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ACCC taking a closer look at the new car industry

Monday 14 August 2017

The Australian Competition and Consumer Commission (ACCC) has just issued a report entitled New Car Retailing Industry—a market study by the ACCC.

“The ACCC is deeply concerned about the level of non-compliance with the Australian Consumer Law (ACL) in the new car industry. We will continue to take action to address failures by car manufacturers and retailers to provide the remedies to which consumers are entitled,” ACCC Chairman Rod Sims said.

This report comes on the tail of the recent enforceable undertaking (EU) accepted by the competition relator from GM Holden requiring that company to meet its consumer guarantee requirements under the ACL.

“The ACCC’s market study into the new car retailing industry is in response to a number of concerns raised with the ACCC and other fair trading agencies about how new car retail markets are operating,” Sim explained. “The issues raised include those complaints received by the ACCC and other ACL agencies about defects with vehicles, misrepresentations to consumers, and issues in post-sale service markets.”
Under the EU, GM Holden is expected to:

  1. Clarify its internal compliance training program so that multiple minor failures of a vehicle may constitute a major failure;
  2. For new vehicles, commit to offering consumers a refund or replacement without the need for them to demonstrate a major failure, if a defect prevents a vehicle from being driveable within 60 days of the date of purchase;
  3. Engage an external reviewer to consider complaints since 1 January 2016, and provide a remedy to consumers where appropriate;
  4. Amend its dealer policies and procedures to ensure they comply with the ACL in relation to consumer guarantees; and
  5. Provide consumers with the ability to obtain information about any issues with their vehicle by contacting Holden and giving their vehicle identification number.  

New Car Retailing Industry
According the report, 1.1 million new cars were sold by more than 1500 car dealers, operating out of more than 3500 retail outlets. Car dealer revenues for 2016-2017 are estimated around $64 billion.

While the law offers protections for consumers, however, the report noted ‘material deficiencies’ in the way consumers can enforce their rights and how they have been represented by the car industry.

Three key issues identified by the report include:

  • car manufacturers’ complaints-handling systems and policies are preventing consumers from obtaining the remedies to which they are entitled under the Australian Consumer Law (ACL);
  • a mandatory scheme should be introduced for car manufacturers to share technical information with independent repairers; and
  • buyers of new cars need more accurate information about new cars’ fuel consumption and emissions.

The ACCC has committed to enforcing the ACL and to using enforcement action where necessary. The regulator will also work with other enforcers in publishing materials to ensure consumers are aware of their rights.

According to the report, the process of selling a new car involves:

  • activities that occur prior to the sale, such as the advertising of new cars and representations made about car performance or emissions;
  • activities that occur at the time of the sale, including the sale of finance and insurance products, representations on standard manufacturer warranties, and the sale of additional warranties; and
  • post-sale activities, closely linked to the new car sale, such as regular maintenance and the cost of spare parts for the new car.
Given the inherent risk of regulation impeding the innovative development of the industry, however, what might impact be of more regulation or regulatory amendments? The question is at least being considered. According to the report:

“While voluntary commitments have been offered by car manufacturers to provide independent repairers with the same technical information to repair and service new cars they provide to their dealers, problems with the breadth, depth and timeliness of the technical information offered appear to be enduring.”

Further to this, a round-table discussion will be held in September, involving key members in the industry. The report from this discussion is anticipated to be released later this year.