The Competition Commission has published Draft Guidelines for the Automotive Aftermarket Industry.
The automotive aftermarket industry is the market for motor vehicle spare parts, tools and components after the vehicles are sold to consumers. This market also includes maintenance and repair services sold by dealerships to consumers.
Currently, most new vehicle owners in South Africa are locked into using a vehicle manufacturer’s service centres, repair shops and parts in ‘embedded’ motor and service plans.
If these owners decide to use an independent service or repair provider of their own choice, vehicle manufacturers punish them by voiding their warranties.
This has also locked out independent workshops and service centres, thereby limiting small-to-medium-sized enterprises’ abilities to transform and grow the sector.
“The guidelines have been labelled as controversial by some bodies, with some claiming that the guidelines could have serious negative consequences for consumers and the country’s road safety initiatives,” said law firm Cliffe Dekker Hofmeyr.
“Whilst the guidelines are not binding, they seem to stipulate a set of ‘rules’ that will apply to Original Equipment Manufacturers (OEMs), service providers (i.e. those who service and maintain motor vehicles); dealers; insurers; and independent service providers or ISPs (i.e. those service providers not appointed by an insurer or OEM).”
Below Cliffe Dekker Hofmeyr outlined the biggest changes and what it means for motorists.
Your choice of mechanic
The guidelines aim to create choices for consumers when selecting a service provider to carry out in-warranty services and repairs.
In terms of the guidelines, manufacturers and insurers must approve any service provider who meets required standards and specifications.
Further, the approved dealers and service providers must not be prohibited from carrying out work for other manufacturers/insurers.
Manufacturers must also inform customers that they can conduct in-warranty services at service providers, but the manufacturers are not obligated to pay for in-warranty services at these ISPs.
Your choice of spare parts
In respect of spare parts (i.e. replacement parts for worn, defective or damaged components of a motor vehicle), manufacturers and dealers must allow customers to fit spare parts which are not manufactured by the OEM (so called “non-original spare parts”) in instances where the warranty on that specific part has expired.
In such situations, the use of non-original spare parts may not void the warranty on other parts in the vehicle which are still under warranty.
Manufacturers and dealers must also make original spare parts available to other service providers (unless those items are related to the vehicle’s security systems) and manufacturers cannot restrict the ability of providers to resell spare parts.
No more bundling
The guidelines also restrict the “bundling” of value-added products (such as maintenance plans, service plans and extended warranties) with the sale of new motor vehicles.
This means that when purchasing a new motor vehicle, a consumer can opt not to take out a maintenance plan or can opt to purchase any maintenance plan or value-added products from another service provider, without voiding the warranty on the vehicle.
Consumers must also be allowed to select the duration of a value-added product and must be free to purchase such products at any time after the purchase of a motor vehicle.
Costs can’t be separated
The guidelines also state that dealers will be required to set out separately the costs of the motor vehicle from the cost of each separate value-added product as well as the information regarding the service and maintenance for that motor vehicle.
In addition, the dealers must disclose their sales commissions with the manufacturers and other third parties.
These provisions will require dealers to ensure that all the necessary information is disclosed to the consumer.