In 2024, the South African Competition Commission updated the Automotive Aftermarket Guidelines for Competition, commonly referred to as R2R. These guidelines aim to enhance competition and consumer choice within the South African automotive aftermarket sector.
Object and Purpose of the Guidelines:
The primary objective of the R2R guidelines is to promote competition in the automotive aftermarket industry by:
- Lowering barriers to entry for small businesses and historically disadvantaged individuals (HDIs).
- Increasing consumer choice and facilitating competitive pricing for motor vehicles, spare parts, and value-added products.
- Ensuring transparency in the sale of maintenance and service plans.
These objectives align with the broader goals of the Competition Act, No. 89 of 1998, which seeks to promote and maintain competition in South Africa to achieve efficiency, consumer welfare, employment promotion, and equitable economic participation.
Key Definitions and Concepts:
Understanding the following terms is crucial:
- Original Equipment Manufacturer (OEM): Companies that manufacture vehicles and their components.
- Independent Service Provider (ISP): Service providers not affiliated with OEMs, offering maintenance and repair services.
- In-Warranty Services: Services performed during the period when a vehicle's warranty is valid.
- Value-Added Products: Products such as maintenance and service plans offered alongside vehicle purchases.
- Historically Disadvantaged Individual (HDI): This term refers to individuals who, before the enactment of the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993), were disadvantaged by unfair discrimination based on race.
Key Revisions to the 2021 Guidelines:
The 2024 revisions introduced several significant changes to the 2021 guidelines:
- Spare Parts Definition: The definition now includes "accessories," treating them in the same way as spare parts.
- Unbundling of Plans: Clause 11 of the Guidelines has been extended to include demo and second-hand vehicles, requiring OEMs and dealerships to separate the sale of all vehicles from value-added products.
- Appointment of Motor Body Repairers: Insurers and OEMs can now choose repairers on a case-by-case basis but must promote HDI participation and not limit decisions to prevailing market conditions or low work volumes.
- Transfer and Cancellation of Service Plans: OEMs and third parties must notify clients when unable to transfer plans to replacement vehicles.
- Handling of Commercially Sensitive Information: There is a new requirement to train staff on handling competitively sensitive information.
- Access to Technical Information: Dealers are now required to include part numbers in all quotations and invoices.
Scope and Application of the Guidelines:
The R2R guidelines apply to the South African automotive aftermarket, encompassing:
- Maintenance and repair services.
- Sale of spare parts and accessories.
- Administration of motor vehicle insurance.
The Guidelines are directed at promoting economic access, inclusion, and broader ownership for small businesses and HDIs, aiming to widen the pool of approved dealers and motor-body repairers.
Link to the Competition Act:
The R2R guidelines are prepared in terms of Section 79(1) of the Competition Act, No. 89 of 1998, which empowers the Competition Commission to issue guidelines indicating its approach on matters within its jurisdiction. The Competition Act aims to promote and maintain competition in South Africa, ensuring efficiency, consumer welfare, and equitable economic participation.
Bundling and Unbundling:
Bundling refers to the practice of selling vehicles together with value-added products like maintenance and service plans. The R2R guidelines now require unbundling these plans at the point of sale, allowing consumers to make informed choices and promoting competition among providers. OEMs and approved dealers must disclose prices of vehicles and value-added products separately, and consumers have the right to purchase these products from any licensed provider.
Access to Technical Data:
Access to technical information is vital for ISPs to perform maintenance and repairs effectively. The guidelines mandate that OEMs provide ISPs with technical data, including:
- Vehicle identification details.
- Service books and electronic records.
- Technical manuals and component information.
- Diagnostic codes and wiring diagrams.
- Operational software and part numbers.
Effect on Warranties:
The guidelines emphasise that consumers have the right to choose their service provider during the warranty period without affecting warranty validity, provided that the service does not cause damage to the vehicle. ISPs must record all work done in the vehicle's service books. Additionally, OEMs must transfer maintenance and service plans to replacement vehicles when applicable, and inform consumers of their rights regarding plan cancellations or refunds when transfers are not possible.
Conclusion
The Revised Automotive Aftermarket Guidelines for Competition of 2024 represent a significant step towards fostering a more competitive and inclusive automotive aftermarket industry in South Africa. By promoting transparency, protecting consumer rights, and encouraging the participation of small businesses and HDIs, these guidelines aim to create a more dynamic and consumer-friendly market.
Written by Kerri Stewart, Attorney, SchoemanLaw
