Competition watchdog seeks justice for panel beaters

NDAMA NAKASHOLE

The competition watchdog has put in spotlight Santam Namibia, Alexander Forbes Insurance, Hollard Insurance , Old Mutual Short-Term Insurance, Outsurance Namibia, Phoenix Assurance Namibia and Momentum Short-Term Insurance (previously Quanta Insurance) for having had engaged in illegal anti-competitive practices, specifically price-fixing.

Price fixing is a practice whereby rival companies come to an illicit agreement not to sell goods or services below a certain price.

The insurance companies’ sin is that they have set up maximum mark-up rates that panel beaters should charge for repairs to insured vehicles.

Mark-up rates refer to the margins that panel beaters add on top of the costs of vehicle parts.

In a media statement yesterday, the NaCC said that their investigation has further found that on top of setting maximum mark-ups on parts, these insurance companies further impose maximum labour rates to be charged by panel beaters for the rendering of their services. Labour rates refer to the costs per hour charged by panel beaters for the repair of vehicles.

“The conduct by the insurance companies (otherwise competitors) is designed to subvert competition and is characterised globally as cartel conduct being amongst the most egregious forms of collusion between competitors,” the competition watchdog further said.

ROUGH ZONE

These insurance companies unjustly influence the price rather than allowing competition to determine the prevailing market conditions, the NaCC said.

These insurance companies further benefit from the costs imposed to the detriment of reduced panel beater competition and limited consumer choice and potentially, prevent consumers from having access to better pricing, the commission added.

“By setting similar mark-ups and rates, the insurance companies have further reduced competition amongst themselves as these rates and mark-ups influence the premiums they charge their consumers (the policyholders),” the NaCC further claims

Ultimately, insurance companies benefit from potentially unfair excess profits that would ordinarily not prevail in the absence of their anti-competitive prohibited conduct, says the competition watchdog.

“The conduct of these insurance companies has further adverse effects on the competitiveness of the downstream market, being the panel beater market. Under normal competitive conditions, insurance companies would consider the lowest substantial quotation from a group of panel beaters, panel beaters would as a result seek to compete against each other to ensure that they secure the work through employing innovative strategies that would reduce cost and improve efficiency,” it says.

This innovation, according to NaCC, has been curtailed as a consequence of the behaviour by the insurance companies.

D-DAY

The commission highlighted that its findings are preliminary and that no final decision has been made. Because of that, all affected parties, including the insurance companies, have been duly notified of the commission’s findings and an oral conference is scheduled for 29th August 2018.

“At this conference these undertakings are expected to make representations to the commission on its preliminary investigative findings before a final determination is made regarding whether or not the commission will refer the matter to the High Court for remedial action as prescribed in the Competition Act.”

The setting of mark ups and labour rates, which are in material respects identical between the various insurance companies, gives rise to a finding that there exists a concerted practice between the insurance companies mentioned above, the commission further said.

Market Watch’s efforts to get comment from the insurance companies proved futile by the time of going to print.