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WILL THE INSTALLATION OF AN AFTERMARKET VEHICLE SECURITY PRODUCT INVALIDATE MY WARRANTY?

The TASSA Guide to the Motor Vehicle Block Exemption Order 2023 (MV-BEO 2023) and what this means for the aftermarket, installers, and consumers.


Criminals are increasingly innovative in overcoming vehicle security systems and theft technology continues to develop at breakneck speed. When a new theft method comes to light, equally effective and innovative counter measures must be developed in order to protect consumers.


In many cases, the aftermarket is at the cutting edge of countering such theft technology and best suited to providing consumers with effective solutions quickly.


However, many consumers fear (or are told) that installing, or fitting, an aftermarket security device to their vehicle will invalidate the vehicle’s warranty.


So…is this true and what part does the MV-BEO, a new piece of legislation which came into force on 1st June 2023, play in providing an answer? Does fitting an aftermarket security device invalidate a vehicle’s warranty?


The Short Answer


The simple answer is no, but there are rules, governed by the MV-BEO, that if not followed would invalidate a warranty, for example:


If the device is fitted by a qualified independent installer, then the manufacturer would have to

prove that, due to a poor installation, a vehicle fault had developed which would not then be covered under the vehicle’s warranty.


Under the MV-BEO vehicle manufacturers cannot insist that your vehicle must have any work carried

out on it by an authorised network whilst under warranty. This is because it would deprive consumers of their right to choose to have their vehicle maintained or repaired by an independent repairer and it would, especially in the case of “extended warranties”, prevent such repairers from competing effectively with the authorised network.


The Detail


The Competition and Markets Authority (CMA)


The CMA is an independent non-ministerial government department which brought together the, now defunct, Competition Commission and certain functions of the Office of Fair Trading. The CMA is responsible for promoting competition in the UK economy and tackling unfair behaviour, including, but not limited to: market analysis and monitoring; investigation of mergers, firms and markets; and, taking action where potential unfair or anti-competitive behaviour is identified.


You can learn more about the CMA and the work they do here: https://www.gov.uk/government/organisations/competition-and-markets-authority


The Competition Act 1998 (CA 1998)


The CA 1998 is a piece of UK legislation in place to limit activities that undermine or restrict competition to the detriment of consumers and prohibits firms in a dominant market position from abusing that position. Chapter 1 of the Act prohibits businesses making agreements which unfairly prevent, restrict, or distort competition. An example of an agreement that may be unfair could include preventing a customer from using the services of a competitor through the lifetime of the agreement.


You can find the complete CA 1998 here:


Exemptions


Nevertheless, it is important to note that, an agreement may be exempt from the prohibition set out in Chapter 1. Specifically, section 9(1) of the CA 1998 provides that:


“9 Exempt agreements

(1) An agreement is exempt from the Chapter I prohibition if it—

a) contributes to—

i. improving production or distribution, or

ii. promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit; and

b) does not—

i. impose on the undertakings concerned restrictions which are not indispensable to the attainment of those objectives; or

afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products in question.”


Block Exemptions


Sometimes, there may be agreements which fall into a certain category that are likely to be exempt. In such instances a Block Exemption (i.e., an exemption that applies to that category) may be specified.


As set out in Section 6 of the CA 1998, in such cases the CMA may recommend that the Secretary of State make an order specifying and detailing that category, along with any related conditions or obligations. A Block Exemption Order: gives effect to such recommendations, and provides businesses with certainty when making agreements.


The Competition Act 1998 (Motor Vehicle Agreements Block Exemption) (No.2) Order 2023 (MV-BEO) is an example of a Block Exemption Order.


The Competition Act 1998 (Motor Vehicle Agreements Block Exemption) (No.2) Order 2023 (MV-BEO)


The MV-BEO came into force on 1st June 2023. To ensure that organisations are not prevented from entering into agreements that are beneficial and not anti-competitive, the order exempts motor vehicle aftermarket agreements relating to the provision of repair and maintenance services, and the distribution of aftermarket goods from the Chapter 1 prohibition in CA 1998.


However, in order to benefit from the exemption, an agreement between organisations must:


  • Comply with the conditions of the Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 (VABEO). Broadly speaking, this means that parties must not have market shares of more than 30% and must not contain any hardcore restrictions. Such restrictions include resale price, customer group restrictions, maintenance, and use of the internet as a sales channel.

Read more about the VABEO here:


  • Not contain any of the additional hardcore restrictions set out in the MVBEO, including:

» Restrictions on the ability of members of members of a selective distribution system to sell aftermarket goods (including software to repair or replace a part or system of a motor vehicle, but which is not a spare part) to independent repairers.


» Restrictions on suppliers of aftermarket suppliers by suppliers of motor vehicles to sell aftermarket goods (including software to repair or replace a part or system of a motor vehicle, but which is not a spare part) to distributers, repairers, or end users.


» Restrictions on a supplier of original parts used by a supplier of motor vehicles to place its trademark or logo on such parts.


» Restrictions on independent operators to access information, tools, or training which a motor vehicle supplier uses for the purpose of repair and maintenance services or provides to authorised repairers, distributors, or partners. Independent operators may include a supplier of spare parts, a publisher of repair and maintenance information, a person who provides inspection and testing services, a person who provides training to independent repairers.


You can find the complete MV-BEO here:


CMA Guidance on Motor Vehicle Arrangements


As per Section 8 of the CA 1998, the CMA must publish details of its proposed recommendations and consider any responses. Further to consultation with interested parties, in June 2023, the CMA published its Motor Vehicle Arrangements Guidance to accompany the MVB-EO.


The Guidance explains how the CMA applies the prohibition in CA 1998 to motor vehicle aftermarket agreements, that is, agreements relating to the purchase or sale of motor vehicle aftermarket goods and services provided to repair and maintain motor vehicles.


Section 4 of the guidance sets out the CMA’s guidance concerning the hardcore provisions in the MVBEO, we draw your attention to the following excerpt:


4. The hardcore provisions in the MVBEO


4.2. One of the objectives of the CMA’s competition policy for the motor vehicle sector is to protect access by suppliers of aftermarket goods to the motor vehicle aftermarkets, thereby ensuring that competing brands of aftermarket goods continue to be available to both independent(17) and authorised repairers,(18) as well as to both independent(19) and authorised distributors.(20)


4.3. Aftermarket goods means any of the following:

(a) spare parts;(21)

(b) any software required to repair or replace a part or system of a motor vehicle, but which is not a spare part;

(c) any code or other information necessary for the use of software falling within (a) or (b); and

(d) fluids used in the braking system, steering system, engine or elsewhere in a motor vehicle as a coolant, lubricant, cleaner or otherwise, in so far as the fluids are necessary for the effective operation of the motor vehicle, but not fuel.


Restriction of the ability to sell components as spare parts


4.4. Article 8(2)(e) of the VABEO describes it as a hardcore restriction for an agreement between a supplier of components and a buyer who incorporates those components to restrict the supplier's ability to sell its components as spare parts to end-users, repairers, wholesalers or other service providers not entrusted by the buyer with the repair or servicing of its goods. Article 5(2)(a), (b) and (c) of the MVBEO lay down three additional hardcore restrictions relating to agreements for the supply of spare parts. We address these hardcore restrictions in turn below.


Restriction of sales of aftermarket goods by members of a selective distribution system to independent repairers


4.5. Article 5(2)(a) of the MVBEO concerns one or more provisions which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object the restriction of sales of aftermarket goods by members of a selective distribution system to independent repairers who use or want to use those aftermarket goods for the purposes of providing repair and maintenance services.


4.6. This provision is most relevant for a particular category of parts, sometimes referred to as ‘captive parts’, which may only be obtained from the supplier of motor vehicles or from its authorised distributors. If a supplier of motor vehicles and an authorised distributor (ie a member of the selective distribution system) agree that such parts may not be supplied to independent repairers, this agreement would be likely to foreclose such repairers from the market for repair and maintenance services and consequently breach the Chapter I prohibition.22


17 In accordance with Article 2(1) MVBEO “independent repairer”, in relation to motor vehicles of a particular make, means a person who—

(a) provides repair and maintenance services for such vehicles, and

(b) is not an authorised repairer.

18 In accordance with Article 2(1) MVBEO “authorised repairer”, in relation to motor vehicles of a particular make,

means a person who has entered into contractual arrangements with a supplier of such vehicles for the purposes of providing repair and maintenance services for such vehicles.

19 In accordance with Article 2(1) MVBEO, “independent distributor”, in relation to motor vehicles of a particular make, means a person who—

(a) distributes aftermarket goods for such vehicles, and

(b) is not an authorised distributor.

20 In accordance with Article 2(1) MVBEO “authorised distributor”, in relation to motor vehicles of a particular make, means a person who—

(a) distributes aftermarket goods for such vehicles, and

(b) (b) operates within the distribution system set up by a supplier of such vehicles

21 Pursuant to Article 2(1) MVBEO “spare part” means a component of a motor vehicle which is, or is intended to be, installed in or on a motor vehicle to replace an original part, and includes software. See also the definition of ‘part’ which, in relation to a motor vehicle, means an original part or spare part. An “original part” means a component of a motor vehicle which is, or is intended to be, installed in or on a motor vehicle for the purpose of the initial assembly of a motor vehicle, and includes software.

22 The CMA notes that an agreement involving a supplier of motor vehicles and a member of its selective

distribution network agreeing that such (captive) parts may not be supplied to independent distributors (notably independent wholesalers) may amount to an indirect restriction on access to those parts by independent repairers. This is because independent repairers may rely on the supply of such spare parts by independent wholesalers to have access to those parts on terms which do not place them at a disadvantage vis-à-vis authorised repairers. Any such (indirect) restriction may therefore fall within the scope of the hardcore restriction in Article 5(2)(a) MVBEO as a possible indirect restriction of independent repairers’ ability to access those parts (ie via independent wholesalers).”


Parts 5.35-5.41 of the guidance sets out the CMA’s guidance concerning Warranty Restrictions:


5. … Warranty restrictions

5.35. The imposition of certain warranty restrictions may result in the foreclosure of independent repairers(50).It may also result in the closing of alternative channels for the production and distribution of aftermarket goods, which ultimately may have a bearing on the price that consumers pay for repair and maintenance services. We set out below two examples of such restrictions (servicing and parts restrictions) which are likely to be caught by the Chapter I prohibition.(51)


5.36. Qualitative selective distribution agreements may be caught by the Chapter I prohibition if the supplier and the members of its Authorised Network explicitly or implicitly reserve repairs of certain categories of motor vehicles to the members of the Authorised Network. This might happen, for instance, if the motor vehicle supplier’s warranty vis-à-vis the buyer, whether standard or


5.37. extended,(52) is made conditional on the end user having repair and maintenance work that is not covered by warranty carried out only by members of the Authorised Network.


5.38. Warranty conditions which require the use of spare parts bearing the motor vehicle supplier’s brand (OEM parts) in respect of replacements not covered by the warranty terms may similarly be caught by the Chapter I prohibition. It also seems doubtful that selective distribution agreements containing such practices could bring benefits to consumers in such a way as to allow the agreements in question to benefit from the Section 9 exemption.(53) However, the Chapter I prohibition does not prevent a supplier of motor vehicles (or any other warranty provider) from legitimately refusing to honour a warranty claim on the grounds that the situation leading to the claim in question is causally linked i) to a failure on the part of a repairer to carry out a particular repair or maintenance operation in the correct manner, or ii) to the failure of a spare part supplied by a third party.


5.39. The fact that the extended warranty containing the servicing or parts restriction is arranged through a third party does not change the assessment. The decisive element is whether the servicing or parts restriction is a factor within the control of one or more of the parties to the network of selective distribution agreements and therefore whether its implementation is likely to foreclose independent repairers or foreclose alternative channels for distribution of aftermarket goods.


5.40. The fact that the extended warranty containing the servicing or parts restriction is arranged through a third party does not change the assessment. The decisive element is whether the servicing or parts restriction is a factor within the control of one or more of the parties to the network of selective distribution agreements and therefore whether its implementation is likely to foreclose independent repairers or foreclose alternative channels for distribution of aftermarket goods.


5.41. Another relevant consideration is whether an extended warranty is being sold years after the purchase of the vehicle. This is because years after the vehicle purchase, authorised dealers do not enjoy the same degree of privileged access to customers as they do in the period shortly after the purchase. As a consequence, alternative providers of extended warranties, such as chains of independent repairers and insurance firms are less likely to face significant barriers preventing them from offering their products to vehicle owners. In such circumstances, it seems less likely that independent repairers could face a significant foreclosure effect even if car warranties issued by suppliers of motor vehicles or their Authorised Networks contained servicing or parts restrictions.


5.42. Further to the restrictions set out above, any other warranty restrictions which indirectly limit the consumer’s right to source repair and maintenance services from independent repairers are likely to be within scope of the Chapter I prohibition.


5.43. Terms and conditions proposed to consumers by suppliers of motor vehicles or their Authorised Networks that clearly state the consumer's right to use the services of an independent repairer without losing the benefit of the warranty are unlikely to give rise to competition concerns.


50 The assessment of these restrictions is in principle the same irrespective of the document in which they appear (eg contract or service booklet).

51 These warranty restrictions are likely to cause or strengthen the anti-competitive effects of the agreements between the supplier of motor vehicles and its authorised repairers and distributors.

52 The fact that the servicing or parts restrictions are not set out in the vehicle supplier's standard warranty but

are instead found in an extended warranty issued by the Authorised Network at the moment of the sale of the

motor vehicle (or shortly thereafter) will not generally alter the assessment of the said restrictions.

53 Paragraphs 5.30 to 5.34 deal with the issue of restrictions on the use of matching-quality parts.”


Please find the complete CMA guidance here:


The EU Motor Vehicle Block Exemption Regulation 461/2010 (MV-BER)


The motor vehicle sector has been subject to specific block exemption regulations under EU Law since 1985. Indeed, while the regulation has since been superseded, the explanatory brochure for COMMISSION REGULATION (EC) NO 1400/2002 notes:


“Question 37: If a consumer has his vehicle repaired or maintained by an independent repairer during the warranty period, can the manufacturer refuse to honour the warranty?


If the consumer has his vehicle repaired or maintained by an independent repairer during the manufacturer's warranty period the warranty may be lost if the work carried out is faulty. However, a general obligation to have the car maintained or repaired only within the authorised network during such a period would deprive consumers of their right to choose to have their vehicle maintained or repaired by an independent repairer and it would, especially in the case of “extended warranties”, prevent such repairers from competing effectively with the authorised network.”


The most recent EU regulation concerning motor vehicle block exemptions in competition law is the MV-BER. The MV-BER has been in force since 2010 and, while due to expire on 31st May 2023, had retained in the UK post Brexit.


In April 2023, the MV-BER’s validity was extended for a further five years and the European Commission (EC) updated its corresponding guidance. Such guidance states that:


“17. The last sentence of paragraph 60 is replaced by the following:


‘To this end, particular attention should be paid to three specific types of conduct which may restrict such competition, namely preventing access of independent operators to essential inputs, misusing the legal and/ or extended warranties to exclude independent repairers, or making access to authorised repairer networks conditional upon non-qualitative criteria.’.”


Although the MV-BER has been extended, and that the MV-BEO is similar in scope and principle to the MV-BER, the MV-BEO replaces the MV-BER in UK law.


The Treaty on the Functioning of the European Union (TFEU) is binding on its members and the CA 1998 reflects Articles 101 and 102 of the TFEU. As a result of Brexit, UK courts are no longer obliged to follow EU competition case law and the competition regimes are now separate,


Nevertheless, the regimes remain very closely aligned and, in some ways, the UK law provides for more protection to the aftermarket. For example, the MV-BEO hardcore restriction on the ability of operators to access information, tools, or training is not reflected in the MV-BEO. Further, where the MV-BER refers to “spare-parts” within hardcore restrictions, the MB-BEO refers to “aftermarket goods”, the definition of which includes:


"any software required to repair or replace a part of, or system in, a motor vehicle, together with any code required to activate or configure that software, and liquids used in the braking system, steering system, engine or elsewhere in a motor vehicle as a coolant, lubricant, cleaner or otherwise, in so far as the liquids are necessary for the use of the motor vehicle (but not fuel)."


Read more about the MV-BER here:

MV-BER Amendment (COMMISSION REGULATION (EU) 2023/822): https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R0822

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