The competition commission - entrusted to determine why our cars cost the earth - has opted to batter six manufacturers with the monetary equivalent of a limp noodle. That is, the offending six have been fined R32m for what amounts to price collusion. Consumers will be enraged.
In the face of high car prices and solid industry profits, they had expected stiffer punishment and some relief on the sales floor. In the event - faced with the complexity of the incestuous relationship between carmakers, importers, and dealers - the commission settled for an "out of court" deal after no fewer than 20 months of intensive investigations.
Notably, the commission found no evidence of over-pricing by manufacturers and importers. Though SA cars are indeed more expensive (given exchange rate differentials) than in some other markets, there is no real proof of profiteering. Why then the perception that this is in fact the case?
In principle, little can be done about the wholesale prices at which manufacturers and importers sell to dealers. The problem is a lack of discount flexibility from dealer to buyer as a result of conditions set by car manufacturers. These are the three "sins" to which the industry pleaded guilty: motor companies impose minimum resale prices on dealers; there is dealer collusion; and franchise deals further inhibit or entirely stifle competition.
The industry's admissions of guilt will not have much impact on retail prices, though in the spirit of the findings there should be some additional flexibility. The structural flaw is that to curb price rises, motor companies have been reducing dealer margins - meaning less flexibility in offering customer discounts. And manufacturers and importers can cancel franchises at short notice, so dealers need contracts that give them greater security of tenure. There is evidence that some car manufacturers punish sellers who drop below the required "minimum" discount.
Another trend that could undermine any new rules on discounting is that some motor companies allocate regions to a single dealer group, rather than having, say, a dozen individual ones. For example DaimlerChrysler has divvied up the main cities between Imperial, McCarthy, its own Sandown Motors, and a few others. This has the (officially unintended) result of standardising regional prices.
There is also a trend for some companies to own their own dealerships rather than rely on franchise-holders. Retail prices are thus controlled from the manufacturer's head office. If regional and control structures are entrenched further they will certainly contravene the spirit of the commission's findings.
To put the spotlight on the industry the commission has, rightly or wrongly, decided to go for a light regulatory touch. The industry is undoubtedly breathing a sigh of relief. But already there are signs that motor companies are set to abide by the letter rather than the spirit of the deal struck with the commission. The commission must therefore ensure strict compliance and intervene swiftly and decisively should there be any transgressions.
