The Competition Commission will oppose the Retail Motor Industry’s request that the Department of Trade and Industry exempt the motor industry from certain prohibitions of the Competition Act.
The Competition Commission will oppose the Retail Motor Industry’s request that the Department of Trade and Industry exempt the motor industry from certain prohibitions of the Competition Act.
Geoff Parr, the commission’s chief economist, on Tuesday told that it would be inappropriate for the body to intervene in the process of normal contract negotiations such as those entered in by manufacturers and franchised dealer.
“It is not for the competition authorities to question the tactics of firms at every step”, Parr said. “It is difficult to see how an intervention by the competition authorities could prevent a manufacturer from exercising complete control over the supply chain for its products, one way or another”.
Technically, the exemption might be granted if alleged anti-competitive agreements or practices contributed to the economic stability of any industry designated by the minister.
But Parr added that it was not clear how the economic stability of the motor industry was being threatened or would be threatened.
CARtoday.com reported last month that the RMI had called on government to offer vehicle dealers protection from possible abuse by manufacturers.
The organisation asked Trade and Industry Minister Alec Erwin to declare the motor industry a “designate” under the Competition Act because it believed “vehicle suppliers were dictating the power relationship between themselves and the dealers”.
The RMI said the move was to provide dealers with the same protection seen in the European Union (EU). The EU, according to the RMI, “now provides dealers with a bigger say on issues such as trading areas, brand exclusivity and services”.
In a memo to the minister, the RMI said motor dealers “were mostly small or medium sized businesses” and that the franchise agreements with manufacturers “reflected this power imbalance”. The restrictions placed on dealers in the agreements subjected the dealers to “financial hardship” and often led to a greater number of insolvencies, the RMI claimed.
However, Parr said that at distribution level there was no indication that recent changes to the relationships between manufacturers and their dealers (such as the new dealership strategies employed by DaimlerChrysler, BMW and VWSA) would have any negative effect on the industry.
“It was in the interest of each manufacturer to choose the most effective distribution model for its products to compete with other manufacturers and those choices should also benefit dealers,” quoted Parr as saying.
