The competition commission has rejected allegations by the RMI that its approach was inconsistent by launching an investigation into car prices despite approving DCSA’s radical dealership strategy.

The competition commission has rejected allegations by the Retail Motor Industry organisation (RMI) that its approach was inconsistent by launching an investigation into car prices despite approving DaimlerChrysler SA’s radical dealership strategy last year.

Zodwa Ntuli, the commission's compliance division manager, told at the weekend that the reference to the DCSA transaction was irrelevant at this point.

Ntuli said the RMI raised its concerns at the time of that merger, and the competition tribunal's decision was clear on the reasons why the conditions the RMI proposed were not accepted.

She added that no public interest concerns arose from that merger, and the tribunal had stated clearly that it was not its mandate to prohibit a merger or put a condition to address concerns that did not arise from the merger.

"We therefore want to send a strong message that the commission is not here to be used by people to fight their own battles in the industry," Ntuli said. "Our decisions are based on an objective assessment, done in line with what our law prescribes. Our main aim is to eradicate all anticompetitive conduct, irrespective of where it occurs." reported on Friday that the RMI was disappointed that the commission had not taken the organisation's earlier appeals about the imbalance of power in the motor industry seriously.

In May last year, reported on the RMI’s appeal to the then minister of trade and industry, Alec Irwin, 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”.

Osborne claimed this imbalance had allowed manufacturers to impose unfair franchise agreements on dealers and deprived dealers of their commercial independence.

DaimlerChrysler SA’s dealer rationalisation programme, launched two years ago, resulted in one single dealer group operating in Gauteng, Cape Town and Durban. Through Sandown Motors, DCSA now holds direct control of a large portion of its own retail market, eradicating competition between its dealers.

’Market forces will bring about price cuts’

McCarthy Motor Holdings chairman Brand Pretorius says manufacturers prescribe retail list prices to their dealerships, but, although list prices were the same, “the actual transaction prices vary because of the trading mentality of the dealers”.

Pretorius said all franchises handling a particular vehicle franchise had the same gross margin. However, dealers applied discretion in terms of the prices of accessories, service plans and warranties, the basis on which financing and insurance was arranged, and the trade in value for the car.

He said market forces - rather than the commission's investigation - would determine whether car prices came down.

"Market forces are linked to many variables, such as the profitability of manufacturers and importers, inventory levels, the strategies of their parent companies, their export earnings and the viability of their dealer networks," Pretorius said.

Original article from Car