Can your car dealership hold you to ransom with vehicle repairs?

The Competition Commission is investigating whether car dealerships have the right to cancel a vehicle’s warranty if repairs are carried out by an unauthorised or non-partner mechanic, or if your insurance company has the right to refuse a claim.

But, does it really matter if your vehicle was repaired by a mechanic of your choice, as long as they are an accredited and qualified mechanic and the repair was carried out without an issue?

Sipho Ngwema, HOD of communications at the Competition Commission, notes that the Commission has received numerous complaints since 2011 about Original Equipment Manufacturers (OEMs – the car and parts manufacturers) regarding possible restrictive and exclusionary practices within the automotive industry.

“We have investigations that we have suspended pending this advocacy process which we hope will result in a mutual agreement with the industry and other related stakeholders. So we are engaging the sector for now but if we fail to make any meaningful and constructive progress, then we shall activate the investigations,” says Ngwema.

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The investigation

The crux of the investigation is whether or not vehicle manufacturers and insurance companies have the right to cancel a vehicle’s warranty or not pay a claim if the vehicle owner chooses their own mechanic or repair centre and uses parts that are not of the same brand or approved by the manufacturer.

Currently, “all maintenance and repair work on vehicles under warranty must be done by an authorised and qualified technician employed or approved by the OEM. All parts used during the maintenance and repair of vehicles under warranty must either be manufactured by the OEM or by the OEM-approved manufacturers.”

In a document from the Competition Commission, it noted: “It appears from the advocacy work undertaken thus far and from the cases reviewed that parts sold by approved manufacturers or vehicle manufacturers are generally more expensive than parts manufactured by independent manufacturers. Moreover, the Commission also found that part manufacturers are restricted from manufacturing parts similar to parts manufactured by OEMs, even if the part is not branded with the OEM’s logo.”

According to Ngwema, the Competition Commission is currently engaged in a series of meetings with the vehicle sector, and will conduct a workshop relating to this issue in March. “We hope to make significant progress by then. On the side of the Commission, the concerns we have raised have already been addressed in other parts of the world like Europe, so it shouldn’t take long to come have a mutually acceptable solutions.”

If, following the investigation, it is decided that changes to current regulations and protocols regarding car repairs are required, Ngwema points out that the implementation of these changes will depend on the pace of the discussions. However, it is hoped that any changes would be implemented “fairly soon.”

“We don’t anticipate any unnecessary delaying tactics,” adds Ngwema. “We are encouraged by the response that we have received from the sector and the public. We have no doubt that we should be able to make progress and the interests of the consumer will be uppermost as we engage on this matter. In the end, the outcome must lead to better prices for the motorist, freedom of choice and access to more professional and quality service.”

Anti-competitive conduct

The Competition Commission has identified the following anti-competitive concerns:

• The exclusion or foreclosure on independent panel beaters in the market for repairing insured vehicles and/or vehicles that are still under warranty.
• The exclusion or foreclosure of independent service centres from servicing insured vehicles or vehicles that are still under warranty.
• The exclusion or foreclosure of parts distributors from distributing OEM-branded parts to panel beaters.

According to the Commission, these exclusionary actions lead to higher prices charged by OEM-part manufacturers to customers and panel beaters, compared to the prices charged by service providers of non-OEM branded parts.

The Commission stated: “[We have] found that overall the arrangements between OWMs and their approved network of service providers during the period of warranty and/or insurance in relation to insurance companies, raise the cost of services for consumers during this period along with restricting competition between authorised aftermarket service providers and independent service providers by raising barriers to entry for small and independent services providers who are unable to expand in the market.”