wholesale supply of car parts in the United Kingdom the commission was required to limit consideration to the practice whereby suppliers of car parts imposed exclusive buying requirements on those persons supplied, and to car parts supplied for resale as such or for replacement of existing parts. The commission has found a complex monopoly situation involving 22 car manufacturers who together supplied at least a quarter of the car parts supplied in the United Kingdom and so conducted their affairs as to restrict competition in the supply of car parts in that they required persons to whom they supplied car parts to acquire those parts exclusively from them or from sources approved by them. The commission also considered the exclusive buying requirements imposed by two component manufacturers but concluded that these did not appear in practice to have any material restrictive effect on competition.The commission found four effects of exclusive buying requirements which were against the public interest:

  • The limitation of the extent to which component manufacturers can compete with one another and with car manufacturers and importers;
  • Restriction of price competition;
  • Some limitation on the level of service from which the franchised sector of the market can benefit;
  • Restriction on competition among factors.

The commission examined a number of arguments put to it in defence of exclusivity but did not consider that there were sufficient benefits to outweigh these adverse effects, and it concluded that the complex monopoly operated and might be expected to operate against the public interest.

In considering its recommendations for remedying or preventing the adverse effects they had identified, the commission recognised that removal of formal exclusive buying requirements would probably not result in any sudden or dramatic change in the pattern of trade, since franchised outlets would continue to buy mainly from the car manufacturers and importers. Nevertheless, component manufacturers and factors appeared to be confident that if the formal restrictions were removed they would be able gradually to penetrate the franchised sector of the market. The commission therefore recommended that car manufacturers and importers should be required to exclude from their franchise agreements any clause having the effect of requiring franchisees to buy car parts exclusively from them or from sources approved by them and to cease enforcing any such clauses in current franchise agreements. The commission noted that this recommendation was not intended to prevent car manufacturers and importers from insisting that "genuine" parts be used by franchisees in warranty work.

The commission pointed out that even after the abandonment of the exclusivity clauses it would be possible for franchisors to ensure exclusive, or near-exclusive, buying by their franchisees by other methods. It pointed out that if in the future any particular car manufacturer or importer adopted any practice which led to exclusive buying to the extent that it was materially anticompetitive he could be made the subject of an inquiry under the Competition Act 1980 or under the appropriate provisions of the Fair Trading Act 1973.