The automotive aftermarket is about to change

Interventions by the Competition Commission to open up the automotive aftermarket are expected to result in far-reaching benefits for consumers and small, independent and historically disadvantaged service providers from July 1, 2021.

These benefits include:

• Promoting consumer choice in the purchase of vehicle maintenance and service plans.
• Promoting the rights of consumers to use original or non-original spare parts during the lifespan of their vehicle.
• Removing original equipment manufacturer (OEM) restrictions in the sale and distribution of original parts.
• Allowing small, independent and historically disadvantaged service providers to undertake service, maintenance and repair work while a vehicle is in-warranty.
• Encouraging more historically disadvantaged individuals (HDIs) to own dealerships.
• Ensuring the fair allocation of repair work by insurers to service providers on their panels.
• Enabling independent service providers to access OEM training and technical information.

This follows the commission last week publishing the final guidelines for competition in the South African automotive aftermarket.

The guidelines also place a responsibility on all industry players to disclose certain information to consumers to enable them to make informed choices, and address consumer safety.

Competition Commissioner Tembinkosi Bonakele said these guidelines are aimed at removing restrictions imposed by OEMs on car owners on the service providers for service and maintenance as well as replacement parts for their motor vehicles in accordance with international best practices.

Promoting participation

“It will unleash entry and participation in the lucrative aftersales value chain by SMMEs and HDI-owned firms. This is in line with the commission’s strategy of opening up markets to support growth and transformation.

“We urge the OEMs to embrace the guidelines and comply as this asks them to do no more than what they already do in their home countries and other parts of the world.

“For its part, the commission is absolutely committed to the enforcement of the Competition Act in accordance with these guidelines,” he said.

Bonakele added that the publication of the guidelines is a culmination of extensive consultation and advocacy work that the commission has conducted since 2017, following numerous complaints from various independent players and members of the public, who raised concerns about alleged anti-competitive practices that exclude independent players in the automotive aftermarket.

Reaction to revisions

Draft guidelines published by the commission earlier this year drew the ire of both the National Automobile Dealers’ Association (Nada) and National Association of Automobile Manufacturers of South Africa (Naamsa).

Nada rejected the draft guidelines, claiming they were “totally unworkable in their current form” and will have serious negative consequences for OEMs, dealers and consumers in addition to South Africa’s road safety initiatives.

Nada said on Monday it appreciates the significant work carried out by the commission in publishing the final guidelines.

“We believe the guidelines present a positive outcome for consumers and franchise dealers, bearing in mind that this document is a guideline that needs to be adopted by the industry as a whole.

“We are currently reviewing the final documentation and look forward to engaging in further productive discussions with the Competition Commission to fully understand its position on certain technical aspects of the guidelines and agree on how best to implement them,” Nada said.

Nada executive director Gary McCraw told Moneyweb there are “quite a number of changes” in the final guidelines compared to the draft guidelines but the Nada team still has to discuss and review the actual content of the document.

Commenting earlier this year on the draft guidelines Naamsa CEO Mike Mabasa said: “Introducing these enforceable guidelines is extremely punitive and a dangerous retrogressive step that is counterproductive and which will harm the economy.”

Mabasa said on Monday Naamsa is still in the process of reviewing the final guidelines “but generally speaking we are comfortable where we are with the commission because we believe very strongly that some of the things they had requested us to consider are things the industry was working on anyway”.

“The fact that the guidelines are there, for us, is not a deal breaker and we believe we can work with government so that we can see how best and how fast we will be able to transform the industry.

“There will obviously be challenges, specifically the manner in which they are proposing some things be done. At the end of the day, the industry will have to implement certain things and we believe strongly that the current environment is not yet fertile in order for us to achieve the time frame that they are proposing,” he said.

‘Major victory’

Right to Repair SA (R2R) movement vice chair Filum Ho said these final guidelines mark a major victory for consumers and the automotive industry in South Africa.

“By carrying out initiatives, such as unbundling the service and repair warranty market, we can expect better competition in the market, greater transformation, access, and freedom of choice.

“The measures to ensure greater inclusivity in the market, from the likes of independent and previously disadvantaged repair and service providers, will also go a long way in boosting transformation and access while creating new job opportunities,” he said.

Werksmans Attorneys competition practice director Dominique Arteiro stressed that the guidelines do not preclude the commission from pursuing any firm in the automotive industry for anti-competitive conduct.

“Businesses should therefore 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,” he said.