Car distributors offer to remove 'designated centres' clause for maintenance not covered by warranty

The Competition Commission commenced a consultation on a proposal to accept legally-binding commitments offered by seven car distributors, which were alleged to have imposed warranty restrictions on car owners that may harm competition.

The commission’s investigation revealed that the seven distributors have imposed warranty restrictions requiring maintenance or repair services to be carried out at authorized repair centers, regardless of whether the item is covered by the warranty.

Customers who did not follow this would be at risk of their warranties becoming invalid.

The commission considered that these restrictions may deter car owners from using independent car repair workshops during the warranty period. This would be likely to limit the ability of independent car repair workshops to compete with authorized repair centers, and may also reduce car owners’ choice of service and ultimately lead to higher prices for maintenance and repair services.

The seven car distributors, namely Cartel Motors Limited, Dah Chong Hong Holdings Limited, Inchcape International Holdings Limited, Kam Lung Motor Group Limited, Motor Image (HK) Limited, Sime Darby Motor Group (HK) Limited, and Vang Iek Holdings Limited, were alleged to have imposed restrictive warranty terms and conditions on car owners.

In response to the investigation, the seven distributors have offered commitments not to enforce the existing warranty restrictions and not to include them in new warranties issued to passenger car owners. They also offered to make corresponding amendments to their contracts and to communicate the changes to customers within 90 days after the commitments entered into force.

The proposed commitments cover 17 passenger car brands: Audi, BMW, Citroen, Ford, Honda, Jaguar, KIA, Land Rover, Lexus, Mazda, MINI, Mitsubishi, Nissan, Subaru, Suzuki, Toyota and Volkswagen.

The commission takes the view that the proposed commitments are appropriate to address its concerns and therefore proposes to accept them.

If the commitments are accepted following the consultation, passenger car owners will have greater freedom of choice to the providers of repair and maintenance services for their vehicles.

Interested parties are invited to submit representations on the proposed commitments, including the commission’s proposed acceptance of these commitments, no later than 6pm on August 15, 2022.