South Africa: Motor vehicle finance institutions referred to the Competition Tribunal for alleged collusion

By Gina Lodolo

On 3 February 2022, the South African Competition Commission (“SACC”), released a press statement confirming that the SACC has made a referral to the Competition Tribunal (“Tribunal”) to prosecute FirstRand Bank Limited (“First Rand”), Wesbank, and Toyota Financial Services South Africa Limited (“TFS”) (jointly “Motor Vehicle Finance Institutions”) for allegations of a violation of Section 4(1)(b)(ii) of the Competition Act 89 of 1998, as amended (“Act”).

In this regard, Section 4(1)(b)(ii) of the Act provides that :

an agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if-(b) it involves any of the following restrictive horizontal practices: (ii) dividing markets by allocating customers, suppliers, territories, or specific types of goods or services”

Generally, once the SACC has initiated a complaint and found that a prohibited practice has  been established, it must refer the complaint to the  Competition Tribunal. Wesbank (as a division of FirstRand) and TFS allegedly prevented competition by entering into a shareholders agreement containing non-compete clauses. The SACC press statement provides that the Motor Vehicle Finance Institutions allocated markets because they are ‘suppose to compete’, which means that they are firms in a horizontal relationship.  In particular, the shareholders agreement included clauses ‘that prohibit[ed] WesBank from offering vehicle finance to customers seeking to purchase vehicles at authorised Toyota dealerships’. Further, Wesbank was also prohibited from financing specific vehicles, being ‘the “new” TOYOTA, LEXUS and HINO vehicles and any “used” vehicles sold through any authorised Toyota dealership, except McCarthy Group’.

Should the Competition Tribunal indeed find that the Motor Vehicle Finance Institutions violated the Act, Section 59 of the Act provides that the Competition Tribunal can impose an administrative penalty of up to 10% of the firm’s annual turnover for engaging in a prohibited practice. Further, if the same firms are found to repeat the conduct, an administrative penalty for a repeat offence can be up to 25% of the firm’s annual turnover.  

Primerio Director Michael-James Currie notes that cartel conduct in South Africa constitutes a criminal offence and respondents found liable are also potentially at risk of follow-on civil damages.

To view the full press statement click here

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