The Competition Commission claims it has found evidence of widespread price fixing and anti-competitive practices in the South African motor industry, and on Tuesday announced that seven manufacturers would be referred to a tribunal for adjudication.

The Competition Commission claims it has found evidence of widespread price fixing and anti-competitive practices in the South African motor industry, and on Tuesday announced that seven manufacturers would be referred to a tribunal for adjudication.

If found guilty, BMW SA, Citroën SA, General Motors SA (GMSA), Nissan SA, Volkswagen SA (VWSA), Subaru SA and DaimlerChrysler SA (DCSA) could face an administrative penalty of up to 10 per cent of their annual turnover, including their exports, the SABC reported on Tuesday night.

The commission, which had been conducting an investigation of the motor industry since mid 2004, said evidence had revealed that DCSA, BMW, VWSA, GMSA, Nissan and their dealers had contravened Section 5(1) of the Competition Act by entering into franchise and dealer agreements which contained a number of restrictions that impacted negatively on competition in their operative markets.

"We are still to finalise the decision in respect of Ford Motor Company of Southern Africa,” said commission spokesperson Menzi Simelani. "The restrictions that were placed on dealers relate to ... the selling of new vehicles to unauthorised agents, the selling of new vehicles to exporters as well as active out-of-area marketing and selling of new vehicles."

‘Imposition of minimum resale prices’

In alleged contravention of Section 5(2) of the Competition Act, the commission found that VWSA, Nissan, BMW, Citroën, DCSA, GMSA and Subaru had either imposed minimum resale prices on their dealers, or agreed on minimum resale prices with their dealers, a Sapa report said.

"On the collusion part," the commission was quoted as saying, "there is evidence indicating that the franchised dealers of BMW, VWSA, DCSA, GMSA and Subaru have contravened section 4(1)(b) of the Act, which provides that an agreement or concerted practice between competing firms is prohibited if it involves, inter alia, directly or indirectly fixing price and/or trading condition; or dividing market by allocating customers, suppliers, territories, or specific types of goods or services."

‘Some manufacturers cleared, others not prosecuted

"We are also pleased to announce that there are a number of manufacturers/dealers that ... have not engaged in the alleged collusion and or resale price maintenance.

"However, there are some that were found to have engaged in anti-competitive practices but their market shares were found to be relatively too small to have a substantial effect on competition.

"In view of the above, we will be preparing notices of non-referral in relation to allegations against Honda SA, Renault SA, Hyundai SA, Volvo SA and Peugeot SA," the commission said.

Though it had cited Naamsa as a respondent in the initiation of its investigation, the commission said it had found no evidence suggesting anti-competitive practices that contravened the Act.

The commission also reportedly said that if the alleged contraventions were corrected, consumers could negotiate discounts and would have an incentive to shop around for better deals.

Vehicle dealers believe that they, and their customers, may be able to benefit from the competition commission’s findings into the anti-competitive practices.

As part of the commission’s investigations, it was alleged that relationships between vehicle manufacturers and their dealers were particularly strained. In the past, it is alleged, dealers have complained about the amount of control exercised by the manufacturers. They believe that Tuesday’s findings could see a relaxation of the manufacturers’ control over the dealers’ activities.

President of the National Automobile Dealers Association (Nada) Ray Nethercott said his organisation had brought the restrictive franchise agreements to the attention of key industry players for years.

Nethercott said the Competition Commission’s investigation could be the first step towards a healthier relationship between car manufacturers and dealers. This would allow for more flexibility in car prices, which would benefit customers.

However, speaking to CARtoday.com on Wednesday, economist Tony Twine of Econometrix said while the findings have rocked the industry, nothing has yet been proven on a judicial level and the competition tribunal will determine the eventual outcome.

Regarding the consumer’s position, he said: “There is nothing in this, so far, for the consumer. It is unlikely that prices will be reduced, though it may introduce more flexibility for consumers when purchasing.

“Ironically, the Tribunal’s ruling may make life more difficult for consumers. If it finds too harshly, it could cause certain elements within the sector to go out of business, which will be to the detriment of consumers.”

Simelani said the investigation initially probed price-fixing by manufacturers, but became broader and came to include investigations into anti-competitive practices in the industry as a whole, including manufacturers, dealers, importers and distributors.

An investigation into the use of market dominance by manufacturers and importers to charge excessive prices for products was still under way, he added.