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Guidelines for Competition in Automotive Aftermarket Industry Set Down

February 2, 2021

Department of Trade, Industry and Competition

Guidelines aimed at addressing constraints to competition in the automotive aftermarket industry have been published.

The trade, industry and competition department published the Guidelines for Competition in the South African Automotive Aftermarket Industry in Government Gazette 44103.

They were published for comment in February 2020.

The Guidelines, drawn up by the Competition Commission, also seek to promote compliance with the “spirit, intent and objectives of the Act by encouraging relevant stakeholders to adopt and promote principles of effective competition regulation for a growing and inclusive economy”.

The automotive aftermarket industry focuses on the after-sale market including motor vehicle spare parts, tools and components and maintenance and repair services sold to motorists following the sale of a motor vehicle.

The aftermarket includes companies involved in the manufacturing (original equipment manufacturers), distribution, retail, service and repairs of motor vehicles.

The Guidelines pertain to all motor vehicles traded in and registered within South Africa.

Specific objectives include lowering barriers to entry, increasing consumer choice and facilitating competition and competitive pricing for new motor vehicles, spare parts and value-added products and increasing transparency and facilitating consumer choice in the aftermarket.

According to the Competition Commission, the drafting of the Guidelines follows numerous complaints from stakeholders and consumers alleging anti-competitive practices such as pricing behaviour in the automotive aftermarket and agreements that foreclose independent players at all levels of the automotive value chain.

The plan is to encourage stakeholders to adopt measures that widen the pool of approved service providers, ensure that independent service providers (ISP) can undertake in-warranty service and maintenance work and in-warranty motor-body repairs, allow for greater consumer choice and product competition for service plans and/or maintenance plans and ensure that motor-body repairs are fairly allocated amongst service providers.

The Guidelines focus on, inter alia, in-warranty service, maintenance and repairs by ISPs; appointment of motor-body repairers by OEMs; appointment of service providers and allocation of work by insurers; preventing anti-competitive information sharing by multi-brand dealerships; fitment and access to spare parts; the bundled sale of motor vehicles with value added products; access to technical information and OEM-training for ISPs and dispute resolution.

The Guidelines provide “practical guidance for the automotive aftermarkets industry, intended to promote inclusion and to encourage competition through greater participation of small businesses as well as historically disadvantaged groups”.

The department also published decisions taken by the Competition Commission on proposed mergers:

• Notice 47 – notification to approve with conditions the transaction involving Hensoldt Optronics (Pty) Ltd and the Air Traffic Management Business and the Defence and Security Business of Tellumat (Pty) Ltd;
• Notice 48 – notification to approve with conditions the transaction involving Roos Foods Proprietary Limited and the Business of 10 KFC Franchised Restaurants Owned and Carried on by Van Eeden Kitskos Proprietary Limited;
• Notice 49 – notification to approve with conditions the transaction involving Nimble Credit Fund 1 Proprietary Limited and parts of Edcon Ltd’s (in business rescue) loan book and associated inhouse administration services;
• Notice 50 – notification of closed conditional merger approvals – 1 April 2020 – 30 September 2020.