Europe's car market is arguably the most glaring exception to the 15 nations' single market rule. The European Commission regularly publishes league tables which show a yawning chasm between the best and worst deals for the same model between Helsinki and Athens.
In part the commission has only itself to blame. For years it has maintained a regime that allows the car market exemptions from the competition provisions of the Treaty of Rome. Critics say the car industry has used the central component of that regime - the close tie between manufacturers and dealers which allows the former to dictate who will sell how many of which models and where - to exploit their customers.
It is a charge which infuriates the car makers, many of whom are struggling with over-capacity and wafer-thin margins. "If we are ripping off the consumer, show me the money," argues an executive from one of the big manufacturers.
Be that as it may the regime is about to change. Block exemption, as it is known, is coming up for its seven-year renewal. From the early days of the review Mario Monti, the EC's cerebral competition commissioner, has been talking tough. The days of dealer as chauffeur with the manufacturer playing back-seat driver were numbered, Mr Monti said at the outset. Time to put the buyer behind the wheel.
Britain's competition commission has been among those calling for radical reform. In its report on the way new cars are sold in the UK, published almost two years ago at the height of the "rip-off Britain" frenzy, it called for sweeping changes; an end to dealers being granted exclusive sales territories, a ban on manufacturers' power to refuse to supply cars to any retailer, a ban on manufacturers forcing dealers to stock their full model range and a break of the link between sales and after-sales servicing.
Mr Monti's proposals will be announced in the next few weeks. But documents seen by the Guardian suggest that the commissioner will disappoint both the industry and consumer lobbies - though the latter rather more than the former.
The commission's draft proposals start from the premise that the existing regime is failing. Renewal of the rules as they stand is simply not an option.
According to the EC's competition watchdog, the current regime wraps car distribution in a "straitjacket" with all new cars distributed in the same way. Parallel trade - customers buying cars from a dealer outside their own country - is still too weak to affect prices. Internet sales or dealers' ability to sell cars from more than one maker are handicapped.
There is no basis for a link between sales and after-sales services. Dealers are "still very much dependent on manufacturers". Spare parts makers need more direct access to dealers and independent repairers more access to technical information.
Worst of all, the competition directorate reckons manufacturers flout the regime, even though it believes it favours them. It cites fines levied on a number of compa nies for restricting parallel trading or for price fixing. The level of complaints underlines the extent of consumer dislike for the system.
Mr Monti and his team, however, have stopped short of a distribution "free-for-all". True enough, car makers could supply, say, supermarkets - the retail sector keenest to break into the car market - but, crucially, will not be forced to do so.
The draft argues that the manufacturers' ability to exclude supermarkets - and pure internet dealers as well - "seems to be justified". Supermarket distributors could actually be bad for consumers.
"If supermarkets could force certain manufacturers to be appointed distributors, this may in the short term lead to price decreases. In the long run it may however be counter-productive: it would reduce the range of vehicles offered and hamper innovation and lead to a strong concentration in the distribution sector with decreasing prices in the short term but less consumer satisfaction and higher prices in the long term."
Instead of completely opening the market Mr Monti has opted for comprehensive reform into a regime which is seen as stricter, but more economic.
The aim is to ensure that "distributors will in future be able to sell new vehicles to all consumers without discrimination between incumbent and foreign consumers. Increased parallel trade will also lead to a reduction in price differentials in Europe and thus contribute to the creation of an internal market".
The proposals will force manufacturers to choose between exclusive agreements (one dealer per manufacturer per geographical area) and selective distribution - where a maker may have more than one dealer per area based on criteria such as quality of showroom, staff and facilities. They will no longer be allowed to have both. Nor will they be able to prevent dealers in one country advertising cars in another - so a company in Denmark, where prices are low, will be able to advertise in any other EU country.
In addition, car makers will only be permitted to set sales targets, product allocations and bonus systems on an EU-wide basis, rather than on much smaller areas as is the present case - a move designed to strengthen dealer independence.
Market share
Overall the system is to be strengthened by complex measures on market shares. In particular the benefits of block exemption may be withdrawn in areas where more than 50% of a particular market is served by the big manufacturers selling through similar, tied, dealer networks.
Measures will also be introduced to allow multi-branding, so dealers can sell cars from more than one manufacturer from the same premises.
The link between after-sales service - which the Monti team estimates accounts for 40% of a car's cost over its life - and sales will be broken, allowing independent servicers greater access to the market.
Car makers are likely to argue that governments must bear their share of the blame for price differentials because of different tax rates across the EU. They may also be concerned by some of the market share restrictions being proposed. But overall the package may be less problematic than at first feared.
"The problem is that the European Commission launched this [review] in the belief it was undertaking a crusade for the consumer and the motor industry was a dragon that needed to be slain," said one motor industry executive this week. "As they have pursued their inquiries they have slowly come to the realisation that the system is not quite as monopolistic as they initially thought."
If anyone is likely to feel the brunt of the new rules it is car dealers. They face a culture change in the way they sell. "Life will be more risky and challenging for dealers in future," says one EU source. "The commission wants them to shift from passive selling to active selling. It wants them to get out and look for business and, for the first time ever, the entire European Union will be their sales territory."
The UK may be a particular beneficiary. "The days of continental dealers shrugging their shoulders and telling British buyers that they would like to sell to them but that the manufacturer won't supply them with the car are numbered," says the source.
