BREAKING NEWS – Dealer Bulletin – 17 February 2016

Good news from the ACCC at last

Our persistence and advocacy is paying off.

The ACCC today brought down its draft determination to deny authorisation of cartel behaviour sought by 16 insurance companies seeking to impose a 20% cap on commissions paid to new car dealers for the sale of five categories of so-called add- on insurance products.

ASIC argued in Report 492 that consumers are being sold expensive products that often provide little or no benefit to them and that consumers are unable to make optimal, well-informed choices when buying add-on insurance products from dealers.

However, ACCC Chairman Rod Sims said a cap on commissions does not address these issues and will not remove the opportunity and incentive for insurers and dealerships to sell consumers expensive, poor value products.

He said ASIC’s proposal did not help to create an environment where consumers are in control and can benefit from effective competition and was unlikely to address these market failures or improve the industry for consumers.

The ACCC considers the proposed cap is unlikely to result in any significant public benefit and will likely be reflected in a wealth transfer from motor vehicle dealerships to insurers rather than a reduction in prices for consumers.

“While insurers would benefit from a cap at the expense of car dealers, this conduct is likely to lessen competition between insurers, creating greater opportunities for explicit or tacit collusion and greater shared knowledge between insurers of competitors’ costs.

“The ACCC is also concerned that these arrangements, if implemented, could significantly delay the development of more effective solutions to the problems that ASIC has identified,” Mr. Sims said.

The ACCC will accept submissions by 3 March 2017 in relation to this draft determination before making its final decision.

“We are delighted with the outcome of this determination. It accords strongly with the direction of our own submissions on this subject and represents the accomplishment of many hours of hard work and the strong representations we have put before ACCC on this vital issue.” AADA CEO David Blackhall said.

AADA looks forward to continuing to work with ACCC and ASIC to ensure that any re-design of these products delivers real consumer benefits and that any changes contemplated are not exclusively to the detriment of our members.

For more information, contact:

David Blackhall CEO
E: dblackhall@aada.asn.au
M: +61 413 007 833

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