3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

3.3 Further discussion and effects of agency model on competition Generally speaking, the removal of intra-brand competition by introducing the agency model could bring higher price-transparency. On the one hand, this might imply easier decision making for customers, as they will only need to select the brand, model, and specific parameters (all of those presumably even online), but they will not be under the pressure of comparing offers from individual dealers (agents) in order to identify the best deal available themselves. On the other hand, however, depending on the actual setting of the agency model agents may offer discounts which they will bear from their own commission. Higher price transparency can also make it easier to compare offers from different car manufacturers, which could, in theory, lead to a greater competition and lower prices. Higher price transparency may, however, also result in a tacit collusion among car manufacturers (which, however, is less likely given the large number of car manufacturers and the significant competition on the market). In addition to the full control of the distribution strategy mentioned above, the agency model could incentivize car manufacturers to explore new ways of attracting customers, including various additional services, subscriptions, etc. In this context, it should be noted that under EU competition rules, tying (i.e. the situation where customers who purchase one product are also required to purchase another distinct product from the same supplier) is also limited and may in some cases be considered restrictive of competition (VBER Guidelines, para 389 et seq.). It seems that the entities that will be the most affected by the transition to an agency model include existing dealers that have invested in developing their business. The question is how those dealers will deal with the manufacturers’ new approach and whether they will find a way to profit effectively under the new regime. It cannot be ruled out that such distributors will try to connect with the brand that offers the most advantageous distribution model. Although one can argue that in the age of the internet, the importance of brick-and-mortar dealerships is declining, car manufacturers still need ways to physically showcase cars to customers. Few non-corporate customers will choose a car without taking it for a spin. However, dealers’ profits have been declining in recent years (at least in the US) (McKinsey, 2019). As not all car manufacturers are yet going to move to an agency model (BreakingNews, 2023), they may try to attract dealers, who are not happy with the regime change by their existing suppliers, into their network. Competition authorities may try to protect the remaining intra-brand competition through the aforementioned stricter assessment of compliance with the conditions for exemption of an agency agreement from Art. 101 TFEU and also by closely monitoring the market for signs of collusion between car manufacturers. Competition authorities may use other policy tools to address the shift to the agency model. First, the authorities may adopt a stricter assessment of mergers between car manufacturers, but as long as strong competition remains in the market, competition authorities should not prevent mergers. In addition, the authorities may explore other new tools in the area of competition policy. As of 2023, the Commission has a new tool to tackle distortions caused, directly or indirectly, by foreign subsidies – the Foreign Subsidies Regulation (OJ L 330, 23.12.2022, p. 1) – aimed at protecting the internal market from possible distortions of competition caused by state aid from third

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