Car Owners - Did You Know?

On 10 December 2020, the Competition Commission issued non-binding guidelines for the South African aftermarket Automotive Industry which become effective on 1 July 2021 addressing complaints received from car owners over the past decade regarding the anti-competitive conduct in the aftermarket value chain by car manufacturers, insurers, car dealerships and service providers. Some of the complaints included objections to ‘service plans’ and the requirements pertaining thereto e.g. that in-warranty vehicles can only be serviced by a car manufacturers own outlets and that only “original” car parts may be used in repairs.

Whilst the guidelines are non-binding, car manufacturers, insurers, dealerships and service providers should take heed of guidelines and the possible implications that such guidelines may have on their operations which relate to motor vehicle servicing, repair and/or maintenance. Notably, the affect role players are responsible to take steps to give effect to the guidelines, failing which they can be sure to expect some interesting claims from disgruntled consumers.

Notably, the guidelines address:

1. Service Plans - which are to be sold separately

2. No restriction is possible on Service Providers

3. Fitment of original vs. non-original spare parts

4. Insurers to use more approved repairs

5. Approved dealerships in rural, peri-urban or township centres

Service plans to be sold separately

One of the biggest changes and one which brings South Africa in line with many other jurisdictions is that maintenance/service plans must be ‘unbundled’ from the sale price of the car and sold separately to consumers. By ‘unbundling’ this cost, prospective car owners are able to determine what these plans cost and can make a more informed decision regarding whether such plans are commercially viable.

In addition to the above, the car manufacturers are required to detail all inclusions and exclusions included in such maintenance/service plan beforehand, which includes, inter alia:

• the average price for each service interval;

• the average price of the parts that commonly require replacement at specific kilometre intervals or upon the vehicle reaching a specific age.

No restriction is possible on Service Providers

New car owners are allowed to seek service, maintenance and mechanical repair work from any service provider of their choice in the in-warranty period (but at their cost) – without risking their warranty. Thus, car manufacturers may not lock car owners into service plans that required them to only use the vehicle manufacturer's service centres for maintenance or repairs (failing which car owners ran the risk of losing and/or voiding your vehicles warranty).

Fitment of original vs. non-original spare parts

Consumers must be permitted to use non-original spare parts from any provider without risking their vehicles warranty (within reason and subject to a few provisos e.g. if a non-original part damages the car, the car manufacturers must conduct an assessment at its own cost to determine the cause of the damage, and if the warranty and/or a part thereof can be voided).

Car manufacturers must make original spare parts variable to independent service providers and may not restrict their ability to procure such original spare parts for the purposes of effecting service, maintenance and repair work.

Car manufacturers may not set minimum retail prices for spare parts.

Insurers to use different repairers

Insurers must promote a fair allocation of work to repairers, with a preference for firms owned by historically disadvantaged individuals. This guideline was included to address practices of some insurers who only allocate repair work to a limited number of accredited services providers in a specific area.

Approved dealerships in rural, peri-urban or township centres

Car manufacturers must promote the participation of historically disadvantaged individuals in the dealership market and as a result, requirements for approved dealers must be reasonable and have an economic rationale, particularly concerning the size of land, showrooms, furniture, fittings, and finishes.