The Competition Commission has published its final guidelines for competition in the South African automotive aftermarket.
Dominique Arteiro, director at Werksmans Attorneys Competition Practice, said that the guidelines are forward-thinking as the measures proposed apply to internal combustion engines, electric vehicles and propulsion ‘by other means’ including hybrid.
Arteiro said that commission states that it issued the guidelines with the aim of promoting competition in the automotive aftermarket, and specifically to promote economic access, inclusion and greater spread of ownership for Historically Disadvantaged Individuals (HDI).
“The genesis of the commission’s engagement in the automotive industry stems from the numerous complaints the commission received over the last decade,” he said.
“In this regard, the commission has been working with participants in the automotive since early 2017 to resolve these market issues.”
Arteiro said that the commission initially facilitated an advocacy program towards a voluntary code of conduct for the industry, but after two years of engagement, the stakeholders did not reach consensus and/or did not commit to meaningful pro-competitive reforms in response to the challenges posed.
“The commission, therefore, issued the Automotive Guidelines to provide practical guidance for the automotive aftermarkets industry.
“The automotive guidelines are intended to promote inclusion and to encourage competition through greater participation of small businesses as well as historically disadvantaged groups. ”
Some of the measures proposed in the guidelines include:
- The unbundling of the new motor vehicle price from the price of the service and/or maintenance plan of that motor vehicle. In other words, dealers must ensure that at the point of sale of a motor vehicle, that consumers have full disclosure of the i) purchase price of the motor vehicle; and ii) the purchase prices of service and maintenance plans, and other value-added products. Consumers will then have the choice whether to purchase the motor vehicle and service/maintenance plan separately or at the same time;
- Original Equipment Manufacturers (OEMs) and independent third-party providers must transfer a service and/or maintenance plan to a replacement motor vehicle in circumstances where the motor vehicle is written off by the insurer;
- In circumstances where there is no replacement motor vehicle after a write-off or its not feasible to transfer a service and/or maintenance plan to a replacement motor vehicle, the consumer must be afforded the right to cancel the service and/or maintenance plan contract and/or receive a refund for the balance of the product;
- Approved dealers that sell new motor vehicles and products of competing OEMs must ensure that they do not engage in price co-ordination. Specifically, the prices of competing motor vehicles and products must be determined by different individuals within the dealership;
- Approved dealers that sell new motor vehicles and products of competing OEMs must ensure that no commercially sensitive information (including information stored in the cloud) is provided or shared with competing OEMs.
“The automotive guidelines are effective from 1 July 2021 and affected parties in the automotive industry, thus, have until 1 July 2021 to ensure their businesses and business arrangements are compliant,” said Arteiro.
“Although the automotive guidelines are non-binding on the competition authorities, it indicates the commission’s approach on any matter falling within its jurisdiction in terms of the Competition Act.”
Arteiro added that the guidelines do not preclude the commission from pursuing any firm in the automotive industry for anti-competitive conduct through the Commission’s enforcement powers.
He said that businesses should carefully consider the implications of the measures proposed by the commission in the automotive guidelines on their franchise and dealer arrangements, and on their different services and product offerings pertaining to motor vehicle servicing, repair and/or maintenance.
“Interestingly, the automotive guidelines do not apply to motorcycle dealers or finance and insurance institutions who provide products and services to participants in the motorcycle industry.
“However, participants in other industries that have similar franchise, distribution, servicing and/or repair arrangements to the automotive industry will undoubtedly be keeping a watchful eye on how the implementation of the commission’s automotive guidelines unfold in the automotive sector.”