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R/€ = 20.04 Change: -0.39
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Criticism, praise for Competition Commission’s aftermarket guidelines

18th February 2020 BY: Irma Venter
Creamer Media Senior Deputy Editor

The National Association of Automobile Manufacturers of South Africa (Naamsa) has slammed the Competition Commission’s draft Guidelines for Competition in the South African Automotive Aftermarket Industry, published for comment last week.

These guidelines will mean, for example, that car owners will no longer be forced to conduct in-warranty service, maintenance or repair work only at approved dealers or service providers.

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Naamsa believes the commission’s policy guidelines will compel “profound structural changes which will intrinsically remould the existing business models of all automotive multinational companies which continue to invest emphatically in the country’s economy, its workforce and its overall future growth”.

According to the association, the industry is not “substantively opposed” to the proposed reforms. It is, however, “disturbed” by the manner in which the Competition Commission has elected to progress, despite the fact that the association held four meetings in the last seven months with the Commission to discuss different approaches to enact the proposed reforms.

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Naamsa’s view is that the reforms require “carefully considered interventions that can be implemented gradually over a reasonable period of time”.

Naamsa CEO Michael Mabasa says publishing the guidelines is an indication that the Competition Commission negotiated with the industry in bad faith.

“Transformation of the automotive sector in South Africa is no longer a contested space, because it is a business imperative that makes sense for the success and sustainability of the automotive industry.

“In all our meetings, I personally reassured the Commission of the industry’s unambiguous commitment to systemically address barriers to entry, which remain very high in the industry for many existing, new and aspiring entrants.

“Clearly our messages fell on deaf ears, because the Commission chose a stick approach and is now using these guidelines as a blunt instrument to achieve a goal that we were all working towards.”

Introducing these enforceable guidelines is “extremely punitive” and a “dangerous retrogressive step” that is counterproductive and will harm the economy, states Mabasa.

“I admire the courage of the Competition Commission in many other areas of their work, but it is our considered view that on this occasion, they resorted to unjustifiably impose a blunt instrument on an industry that has already agreed to self-regulate and reform.

“The motor industry has taken practical measures and developed an ambitious Automotive Masterplan 2035, which is a blueprint for many other sectors.

“Our industry has also already made a commitment to invest resources, including a financial injection of R6-billion to create the Automotive Industry Transformation Fund (AITF), which, among its key priorities, seeks to address the very same reforms that the Commission feels it should rather forcefully impose on us.”

Mabasa says the industry is ready to address a number of key priority areas, including stimulating a transformation programme across the automotive value chain through the work of the AITF; developing inclusive market access to ensure greater participation of previously disadvantaged firms in the components manufacturing, vehicle maintenance, mechanical and motor vehicle body repairs; increasing the contribution of black-owned automotive component manufacturers within the automotive supply chain; accelerating the empowerment of black South Africans within the auto sector; upskilling black automotive entrepreneurs through targeted skills development interventions; and expanding black-owned dealerships and authorised repair facilities and workshops.

He adds that Naamsa urges the Competition Commission to reconsider “its punitive approach” and to rather use any guidelines it formulates as an industrial policy tool to stimulate economic growth and inspire business confidence.

“The trajectory chosen by the Commission this time, regrettably, is likely to achieve the opposite outcomes.”

The Guidelines
The draft Guidelines for Competition in the South African Automotive Aftermarket Industry provide practical guidance to firms in the automotive sector on conduct that may be anti-competitive, and how to mitigate this conduct, says the Commission in a statement.

The Commission says the guidelines seek to encourage competition through greater participation of small businesses, as well as historically disadvantaged groups.
 
The Commission has, since 2017, conducted a consultation process in the automotive aftermarket industry, following concerns of possible anti-competitive conduct.
 
This process was triggered by complaints from independent players in the automotive aftermarket industry, as well as members of the public.

These parties raised concerns about alleged anti-competitive practices that prohibited independent players from gaining access to the automotive value chain.
 
“The purpose of the guidelines is mainly twofold, namely, to provide guidance to firms on conduct that may fall foul of the Competition Act, and to enhance transformation in the industry, [in order] to foster inclusion,” says the Commission.
 
The Commission has invited automotive industry participants (especially small and independent repairers and maintenance service providers), regulators, consumers and any other interested party to submit their views and comments on the draft guidelines.
 
Following this consultation phase, the Commission will publish the final guidelines.

The final guidelines will form part of the Competition Act and will give authorities the power to pursue anti-competitive behaviour through enforcement.
 
The deadline to provide comments is March 16.

Praise for Guidelines
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, says auto glass, paint and parts specialist Autoboys.

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 effectively locked out independent workshops and service centres, thereby limiting the ability of small- to medium-sized enterprises (SMEs) to transform and grow the sector.

Autoboys is 51% owned by African Rainbow Capital and is level 1 empowered. The company has 80 outlets across South Africa, 290 insurance partners and more than 169 fitment vehicles.

In what Autoboys regards as a big shakeup for the industry, the Commission’s draft 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 vehicle’s warranty.

Autoboys says this is a breakthrough in the adoption of original equipment equivalent parts, which offers the same standards of safety and quality as their counterpart original equipment manufacturer 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, as this will allow consumers to choose whether they want to purchase the maintenance or service plan.

“These draft guidelines mark a major victory for consumers,” says Autoboys CEO Filum Ho.

“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,” he notes.

  

EDITED BY: Creamer Media Reporter
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