1. MANUFACTURER CHANNEL
76. In order to enhance intrabrand competition within vehicle manufacturers' authorised networks, and in particular between authorised spare parts distributors, Regulation 1400/2002 introduced a requirement that authorised networks be defined according to purely qualitative criteria when the supplier's market share is in excess of 30%; in other words, in most cases, because the relevant markets for spare parts are usually defined at brand level. With effect from 2003, vehicle manufacturers have been unable to limit the number of authorised distributors per geographic area, which should have increased the number of authorised distributors and, therefore, enhanced competition between them.
77. However, this requirement of Regulation 1400/2002 had mixed results in France. The total number of authorised repairers in Europe fell by 22% between 1997 and 2008, with a marked downturn in 200297. In some cases, the number of repairers authorised directly by vehicle manufacturers increased, as several level 2 authorised repairers who had previously been authorised by level 1 authorised repairers entered into direct agreements with the vehicle manufacturers, although numbers also dropped for other vehicle manufacturers98. However, Regulation 1400/2002 also provided vehicle manufacturers with an opportunity to reorganise the level 2 authorised repairer networks, which French vehicle manufacturers were quick to act on99. The number of repairers fell sharply and certain vehicle manufacturers no longer have any level 2 authorised repairers. The consequence of this is that vehicle manufacturers have greater control over their networks, without any increase in intrabrand competition between spare parts distributors. Furthermore, the fall in the total number of authorised repairers suggests that very few new repairers have entered the vehicle manufacturers' authorised networks as a result of the 2002 Regulation. The final
96 Answer to question 12 in the document published by the European Commission "Frequently asked questions on the application of EU antitrust rules in the motor vehicle sector" dated 27 August 2012.
97 Aforementioned ICDP report, page 12.
Although the London Economics report notes an increase in the number of authorised repairer contracts since Regulation 1400/2002 (page 138), the number of sales outlets has fallen in most cases, including in France (page 139); certain sales outlets may have signed more than one contract.
98 Changes in the number of repairers directly authorised by manufacturers vary depending on the manufacturer.
99 Evaluation Report on the operation of Regulation 1400/2002 by the European Commission. Staff Working Document no. 2, pages 31-32.
outcome has been a reduction in the density of vehicle manufacturers' authorised networks, as observed by the London Economics report covering the period from 1997 to 2004100. 78. However, the European Commission has observed that the ban on quantitative selective
distribution systems and exclusive distribution systems has raised the standards of quality that the vehicle manufacturers’ authorised networks are expected to provide, and that this has had a knock-on effect in the independent channel101.
79. The line between qualitative and quantitative criteria is not always clear. Certain qualitative criteria could be classified as quantitative criteria in some cases, and have the effect of limiting the number of authorised distributors present in a given catchment area102. In practice, the denser a network, the easier it is for a repairer (level 2 authorised repairer or independent repairer) to place several level 1 authorised repairers in competition with each other. This means that intrabrand competition should logically be stronger within the Renault, Peugeot and Citroen networks, which have a much denser geographic coverage than the foreign brands. However, the concentration of dealers in local or regional clusters, bringing together competing competitors, could weaken intrabrand competition. In practice, a repairer will prioritise proximity as well as delivery and supply conditions, and has limited negotiating power, which means that intrabrand competition within authorised networks is unlikely to make up for the absence of interbrand competition.
2. INDEPENDENT CHANNEL
80. As illustrated in Diagram 1 on page 33 above there is a direct distribution channel within the independent channel for the distribution of parts to fast-fit centres, auto-centres and large retailers, as well as a supply channel for standalone or franchised independent repairers and independent body shops, which is made up of more levels and more intermediaries. The market share of these two sub-channels in 2007 in terms of sales of spare parts downstream was 28% and 27%, respectively103.
81. The service distribution networks, and in particular, auto-centres and fast-fit centres, are highly integrated. Their main supply source is the warehouse managed by the franchisor, which acts as a centralised purchasing agency. These chains obtain 80% of their supplies from the franchisor, 15% from independent distributors and only 5% from the manufacturer channel. In addition to the sale of spare parts for repairs carried out by repair
100 London Economics Report, page 141.
101 Evaluation Report on the operation of Regulation (EC) 1400/2002 concerning motor vehicle distribution and servicing, “While vehicle manufacturers have set more demanding quality standards for their networks of authorised repairers, this does not seem to have operated against consumers’ interests. The new standards have not only increased the quality of service provision, but have also had an influence on the independent sector, which has reacted by setting up competing networks and franchised chains with common standards, so as to better respond to consumers’ demand for high quality, efficient and reliable services”.
102 Minimum results or bonus systems, for example.
103 Source: TCG Conseil.
chains, auto-centres are also very well-positioned for the sale of accessories and parts to end consumers.
82. The traditional independent distribution circuit is based on a multi-tiered organisation in which wholesalers and centralised purchasing agencies buy parts from the various equipment suppliers and stock them before selling them on to local distributors, who in turn supply independent repairers, with deliveries up to six times a day104. The ever-increasing number of part references and the resulting storage and logistics problems led to the creation of “regional platforms" in 2006, which serve as an intermediary between the centralised purchasing agencies and/or the equipment suppliers on the one hand, and the distributors-stockists on the other. Their main purpose is to stock parts with a low turnover, while the distributors-stockists manage the high-demand part references. This segmentation enables distributors-stockists to provide a high level of service while limiting the increase in inventory volumes.
83. There are eight main centralised purchasing agencies in France105, which are affiliated to just over 900 distributors, representing 1,630 sales outlets. Some of the centralised purchasing agencies are owned by international groups, such as Autodistribution, which is present in approximately 25 countries and recorded turnover of €5.5 billion in 2008106. Furthermore, distribution channel integration levels vary. Whereas some distributors are only responsible for deliveries, storage and logistics, others operate under a franchise system, the flexibility and organisation of which may vary.
D. CHANGING DEMAND – PRICE TRENDS
84. The fall in demand in the repair and maintenance sector has led to a fall in the sale of spare parts, which has been exacerbated by the fact that parts now account for a smaller proportion of repair and maintenance bills107: sales of spare parts fell by 10% in terms of real value (adjusted for inflation) between 2000 and 2010108.
85. At the same time, several indicators suggest a substantial increase in spare part prices over the first decade of this century.
86. Consumer price indexes for parts and accessories produced by Insee only concern parts and accessories purchased in the retail market by private customers that are not fitted by a garage. However, when parts are purchased as part of a service that includes parts and labour, and are therefore supplies used by a garage, they are included in a "repair and maintenance" index, which also includes the price of labour, and which is described in section 1, part I. Given that the DIY segment only represents 10% of the repair and maintenance sector, the "parts and accessories" price index is not necessarily representative
104 Source: TCG Conseil.
105 Autodistribution, Groupe Auto Union France, Starexcel, Partner’s, Gefa, Doyen, Autofit and Flauraud.
106 Source: aforementioned ICDP report, page 30.
107 Source: TCG Conseil.
108 Source: TCG Conseil – excluding parts used for bodywork, DIY included.
of the price of all spare parts. However, it does provide an initial indication of changes in prices charged for parts. There is no obvious reason why changes in prices of all spare parts should be fundamentally any different from changes in prices of parts used in the DIY segment. Table 4 below shows price increases in the "spare parts and accessories”
price index between 2000 and 2011, broken down according to sub-index. These changes are also compared to changes in the price indexes for new and second-hand vehicles and for repair and maintenance services.
Table 4 – Price increases for parts and accessories used for DIY compared to price increases for vehicles and repair and maintenance between 2000 and 2011
Nominal prices Real prices
Parts and accessories (7.2.1) 36 % 13 %
of which, tyres (072111) -1 % -18 %
of which, "other large vehicle spare
parts" (072121) 40 % 16 %
of which, "accessories and small
vehicle spare parts" (072122) 33 % 10 %
New and second-hand cars (7.1.1) 11 % -8 %
individual vehicle repair and
maintenance (7.2.3) 55 % 28 %
Source : Insee – consumer price indexes
87. Although the real price (adjusted for inflation) of tyres sold directly to private individuals fell by 18% in real terms between 2000 and 2011, the price of "large spare parts" rose by 16%, while the price of "accessories and small spare parts" rose by 10%. Although the prices of spare parts and accessories on the DIY segment matched the downward trend of vehicle prices until 2003, they then rose steadily from that year onwards.
88. Furthermore, the Insee consumer price indexes per type of product, which are not therefore restricted to the DIY segment, suggest comparable price increases to those shown in Table 4109.
89. According to data from SRA (Sécurité et Réparation automobile – Motor Vehicle Safety and Repair Association – hereinafter SRA), part prices charged to insurers in connection with collision repairs – essentially visible parts protected by design rights – have increased
109 In nominal terms, between 2000 and 2011, the "vehicle equipment production" index (GC29B) rose by 40%, the "like-for-like engine replacement" index (HC29A1C) rose by 40%, the "new and re-capped tyre"
index (HC22A1) fell by 1%, the "lubricants" index (HC19Z2I) rose by 28% and the "car batteries and other rechargeable batteries" (HCB3A B) index rose by 38%.
in recent years. Between 2005 and 2011 the price of spare parts used in bodywork rose by 30.5% in nominal terms and 18.5% in real terms.
90. Data on vehicle manufacturers' recommended sale prices confirms this observation. Four vehicle manufacturers (five brands) provided the Autorité de la concurrence with data on average changes in recommended prices for OEM spare parts between 2006 and 2010, weighted according to quantities sold. The average price increase for the five brands was 19% between 2006 and 2010 (i.e., a 12% increase in real terms).
91. Although this recent data on recommended prices in the manufacturer channel suggests relatively comparable price increases, data concerning equipment suppliers is much more disparate, with prices per family of part varying greatly from one equipment supplier to another. Accordingly, although increases in recommended sale prices for spare parts in the Independent Aftermarket are relatively moderate for certain equipment suppliers compared to the changes in nominal prices observed above – with average increases of between 5%
and 10% between 2006 and 2010 –, increases were much more pronounced for other equipment suppliers, and closer to the increases in the price of OEM parts.
92. The vehicle manufacturers have explained this substantial increase in the price of spare parts by the improved quality, the increase in the price of raw materials, the increase in transport costs because of increased fuel costs, the significant increase in labour costs in Eastern European countries (where some of these parts are manufactured), and the increased storage and distribution costs due to the multiplication in the number of referenced parts. Shorter series production times due to the large number of new model launches in the first decade of the century pushed production costs for spare parts upwards, as they are either held in stock for longer or are produced more frequently in small batches.
93. These factors may all contribute to pushing costs, and therefore the price of spare parts, upwards. Nevertheless, vehicle manufacturers have been unable to produce information on changing profit margins in support of this analysis. Data that were received for the entire period from 2000 to 2010 (although most vehicle manufacturers have not provided any data for the period before 2008) show a sharp increase (between [30%; 60%]) in pre-tax profit margins on spare parts distributed in France, and a simultaneous drop in profit margins on the sale of new vehicles (which are negative in some cases). One vehicle manufacturer reported an increase in gross profit margins on spare parts in France of [2; 5]
points between 2006 and 2010, i.e., a [5; 10]% increase in profit margins in four years.
Data for the period since to 2008 shows a slight increase in net profit margins on spare parts between 2008 and 2010, rather than a fall, despite the economic crisis.
94. Within the same families of parts, changes in prices charged by equipment suppliers to vehicle manufacturers for OEM spare parts are often unrelated to changes in recommended prices in the independent channel. The price of spare parts supplied to vehicle manufacturers rose only slightly (below inflation), and even fell for certain families of parts.
95. Eurostat data suggest that France is a European exception with regard to spare parts sold on the DIY segment, as it is the only one of the 27 countries where prices for spare parts increased in real terms between 1998 and 2010. Contrary to the vehicle manufacturers' claims that some countries, such as France, include parts fitted by garages in this index, while other countries do not, the scope of the parts and accessories covered by this index is identical for all EU countries. The Autorité de la concurrence has received direct confirmation of this from Insee. However, this index only includes parts and accessories purchased by private individuals in order to carry out repairs themselves, and is not therefore necessarily representative of all spare parts and accessories. The public
consultation provided some perspective on the relevance of this index. Although Insee also monitors prices of spare parts paid by consumers, irrespective of the distribution method (in other words, including parts fitted by garages and parts purchased by consumers for self-fitting), the Autorité recommends that Eurostat create an index to record the price of spare parts sold to consumers.
96. Graph 6below shows changes in the "parts and accessories" price indexes (which only include parts and accessories purchased by private individuals in order to carry out repairs themselves) in France and neighbouring countries. Although a downward trend in the price of spare parts and accessories used for DIY is observed in all other European countries, prices have risen significantly in France since 2003.
Graph 6 – Changes in the price of spare parts and accessories used for DIY (real price index) in France and neighbouring countries
Source : Eurostat – consumer price indexes for spare parts and accessories – 1998 = 100 base 97. The vehicle manufacturers have claimed that, on the contrary, the increase in the price of
the spare parts they sell matches increases in the other countries in which they are established and that France is not an exception. However, in addition to the fact that the data submitted by the vehicle manufacturers concern OEM parts only (of the manufacturer’s brand), the figures also suggest that this claim does not apply to all the vehicle manufacturers. Although it seems to be the case for one of the vehicle manufacturers, the recommended sale prices of another vehicle manufacturer are much
higher in France than in Italy, Spain and Germany110. Another vehicle manufacturer failed to supply data on comparative price changes for spare parts, but has shown through average price indexes per family of parts that its position was in line with its competitors, in particular its foreign competitors, in France, Spain, Belgium and the Netherlands. The data submitted by the other vehicle manufacturers is not sufficiently detailed to allow an assessment of price changes in different countries111.
E. COMPARATIVE ANALYSIS OF OVERSEAS DÉPARTEMENTS AND MAINLAND