The European Commission wants to make certain changes in order to give retailers more freedom to sell cars from a variety of manufacturers.
But in principle the system, which protects makers' exclusive distribution operations from the free trade rules that apply to other consumer goods, will remain.
Britain's leading car dealerships, Cowies and Lex Service, broadly welcomed the move. But it was condemned by consumer groups which said it would restrict choice and keep prices up.
The Brussels-based European Bureau of Consumer Unions wants dealers to be free to sell different makes of car under one roof so consumers can compare before they buy, just like other goods.
The group said the decision was disappointing. 'Even with some modifications to the system there is no significant change for consumers. There will still be obstacles put in the way of buying cheaper cars abroad.'
A 10-year rule on the so-called block exemption for motor manufacturers was introduced in 1985 and was being reviewed by the European Union's competition commissioner, Karel van Miert.
Although his draft proposals for a 10-year extension to 2005 must go before a committee of national competition experts, they are almost certain to be approved within six months in readiness for introduction next June.
Mr van Miert said yesterday that consumer interests were best served by preserving exclusive dealerships and safeguarding standards of sales and servicing. Block exemption also helped in the monitoring of Japanese imports.
The EU's main points were:
Retailers will be able to sell more than one make of car, provided the rival make is sold on separate premises under separate management. Critics say manufacturers can still refuse to deal with other franchises.
Dealers will be allowed to buy spare parts from makers other than car manufacturers provided they are of the same quality. And independent repairers are to have access to the technical information needed to do their work.
Manufacturers will no longer be able to set unilateral sales targets for dealers, which have often been unrealistic. Targets will have to be mutually agreed and subject to arbitration.
David Leibling, of Lex, which has 103 British car franchises, said the changes helped to shift the balance of power in favour of dealerships. 'The EU has endorsed the current franchise system and we welcome that,' he said. 'A free- for-all would lead to the disappearance of some dealerships and that would restrict competition.'
Consumer groups complained to the Commission about abuses of the block exemption system following a French car industry campaign to stop consumers buying cars in another EU member state.
Renault, Peugeot and Citroen published advertisements claiming that cars bought in France after 1 July could be described as 1995 cars but the same cars bought elsewhere and reimported must be described as 1994 vehicles.
The consumer bureau said: 'This is just the latest example of how manufacturers openly flout EU rules. The industry is abusing the privilege of the exemption and denying consumers the benefits of the single market.'
It said it would continue battling to end the car makers' special treatment. Already fresh complaints are in the pipeline about artificially high car prices and the effective monopoly on after-sales service that the philosophy imposes on car buyers.
The most recent car price study by the Commission showed that more than a fifth of the models produced by European makers had price differentials above 20 per cent. In March the Monopolies and Mergers Commission cleared the British car industry of anti- competitive behaviour.Reuse content