Update: European Law Curbs Automakers Ability to Restrict Cross-Border Sales

The European Commission introduced new laws today to stop car manufacturers from restricting the cross-border sale of cars by dealers and other groups, so called “gray market sales.”
The new laws are designed to allow consumers to cross borders to buy cars. The new laws became necessary when manufacturers tried to keep gray market sales out of Europe. Currently, several jurisdictions in the European market had maintained much higher vehicle pricing than others. When business began to capitalize on the desire by consumers to look elsewhere for their cars, automakers moved in to prevent the tactic.
DaimlerChrysler, was fined (euro) 71.825 million last October by the European Commission. Volkswagen AG and General Motors Nederland BV were hit with similar fines. The European Commission found that manufacturer imposed restrictions hurt consumers and new rules to protect the gray market were needed.
Independent vehicle dealers and consumer groups in Canada and the United States are already pushing for similar changes in North America. This week, General Motors warned its dealers in the U.S. that performing warranty service on some vehicles built in Canada could cost the dealership its allocations of the General’s hottest new products. G.M. estimates that between 25,000 and 30,000 gray market vehicles arrive in the U.S. from Canada each year, most of them sold by brokers seeking to gain from the favorable exchange rate. The practice is not illegal, however, automakers also make higher profits on vehicles sold in the U.S. and all of the Big Three have policies regarding the sale of their vehicles in Canada and bound for the U.S. market.
Brian Osler, President of the North American Automobile Trade Association (NAATA), applauded the changes in Europe. “It is completely unreasonable for manufacturers to restrict cross-border sales within a free trade zone like North America or Europe. Consumers should have a right to buy a car wherever they want, as long as safety and emissions standards are met.”
The new rules in Europe protect the rights of gray market dealers to buy cars for export. A press release issued today by the European Commission notes that manufacturer restrictions on cross-border sales “…hamper what is a perfectly legitimate trade, and they will in future be prohibited.”
“If manufacturers get too aggressive in fighting the gray market in Canada and the U.S., they will end up facing similar laws here too”, says Osler. “Consumers are fed up with manufacturer price fixing. They want the gray market to bring them identical cars at lower prices.”