Car industry on notice

ACCC Chairman, Rod Sims, talks about his concern with  about the level of non-compliance with the Australian Consumer Law in the new car industry

Introduction: Car industry on notice

Ross Greenwood:  Motorists listen up, there are two key things happening right now at the Australian Competition and Consumer Commission, the ACCC, that actually relate to you.

One is in regards to when you buy your car, and the other is in regards when you buy your petrol. Because what’s happened is that the ACCC has indicated that it’s taken a preliminary view that if BP were to buy all of Woolworth’s petrol stations, its business, for $1.78 billion, that well compensation could be suppressed as a result of that. Because ultimately you’d have less competition throughout the whole petrol market.

The second one is regarding car dealerships when you buy cars. What’s the ACCC here is reporting in a draft report is that, it believes that there is systemic problems in regards to abuses. When people come to warranties, when it comes to a range of other products that they might buy as add ons. When I buy a new car, in fact we’ve spoken with Rod Sims, the chairman of the ACCC, a number of times about that on this program. He’s on the line right now. Many thanks for your time Rod.

Interview: Rod Sims, Chairman, ACCC

Rod Sims: Thank you, Ross.

Ross Greenwood:  Can I start with the BP-Woolworths deal. This is a preliminary view as you say, but of course you’re there trying to come to a final conclusion as to whether this deal should go through or not. What is influencing your thinking right now?

Rod Sims: Well, it’s two different issues Ross. One is that they could well be a reduction in competition in a range of local layers, particularly, regional areas where you don’t have a lot of competition. You could find many areas where the two dominant players in a local market are they BP and Woolworths. If they come together you lose that competitive dynamic, but then separately the broader issue is all the metropolitan, the big city markets, which have these price cycles, where the price shoots up in a few hours by 20 cents and then goes down over the next 20 or 30 days.

We judge that BP and Woolworths play different roles in that. Woolworths interestingly usually the price is below BP. If BP is not going to take over Woolworths, we have to have a good look at whether or not that will lead to consumers paying more for petrol at the pump.

Ross Greenwood:  That being the case quite clearly, even if you take it a very big influence, say for example, Woolworths is effectively taken out and is absorbed into BP. Is there not in your mind enough of the independents and the other large oil companies or petrol stations around the place to really provide the type of competition that might be required? In other words, if you end up with say at no BP and Shell which is the Coles affiliated oil company, is there not enough competition between those plus the independents as well?

Rod Sims: Look, that’s an extremely good question, Ross. That’s exactly the one we’re trying to wrestle through. Different players in the market play different roles. Coles and BP tend to price quite high. United, 7-Eleven, Woolworths, tend to price at lower levels. If BP would take over Woolworth, how would that changed pricing that would inevitably come with BP ownership of Woolworth that change pricing behavior. How would that affect others? How would they respond? Would we get less competitive petrol prices?

As the site very much depends on the different roles that I play in the price cycle. Woolworths does have a bigger role in leading prices down or quickly following others that reduce prices. How will that affect the market if we lose them? Will others step in? Of course, Woolworths is 24% of the petrol retailing market, Ross, by volume, it’s a big plus.

Ross Greenwood:  I was going to say it’s such interesting work that you do because you’re trying to work this out and trying to figure it out. Then ultimately, we’re dealing with something that every consumer, broadly every consumer in Australia is influenced by. They are the vast majority of people in their cars right now listening to these, and now Rod have a view about this. You’ve got obviously people whose prices are affected by the price of fuel around Australia. It is something that is basic to our everyday lives.

Rod Sims: Absolutely Ross, it’s basic to people’s cost of living just as I’d like to think. I work on electricity and NBN and so many other issues. This is a very core issue for us, we’ve got a big team working on it. We’re trying to come up with the right answer Ross.

Ross Greenwood:  Okay, then let’s take it to the dealerships because you and I have spoken before about your concerns about what is taking place inside the dealerships. Some extent it guarantees. We’ve talked about Rim and wheel insurance in the past. There’s been a number of issues that you have addressed in regards to this draft report you have come up with today. Where have you landed in regards to thinking about how those dealerships could be changed in the future?

Rod Sims: Well, it’s much the manufacturers Ross, and the influence they have on the dealerships. We are concerned that the manufacturers through the dealers deal with their customers basically through the warranty you get when you buy the vehicle, rather than the consumer guarantees that you have under the Competition and Consumer Act. Every time you bring the car back, for example, you might be offered a repair, but there could be something fundamentally wrong with the vehicle which means you’re entitled to a replacement or a refund.

Once the warranty is over, companies might remedy a problem or not at their discretion but it could well be if you get a problem with your transmission, three years and three months after you buy the car, it could well be that it’s actually a fault that should be remedied by the manufacturer and therefore the dealer without cost to you. Not because of your warranty but because of your Goods Trading and Consumer Guarantee right. That’s one of what I’d call a couple of big issues Ross.

Ross Greenwood:  I’ll tell you there’s no doubt about that, and it’s one that we will pursue in the future as well. Rod Sims, is the chairman of the Australian Competition and Consumer Commission doing that work both on petrol but also on those car dealerships. As always Rod we appreciate your time.

Rod Sims: Thank you, Ross.

 

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