The SA Competition Commission has announced that several vehicle manufacturers and importers will have to pay fines totalling almost R32 million, but the authority also said it had no case against any car companies for charging excessive prices.
The SA Competition Commission has announced that several vehicle manufacturers and importers will have to pay fines totalling almost R32 million, but the authority also said it had no case against any car companies for charging excessive prices.
In terms of agreements signed with the competition commission, General Motors SA (GMSA), Nissan SA, DaimlerChrysler SA (DCSA), Citroën SA, Volkswagen SA (VWSA) and its Gauteng dealers and Subaru dealers have agreed not to impose minimum resale prices or maximum discounts on dealers, and to allow dealers to sell vehicles at whatever prices they choose; not to be party to or support agreements between dealers on prices; to set up programmes to ensure that employees and dealers are informed about their obligations under competition law and the agreements with the commission… and to pay administrative penalties… Last year, Toyota SA agreed to pay a R12-million fine and agree to “discontinue minimum resale price maintenance”.
GM incurred the heaviest of the administrative penalties – R12 million, followed by DCSA (R8 million), Nissan (R6 million), Volkswagen and its Gauteng dealers (R5 million), Subaru dealers (R500 000) and Citroën (R150 000). The penalties were determined according to a set of criteria, including the nature, duration and gravity of the transgression, a report said on Thursday.
The agreements still have to be ratified by the Competition Tribunal, but accepting settlement agreements, the companies do not admit guilt, but rather avoid further investigation and possible prosecution by SA’s highest competition authority. The commission has also found evidence of anticompetitive behaviour by BMW, but said it was still negotiating with the Rosslyn-based company.
Much of the commission’s findings in its investigations related to an unhealthy level of control exercised by manufacturers and/or importers over dealerships, and acting commissioner Shan Ramburuth said that franchises would now no longer “have the excuse that they’re bound to maximum discount”.
In addition, the contravening manufacturers, importers and dealers agreed to establish a mechanism for dealers and consumers to report contraventions of the Competition Act and to review franchise agreements with dealers to ensure compliance.
Does that mean consumers can look forward to lower car prices? No. The Competition Commission said it had no case against any car companies for charging excessive prices. Its 18-month-long investigation into excessive pricing showed that cars in South Africa cost about 14 per cent more than in Europe, but a legal case could not be brought against any of the companies, because none of them were “dominant” players as defined by competition law.
The Commission said earlier this year that government’s Motor Industry Development Programme (MIDP) may be one of the factors responsible for South Africa’s high car prices. On Wednesday, Ramburuth said the commission would participate in the review of the programme to ensure that consumers were not disadvantaged due to the MIDP.
Reaction to Competition Commission findings:
Econometrix economist Tony Twine said the administrative penalties would have “absolutely no effect” on industry behaviour.
The National Automotive Dealers’ Association welcomed the commission’s requirement that car makers that had entered into settlement agreements had to review dealer franchise agreements. Dealers widely regarded these as being highly restrictive.
Denise van Huyssteen, a GMSA spokesperson, said the Port Elizabeth-based company had chosen to reach an agreement with the commission to bring the investigation to an end and to avoid lengthy, costly and time-consuming proceedings. The agreement did not constitute an admission of liability, she said.
DaimlerChrysler SA’s Annelise van der Laan said the company accepted that the Competition Act had been tested for the first time “and we have already made the necessary changes to ensure that there is no compromise on meeting the requirements of the act”.
VWSA’s Bill Stephens said that at no stage had VWSA issued a vehicle discounting policy to its retail franchise network. But a limited number of dealers in one geographic region had tried “to regulate the retail price among themselves in relation to one model range”.
VWSA and its regional dealer council had agreed to pay the administrative penalty without any admission of liability.
Richard Carter, a BMW SA spokesperson, said earlier this week: “Our dealer body is involved in discussions with the commission in regard to a settlement. BMW SA is not involved in discussion with the commission at all.”
Subaru South Africa said it welcomed the competition commission’s investigation, adding that its latest findings were in keeping with the original finding that Subaru dealers were not guilty of dealing in an anti-competitive manner.
The commission levied a penalty against the Subaru Dealer Council on the basis of its meetings in 2003 regarding discounting policy. Subaru, the importer, is not a member of the dealer council.
Managing director Teresita van Gaalen said: “The focus of this inquiry has been on the high prices of vehicles in South Africa. I encourage the Commission to consult with the reviewers of the Motor Industry Development Programmes (MIDP) with a view to seeking sustainable relieve for vehicle importers and ultimately for the consumer, by addressing import duty which is above 30 percent, Ad Valorem tax, VAT and personal tax paid to the government through the supply chain, which are major determinants of pricing.”
“The fine imposed on the independent Subaru dealers is also unfortunate. They are all independent entrepreneurs who make their own decisions, particularly with regard to ensuring their businesses offer good value and good service, as a prerequisite to staying viable,” van Gaalen said. “The dealers at no stage admitted liability, and settled with the Commission without any admission of liability. The settlement was concluded purely in order to avoid ongoing and extremely costly and time-consuming legal proceedings.”
