Will the right to repair guidelines affect the second-hand car market?

August 1st, 2023
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The right to repair guidelines came into effect on 1 July 2021 and the legal basis for these guidelines is s 79(1) of the Competition Act 89 of 1998, as amended.

Background

The Competition Commission over the past decade received complaints regarding allegations of anti-competitive conduct in the aftermarket value chain (Guidelines for Competition in the South African Automotive Aftermarkets, December 2020 (the guidelines)). The allegations include exclusionary agreements and/or arrangements between an original equipment manufacturer (OEM) and an approved motor-body repairer. This has resulted in the exclusion of independent service providers (ISPs) for the servicing and repairs of vehicles that are still within their original warranty period.

With the new guidelines, consumers now have the right to use independent service providers. Your warranty with the motor manufacturers will not be affected should you choose to use an ISP. This directly deals with issues of high barriers to entry that exclude small and medium enterprises (SMEs) and historically disadvantaged individuals (HDIs) from becoming Approved Motor-body Repairers and Approved Dealers.

At the heart of these guidelines lies the right for consumers to have a choice in how their motor vehicles are serviced. However, this choice is still limited should you use an ISP. Another argument is whether these guidelines really do have a real effect if they only apply to motor vehicles that are in-warranty. Before we engage with these arguments, let us look at the advantages.

The first advantage is that you now have a choice to service your motor vehicle with an ISP and your warranty will not be affected should you opt for an ISP as opposed to servicing your car with an OEM. This gives the consumer an opportunity to use an ISP that offers the best price. The second advantage is that car dealerships are now obligated to separate the sale price of the vehicle and the service or maintenance plan costs. Consumers now have the option of purchasing motor vehicles without buying the plans. Prior to the guidelines, these two costs were bundled together and presented as a package deal. Lastly, consumers have the option of using parts that are not manufactured by the OEMs during the in-warranty period. Parts that are normally referred to as ‘aftermarket/generic parts’.

From a consumer’s perspective, this new legal framework is very progressive. However, it also poses many issues. Firstly, dealers do have the discretion and are well within their rights to refuse to repair a faulty component that was replaced by a third party. The warranty will not be completely voided; however, the dealer can refuse to cover the affected component. Therefore, it is important to use an ISP that is accredited and has insurance.

There have been a lot of advancements to car technology and most cars that are being launched are high in technology and OEMs invest a great deal into equipping their technicians with the necessary skills to repair these models. You may put yourself at a disadvantage if you approach an ISP that is not skilled in repairing your vehicle. The technical information pertaining to new models will be accessible to ISPs. However, there is no legal obligation for OEMs to train technicians from ISPs. It is very important that you approach a Motor Industry Workshop Association accredited service centre for guidance.

The biggest contention with these new guidelines is whether the second-hand car market will not be negatively affected by them. Is there any guarantee that the second hand car buyer is purchasing a quality used vehicle? If consumers are given so much discretion like using non-OEM parts and using ISPs that may or may not be accredited, what effect would this have on a second-hand car buyer? Will car dealers volunteer this information to second hand car buyers? People approach OEMs under the assumption that the product they are buying is authentic. It becomes a problem when a consumer purchases a second-hand car from an OEM only to find out that it was not serviced by the OEM, and it also has aftermarket/generic parts. The solution would obviously be to declare this to the consumer and allow them to choose whether they would like to proceed with the purchase. This, however, could potentially pose a problem to OEMs should consumers elect to reject motor vehicles that were not serviced by the OEMs. This will in turn affect the trade-in market because if OEMs struggle to sell the traded vehicles, consumers will have limited trade in options. So now we are back to square one, where consumers will lean towards using the OEMs as opposed to ISPs.

There is no doubt that the new guidelines are progressive and will give consumers more options, but I would still recommend that consumers purchase service and maintenance plans and use reputable service providers.

Zikhona Mphongoshe BA (Law) LLB (Wits) is an automotive legal practitioner at Ford Motor Company in Johannesburg. 

This article was first published in De Rebus in 2023 (Aug) DR 7.

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