The Competition Commission (“the Commission”) published guidelines for competition in the South African automotive aftermarket industry on 6 February 2020 for public comment.
According to the Commission, the guidelines were prompted by multiple complaints received by the Commission from various independent service providers in the automotive aftermarket as well as members of the public. These parties raised concerns about alleged anticompetitive practices, such as pricing behavior in the automotive aftermarket and agreements that foreclose independent players at all levels of the automotive value chain.
It is important to note that the guidelines are not binding on the Commission, the Competition Tribunal or the Competition Appeal Court in the exercise of their respective discretion, or their interpretation of the Act. However, their ramifications are the creation of a set of ‘rules’ and/or a code of practice for the automotive industry. These rules would apply to:
- Original Equipment Manufacturers (“OEMs”);
- Service Providers (“SPs” are those who service and maintain motor vehicles);
- OEM appointed Dealers; and
- Insurers and Independent Service Providers (“ISPs” are those service providers not appointed by the OEMs and Insurers).
Exclusion of ISPs in the market for service and maintenance of insured and/or vehicles under warranty
Firstly, the Commission introduces the concept of affording consumers a choice of Service Providers and encourages a fair allocation of work for approved SPs and ISPs, for in-warranty service and maintenance work. The consumers must have a choice when selecting a SP for their in-warranty maintenance and repairs.
The OEMs and Insurers must appoint and approve any SPs that apply to carry out their in-warranty services and repairs if they meet their standards and criteria. The OEMs and Insurers must not bar approved SPs from carrying work for other brands.
The OEMs must conduct themselves in a manner that is not exclusionary and exploitative. This will have the effect of opening the market and thus proving healthy competition by increasing the number SPs and Dealers carrying out in warranty services to different brands.
Fitment of non-original and original spare parts
In respect of the fitment of in-warranty spare parts, the Commission seeks to give consumers the liberty of choosing between original and non-original spare parts without the risk of voiding warranty. The OEMs and Dealers must make original spare parts and components available to ISPs, save for parts linked to the motor vehicle’s security system. The OEM’s must not enter into any agreements with the manufacturers or suppliers of spare parts that have the effect of restricting the manufactures’ ability to resell those goods to SPs, except for IP protected components. Therefore, exclusionary supply agreements that are already in place must be reviewed to be in line with the guidelines.
The bundled sale of motor vehicles with value added products
The guidelines also provide for the unbundling of value-added products, e.g., maintenance plans, service plans, extended warranty and dent/scratch cover when purchasing a new vehicle. The consumer must be given a choice when selecting value added products at the time of purchasing a new vehicle without affecting the validity of the warranty. The Dealers must allow consumers to use cheaper products provided by SPs other than the dealer itself without voiding the warranty. The Dealers must afford buyers the ability to purchase a value-added product any time after the purchase of the motor vehicle.
Transparency and access to technical information by ISPs
Finally, complete transparency must be provided by motor vehicle Dealers when selling a vehicle to consumers, in that the cost of the motor vehicle must be set out separately from the costs of value-added products. In furtherance of creating effective competition in the automotive aftermarket, the commission provides that OEM’s must make available to ISPs the OEM-technical information relating to its motor vehicle, on the same terms offered to its approved SPs.
The guidelines provide an opportunity to market role players to report anti-competitive behavior. Market role players and consumers are welcome to contact us to unpack the micro effects of the guidelines in their respective businesses and for advice.