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Guidelines for the competition in the Automotive Aftermarket By Khomotso Mamburu

KHOMOTSO MAMBURU

Guidelines issued by the Competition Commission on 10 December 2020 (“the guidelines”) aim to increase competition through encouraging greater participation of independent services providers (“ISPs”) in the “Automotive Aftermarket” industry, as well as promoting consumer choice in the purchase of vehicle maintenance and service plans.  In the Guidelines the “Automotive Aftermarket” is defined to mean, “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”.

The guidelines are available on the Commission’s website, at http://www.compcom.co.za/guidelines/ and will become effective on 01 July 2021.

The Guidelines were prepared in terms of section 77 of the Competition Act 89 of 1998, to provide practical guidance to industry players for the adoption of pro-competitive measures in the Automotive Aftermarket, and to promote greater participation of small businesses as well as historically disadvantaged individuals (“HDIs”) in the market.  The Guidelines also place responsibility on all industry players to disclose certain information to consumers, to enable them to make informed choices; the guideline also addresses consumer safety. A dispute resolution process and a self-monitoring mechanism by industry stakeholders are included.  The main guidelines are set out below.

Unbundling of maintenance plans and service plans at point of sale

The purchase price of motor vehicles usually includes a maintenance and/or service plan (“the value added products”).  The guidelines provide for the unbundling of value added products at the point of sale from the purchase price of the motor vehicle.  This is aimed at allowing consumers the option to purchase the products separately from the new motor vehicle.

In-warranty services, maintenance, and repairs by independent services providers

Currently an owner who has a motor vehicle serviced, maintained, or repaired by a party other than an approved dealer during the in-warranty period runs the risk of the warranty becoming void.  The guidelines provide consumers should have the freedom to choose an independent service provider (ISP), also during the warranty period, subject to certain safeguards: Where a consumer chooses to use an ISP during the In-Warranty period, there shall be no obligation on the original equipment manufacturer (“OEM”) to pay for any service and maintenance work undertaken by the ISP. The Motor-body repairs of consumers who have insurance cover shall be undertaken by an Approved Motor-body Repairer during the In-Warranty period, as allocated by an Insurer to the consumer.  Consumers who do not have insurance cover may repair their Motor Vehicles at a service provider of their choice at any point during the Motor Vehicle’s lifespan.  To ensure that all the work done on a Motor Vehicle is traceable ISPs are obliged to record such In-Warranty work undertaken by them in Vehicle Service Books or equivalent record. ISPs shall disclose to consumers, in clear and explicit terms, the risk of damage that could arise from the ISP’s work, including consequential damage to the Motor Vehicle, which may potentially void certain obligations of the OEM in terms of the Warranty.

Original and non-original spare parts

Currently consumers are effectively prevented from fitting parts not manufactured by the OEM to their own motor vehicles during the warranty period, because the warranty would become void. The guidelines provide consumers should have greater freedom of choice, also during the warranty period, subject to certain safeguards:  If there is any damage to the vehicle from the fitment of parts by an ISP, certain provisions in the warranty may be voided, but other provisions of the warranty may remain severable and enforceable. The OEM or Approved Dealer may conduct an assessment at its own cost to determine the cause of the damage and if the warranty is voided.  If there is a dispute a consumer can approach the relevant authority to investigate the matter.  A consumer that suffers harm from a defective product can bring a claim against any party in the supply chain in terms of section 61 of the Consumer Protection Act No. 68 of 2008.  Approved Dealers and ISPs must make consumers aware, in clear and explicit terms, of the risk of damage, including consequential damage, from the fitment of spare parts by an ISP, potentially voiding certain obligations of the OEM in terms of the warranty. To ensure that all the work done on a vehicle is traceable, ISPs are obliged to record such In-Warranty work undertaken by them in their customers’ Vehicle Service Books.

How do the guidelines affect Independent Service Providers (ISPs)?

The guidelines aim to ensure that OEMs and/or Approved Dealers make Original Spare Parts available to ISPs, where required to perform service, maintenance or repair work.  Conditional sale and distribution of Original Spare Parts shall only be reserved for those items that are linked to the Motor Vehicle’s Security System.  OEMs may not restrict an ISP’s ability to procure Original Spare Parts, when required for the purposes of effecting service, maintenance and repair work.  OEMs may however impose restrictions or prohibitions on ISPs from on-selling Original Spare Parts to third parties.

The guidelines aim to encourage OEMs to make available technical maintenance and repair information to ISPs, including information stored electronically or in the cloud. OEMs must make available to ISPs the OEM-technical information on reasonable terms and conditions, including terms related to usage, confidentiality and fees that are no less favourable to the terms offered to its Approved Dealers and Approved Motor-body Repairers, where applicable.  Access by ISPs to OEM-technical information includes security-related information that permits access to motor vehicle security systems, including coding, programming and software.  Such access must be subject to OEMs’ intellectual property and data privacy rights and ISPs meeting their accreditation requirements.

Dispute resolution

The dispute resolution processes under the Consumer Protection Act 68 of 2008 are available regarding any goods or services provided by the automotive industry to consumers, including to suppliers who are in turn also consumers within the industry supply chain.  The guidelines should be read in conjunction with these relevant provisions.  Affected parties can also refer disputes directly to the Motor Industry Ombudsman of South Africa (“MIOSA”) and the National Consumer Commission (“NCC”) for resolution.

These guidelines may have far-reaching implications and persons and entities involved in the auto industry should proceed with care and obtain legal advice before implementing changes to business practices on the basis of the guidelines.

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