Collusive Conduct in Automotive Industry

A media release by the Competition Commission on 13 October states that it has launched investigations into “…price fixing, market division and collusive tendering in the market for the manufacture and supply of automotive components to original equipment manufacturers (OEMs). The investigation arises from information received by the Commission that automotive component manufacturers colluded when bidding for tenders to supply automotive components to the OEMs.”

The media release contains the names of ten prominent automotive components manufacturers.

The information in the possession of the Commission suggests that from 2000 to date, 82 automotive component manufacturers have colluded in respect of 121 automotive components.

“The Commission’s investigation into this pervasive collusive conduct joins similar investigations launched in other jurisdictions internationally. The Commission will prioritise the investigation of cases that involve automotive components that are in vehicles assembled in and supplied to the South African market”, said the Competition Commissioner, Tembinkosi Bonakele.

Alexander Forbes Insurance MD, Gari Dombo, welcomed the investigation.

“As an industry we are battling, and one of the reasons we are battling is parts prices, so I would welcome this intervention. The biggest challenge is it is quite a fragmented industry, and a lot of the players in the panel beating industry are family businesses. We have, to a large extent, been held to ransom by some parts suppliers,” he said.

Business Day quotes Dombo as saying that insurers were considering the use of alternative parts, where feasible. Between 65% and 70% of motor repair costs relate to parts, many of which are imported, according to PwC’s insurance industry analysis released in March.

Dombo also pointed out that uninsured motorists are an even bigger problem for the industry, with about 60% of the 12-million vehicles on the road in SA not insured.

When uninsured motorists are involved in accidents with those who are insured, insurers cannot recover the costs of repairs to or replacement of vehicles, which pushes up the cost of premiums. This is why the short-term insurance industry is calling for the introduction of blanket third-party insurance for all motorists, according to the Business Day article.

In May 2014, SAIA establish a task team comprising nine strategic and technical representatives from the motor insurance members to investigate the possible impact of the introduction of blanket third-party insurance. The study will look at other countries which have introduced compulsory insurance, and will be presented to the Treasury and the Financial Services Board.

In the wake of the collusion scandal surrounding the stadiums built for the Soccer World Cup in 2010, there will be plenty of media attention on this investigation as well, particularly in view of the fact that it directly touches the pocket of the man in the street.

Or should that read “in the car”?

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