The aftermarket for motor vehicles (i.e., distribution of spare parts, and provision of repair and maintenance services) is still not subject to sector-specific competition rules, but this may soon change. The Serbian Commission for the Protection of Competition ("Commission") has recently published an external study on aftermarkets for motor vehicles (and household durables).1 The results of the study, the Commission states, will be taken into account when drafting Motor Vehicle Block Exemption Regulation ("MVBER").
The study reveals that the Serbian vehicle market is largely comprised of light cars, most of which are ten years or older. Only 6.5% of the vehicles on the market are less than five years of age and are thus subject to statutory warranty by law or an extended warranty at manufacturer's discretion. Serbian law requires customers to do regular maintenance and repairs at authorized repairers using original spare parts, or else they lose their warranty. It then comes as no surprise that up to 80% of warranty work is carried out by repairers authorized by vehicle manufacturers. Unlike independent repair shops, authorized operator has an agreement with the manufacturer which requires it to fulfil certain technical, staff, and financial requirements. The service hour price difference between warranty and non-warranty works is tremendous (86% on average, as compared to 15-20% in the EU). This is largely due to the costs authorized repairers incur to comply with manufacturer's standards, but also due to dumping by independent garages a lot of which are not registered businesses.
The dominance of authorized repairers in provision of warranty services is likely to fall, and the price imbalance likely to level, if the Serbian legislator enacts MVBER in line with the EU Supplementary Guidelines prohibiting manufacturer's from conditioning their warranty on usage of an authorized repair shop.2 The study results show that the independent aftermarket dominates in the provision of services where the authorized repair shops have no "warranty privilege": more than 70% of all aftermarket services (selling of spare parts, repair and maintenance works) are provided by non-authorized repair shops.
Serbian aftermarket for motor vehicles enjoys moderate to fierce competition at all levels (manufacturers and distributers of spare parts, repairers) without obvious competition shortcomings or barriers to entry. For this reason, the study advises that future Serbian MVBER be no stricter than the EU one.
Typical agreements between authorized distributors, repairers and manufacturers are selective distribution agreements (manufacturer supplies products only to distributors/repairers selected on the basis of objective criteria that are linked to the nature of products) and single branding arrangements (distributors/repairers may not sell products competing with the manufacturer's products). Currently, such agreements fall under the "safe harbour" of the General Vertical Block Exemption Regulation, if the distributor/repairer and manufacturer each has less than 25% on the relevant market, and the agreement does not contain "hard-core" restrictions. Particularly, the following arrangements are prohibited:
- restricting members of selective distribution network who operate at retail level to sell manufacturer's products to end-users;
- restricting cross-supply between members of a selective distribution network;
- agreement between a supplier of components and a buyer who incorporates those components, to restrict the supplier from selling its components as spare parts to parties not authorized by the buyer with repair and servicing of its goods;
- single-branding arrangements exceeding five years;
- restricting members of selective distribution network from selling competing products/performing competing services.
Future MVBER, if it were to follow the EU rules, would add three additional prohibitions:
- manufacturer in a selective distribution system may not prohibit its authorized distributor/repairer from selling spare parts to unauthorized repair shops (so as to avoid market foreclosure for unauthorized repairers by declining them captive products available only through manufacturer or its authorized network, and necessary for maintenance/repair of manufacturer's vehicles);
- manufacturer may not agree with a supplier of spare parts, repair tools or diagnostic or other equipment, that the supplier limits sale of such parts to other distributors, repairers, or end-users (e.g., so-called "tooling arrangement");
- manufacturer which uses components for the initial assembly of motor vehicles may not prohibit supplier from putting supplier's trade mark or logo on such components (i.e., so as to promote marketing of compatible components from alternative suppliers).
In its 2015 Annual Report the Commission stated that the Serbian MVBER would be harmonized with EU Supplementary Guidelines, which provide guidance for assessment of agreements for sale and repair of motor vehicles, and distribution of spare parts for motor vehicles. The guidelines are particularly helpful for assessment of borderline cases, where the restrictiveness of a conduct depends on the circumstances. For example, the guidelines regulate the scope of brand-specific technical information which manufacturers must share with independent aftermarket. Likewise, the guidelines elaborate on obligation imposed by manufacturer upon authorized repair shop to sell new motor vehicles, which is generally prohibited but could be justified under certain circumstances when launching a new brand.