You will soon be able to service your car anywhere Vehicle manufacturers react with outrage to draft guidelines published by the Competition Commission By: ROY COKAYNE

LOCAL VEHICLE manufacturers are outraged at proposed guidelines for the aftermarket industry that will allow consumers to select a workshop of their choice when having their vehicles serviced, maintained, and repaired. New vehicle owners are currently compelled to have in-warranty service, maintenance, or repair work conducted only at approved dealers or approved service providers. The proposed guidelines, which were published for public comment by the Competition Commission on 14 February 2020, also deal with the relationship between original equipment manufacturers (OEMs) and dealers. Among other things, they state that OEMs must not impose onerous obligations on prospective dealers. Grandiose Taj Mahal-type dealerships have become commonplace in South Africa. However, the guidelines state: that [the] requirements for dealers must be reasonable and have an economic rationale, particularly in relation to the size of land, showrooms, furniture, fittings and finishes. NAAMSA not happy National Association of Automobile Manufacturers of South Africa (NAAMSA) chief executive Michael Mabasa said in response that while the industry does not have any objection to any of the substantive reforms proposed in the guidelines, introducing these enforceable guidelines is extremely punitive and a dangerous retrogressive step that is counterproductive and will harm the economy. Mabasa added that the proposed guidelines will compel the automotive industry to implement enforceable measures that could fundamentally change the current nature and structure of the automotive retail and aftermarket value chains in the country. He also said that they will bring about some profound structural changes that will intrinsically remould the existing business models of all automotive multi-national companieswhich continue to invest emphatically in the countrys economy, its workforce, and its overall future growth. Big win for consumers.

In contrast,, Right to Repair SA (R2R), a Section 21 not-for-profit organisation that has been advocating for freedom of repair choice for vehicle owners, has welcomed the publication of the draft guidelines, adding that it is a positive move for the industry and a big win for consumers. R2R chair Gunther Schmitz said that it is encouraging to see such a strong focus on increased consumer choice, fair competition, and competitive pricingand that the increased transparency and freedom of choice for consumers will help grow small business. The unbundling of maintenance and service plans from the purchase price of the vehicle at the point of sale is another win for the consumer.

Schmitz said that at point of sale, dealers and financiers must now provide the consumer with details of all inclusions and exclusions in their service and maintenance plans, adding that the draft guidelines point out that this will allow consumers to exercise choice regarding whether to purchase the maintenance or service plan and make servicing a more affordable option for South Africans, while allowing for more players to provide such value-added services for consumers whose vehicles are in-warranty. It is good for the industry and good for consumers, who can now make informed financial choices. Access to technical information Schmitz noted that it is encouraging that the commission acknowledged that access to technical information remains a prerequisite for effective competition in the automotive aftermarket. The commission is removing that obstacle by directing OEMs to share key technical information with independent service providers for both in-warranty and out-of-warranty motor vehicles. The commission said that the guidelines are directed at addressing constraints to competition in the automotive aftermarket industry. The specific objectives of the guidelines are to:

Promote principles and remedies that lower barriers to entry and ensure that a greater number of firms have an opportunity to undertake service and maintenance work, mechanical repairs and motor vehicle repairs within the period covered by the vehicles warranty

Increase consumer choice and facilitate competition and competitive pricing in the markets for new vehicles, spare parts and value-added products

Increase transparency and facilitate consumer choice in relation to the service, maintenance, mechanical and motor-body repairs of vehicles.

Widen the pool of approved service providers who can undertake in-warranty service and maintenance work, mechanical repairs, and motor-body repairs Ensure that independent service providers can undertake in-warranty service and maintenance work and in-warranty motor-body repairs

Allow for greater consumer choice and product competition in the retail of service plans and/ or maintenance plans and Ensure the fair allocation of motor-body repairs among approved service providers based on their competitive merits such as service, quality, and price.

EU regulations stipulate that manufacturers have to honour warranties irrespective of where the vehicle is serviced, provided that the manufacturer service stipulations are adhered to. Could something similar be on the cards for SA? Discuss the type of market failure that is currently prevelant in the South African automotive aftermarket citing from the extract to support your answer. 1.1 (10 marks) With the aid of diagrams, use monopoly theory to discuss the social costs in the automotive aftermarket in South Africa, before the competition commissions guidelines are enforced