Car manufacturers' annus horribilis - Takata airbags and the ACCC's enforcement focus

Competition and Market Regulation Update

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It is a tumultuous time for Australian car manufacturers. 

The ACCC (the Australian competition, antitrust and consumer law regulator) released its draft study report into the new car retailing industry earlier this month. The draft report:

  • made extensive, critical findings about the Australian Consumer Law (ACL) compliance of car manufacturers' customer complaints handling systems and processes, vehicle log books and service manuals and warranty framework, and foreshadowed further enforcement activity against car manufacturers;
  • raised competition concerns regarding the after sale markets for the repair and servicing of new cars, including about limited access to the technical information and data required for the repair and servicing of new cars by independent repairers and access by independent repairers to OE manufacturer-branded parts and accessories, and foreshadowed the possibility of enforcement activity for refusals to supply OE manufacturer-branded parts and accessories; and
  • raised concerns about consumer information on the fuel consumption and emissions performance of new cars.

The draft report is just one of many recent developments in the sector that give rise to the potential for legal actions (product liability and consumer class actions and other private actions) and regulatory action (ACCC investigations and enforcement) against car manufacturers. Others include:

  • the Takata product recall and related Government / ACCC investigations concerning the timeliness of remediation and impending class action proceedings;
  • the ACCC's enforcement action against Ford in late July 2017 for breaches of the ACL prohibitions against unconscionable conduct, misleading and deceptive conduct and false representations related to its management of customer complaints about Ford vehicles with a transmission fault;
  • the ACCC's acceptance of an undertaking from Holden in early August 2017 to address ACCC concerns about the ACL compliance of Holden's representations to customers and dealers about consumers' rights under the ACL's consumer guarantees and dealers' rights to indemnification from car manufacturers; and
  • ACCC enforcement proceedings launched against Volkswagen (in September 2016) and Audi (in March 2017) for ACL breaches by their diesel emissions claims.

So what should car manufacturers be doing to mitigate and manage the risk of private legal action and ACCC enforcement action?

Car manufacturers require a holistic response strategy to recent developments. We summarise key recent developments affecting the sector and possible response activities below.

Key developments

Response activities

Product recalls

  • Takata airbag recall
  • Government / ACCC investigations concerning timeliness of remediation
  • Impending commencement of class action proceedings
  • Development of integrated, pro-active litigation and regulatory strategy to mitigate and manage risks arising from legal actions, and Government and ACCC regulatory oversight of recall activities.
  • Review of recall processes and recent recall activities for ACL / FCAI Code of Conduct compliance, and/or adequacy for risk mitigation.

Complaints handling, log books and service manuals and warranty framework

  • ACCC enforcement proceedings launched against Ford in late July 2017
  • ACCC acceptance of Holden undertaking in early August 2017
  • Critical findings in ACCC's draft report concerning the ACL compliance of car manufacturers' customer complaints handling systems and processes, vehicle log books and service manuals and warranty framework
  • ACCC's draft report foreshadowed further enforcement activity against car manufacturers
  • Review of customer complaints handling systems and practices, vehicle log books and service manuals and warranty framework for ACL compliance.
  • Where issues identified, development of a strategy to manage the risk of ACCC enforcement action including mitigating enforcement outcomes (e.g. a self-reporting strategy).

Competition in aftermarkets for new car repair / servicing

  • ACCC's draft report raised competition concerns regarding the aftermarkets for the repair and servicing of new cars, including:
    • limited access to technical information and data required for the repair and servicing of new cars by independent repairers
    • access by independent repairers to OE manufacturer-branded parts and accessories
  • ACCC's draft report foreshadowed possibility of enforcement activity for refusals to supply OE manufacturer-branded parts and accessories (in particular security-related parts)
  • Development of a pro-active regulatory strategy to respond to the ACCC's proposal for regulatory intervention to mandate the sharing of technical information with independent retailers on commercially fair and reasonable terms.
  • Development / review of policies relating to independent repairer access to OE manufacturer-branded parts and accessories including in particular security related parts, and consideration to making these publicly available.

Fuel consumption and emission claims

  • ACCC enforcement proceedings launched against Volkswagen (in September 2016) and Audi (in March 2017) for diesel emissions claims
  • ACCC's draft report raised concerns about consumer information on the fuel consumption and emissions performance of new cars.
  • If not already done in response to the global emissions scandal, a review of marketing and advertising internal approval processes and/or fuel consumption and emissions claims in recent marketing and advertising activities.