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Restrictive car service plans set to become a thing of the past

Autoboys CEO Filum Ho

Change is coming to the motoring industry in South Africa as the Competition Commission has gazetted draft guidelines that seek to sweep away anticompetitive service and warranty plans.

Currently, owners of new cars in South Africa are unique in the world as they 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 our sector.

In a bid to address these problems, the Competition Commission released its latest draft guidelines for the automotive aftermarket industry on Friday, 14 February 2020. A finalised set of guidelines will ultimately be implemented as part of the Competition Act and will give authorities the power to “pursue anti-competitive behaviour through enforcement”.

In a big shakeup for the industry, the Commission’s guidelines stipulate that consumers will no longer be compelled to conduct in-warranty service, maintenance or repair work only at approved dealers or approved service providers.

The guidelines further state that vehicle manufacturers and approved dealers must allow consumers to fit non-original parts where a specific part's warranty has expired, without voiding the balance of the motor vehicles warranty. This is a breakthrough in the adoption of OEE or Original Equipment Equivalent parts, which offer the same standards of safety and quality as their counterpart Original Equipment Manufacturer (OEM) parts, but at a lower cost.

Other key points of the guidelines state that, at the point of sale, dealers and financiers must provide the consumer with details of all inclusions and exclusions in the service and maintenance plans.

The Commission says, “This will allow consumers to exercise choice regarding whether to purchase the maintenance or service plan and make servicing a more affordable option for South Africans whilst allowing for more players to provide such value-added services for consumers whose vehicles are in warranty.”

There are several more major changes proposed in the draft guidelines which are publicly available on the Competition Commission’s website (click here). The deadline for submission of comments is 16 March 2020.

Responding to the guidelines, Autoboys CEO Filum Ho says: “These draft guidelines mark a major victory for consumers. Fair competition, transformation, access, and freedom of choice are themes that run throughout the draft.”

“We believe that strong guidelines are needed to unlock greater opportunities for SMEs in our sector and help generate economic growth. Global institutions such as World Bank have regularly cited that highly concentrated, uncompetitive sectors are a big reason for slow growth in South Africa. This must change for South Africa to break free from its status as the world’s most economically unequal country,” says Ho.

Backgrodnd

The latest guidelines are a product of a process that started in 2017 when the Competition Commission consulted widely in the automotive industry with a view, at first, of creating a single, voluntary Automotive Code of Conduct to help open up the market, promote greater transformation and encourage increased economic participation of SMEs and black South Africans.

That code also sought to deal with issues such as restrictive in-warranty service and maintenance plans as well as a lack of transformation.

However, because of a wide range of divergent views and difficulties with achieving consensus on a final voluntary code for the industry; the Competition Commission felt the need to go one step further by converting the code into guidelines of the Competition Act.

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