SOUTH AFRICA: COMPETITION COMMISSION HOSTS CONSUMER WORKSHOP ON GUIDELINES FOR COMPETITION IN THE SOUTH AFRICAN AUTOMOTIVE AFTERMARKET

The Guidelines for Competition in the South African Automotive Aftermarket (Guidelines) (access here) come into effect on 1 July 2021. In anticipation, the Competition Commission (Commission) recently hosted a workshop to discuss what the Guidelines mean for consumers and other industry participants (Workshop).

By way of background, the Guidelines are – according to the Commission – the outcome of more than a decade of complaints received by the Commission from independent service providers (ISPs) and other industry players about exclusionary conduct at all levels of the automotive aftermarket supply chain.

The Guidelines aim to provide guidance for the automotive aftermarket industry and are intended to promote inclusion and to encourage competition through greater participation of small-and-medium sized businesses (SMEs) as well historically disadvantaged persons (HDPs). The Guidelines do not, though, have the force of law.

Key takeaways from the Workshop

Application of the Guidelines

The Guidelines are of wide import and will have an impact on a number of stakeholders in the market including consumers, original equipment manufacturers (OEMs), dealers, repairers, insurers and third-party ISPs. During the Workshop, the Commission clarified that: 

• the ‘Automotive Aftermarket’ means the after-sale market which includes maintenance and repair services and related value-added products; mechanical repairs; structural repairs and non-structural repairs to motor vehicles; the sale of motor vehicle spare parts, tools and components; and the sale and administration of motor vehicle insurance; and
• the Guidelines are applicable to all types of motor vehicles adapted for propulsion or haulage on a road by means of fuel, gas, electricity, or other means within South Africa (for example, buses, cars, trucks, motorcycles, electrical and hybrid vehicles). 

Amongst the Commission’s primary concerns is that purchasers of in-warranty vehicles / vehicles which come with service or maintenance plans are captive to the particular OEM’s dealer or service network: that is, should work be carried out by non-approved providers, warranties and plans may be voided. This, according to the Commission, limits participation (in particular by SMEs and HDPs) in the automotive aftermarket.

What the Guidelines mean for consumers

The Guidelines aim to increase consumer choice. Once in effect, the Guidelines will permit consumers to repair their motor vehicles at service providers of their choice. Moreover, consumers will be able to choose whether to fit original or non-original spare parts to their vehicles and will be able to source these spare parts from ISPs of their choice, regardless of whether their vehicles are under warranty or not.

Whilst consumers are afforded increased choice, the Commission cautioned that consumers ought to still be aware of the potential risks involved with maintenance and repair work by a third-party ISP, and in particular, the risk that certain provisions of the warranty on the motor vehicle may become invalid or void in circumstances where the selected ISP is found to be at fault.

The Commission reminded consumers that where disputes arise with their service providers, dealers or insurers, they should approach the relevant complaints department at the dealer or OEM and follow the internal complaints procedures. If no resolution is found, recourse may be had to the Motor Industry Ombudsman of South Africa (MIOSA).

Where conduct is potentially in contravention of the Competition Act 89 of 1998, as amended, consumers may also approach the Commission directly. Where appropriate, relief may also be sought from the National Consumer Commission.

Participation and lower barriers to entry for SMEs and HDPs 

One of the key objectives of the Guidelines is the need to promote the entry and participation of SMEs and HDPs in the automotive aftermarket.

The Guidelines seek to achieve these objectives by encouraging stakeholders in the industry to adopt measures to facilitate the:

• increased entry, promotion and support of SMEs and HDPs as approved dealers;
• dispensing of the practice of OEMs entering into exclusive agreements with motor-body repairers;
• ensuring that ISPs can undertake in-warranty service, maintenance and repair work; and
• ensuring the fair allocation of work by insurers to service providers on insurance panels, with no service provider serving for more than five years on a panel. 

Prevention of anti-competitive information sharing by multi-brand dealerships

The Commission also emphasised the need for dealers to implement internal policies to ensure that no exchange of competitively sensitive information occurs in the context of multi-brand dealerships. 

Going forward

Although the Guidelines do not constitute binding law, the Commission was clear that the Guidelines reflect the policy position of the Commission regarding what would be considered anti-competitive in the industry going forward.

The Commission also noted that it is interested to see how the industry will implement the Guidelines in every-day practice, and that it will be conducting periodic assessments to monitor compliance with the Guidelines. Practically, this means that the Commission will meet with, and obtain information from, relevant stakeholders in the industry with a view to determining how the industry is applying the Guidelines.

How the application of the Guidelines will unfold is – of course – not certain. Industry players may need to adopt purposive interpretations in certain instances where compliance is commercially impractical. To this end, it is not implausible that the Guidelines may evolve over time based on experience and application. The key message though is that transformation should be fostered in the value chain, with the various key players (OEMs, dealers and like) spearheading initiatives to do so.

This article was written by Judd Lurie, Nazeera Mia, Sian Fagan and Aneesa Ravat.