Motor industry faces scrutiny over ‘anti-competitive practices'

Times

a day ago

Joey Donnelly, manager at Crofton Motors, a crash repair specialist in Kimmage in Dublin, believes independent garage owners have a communication problem.
Motorists can choose who repairs their cars, what price they pay for their annual service and, to a certain extent, what parts they put in their cars, he said.
'Consumers always have a choice and a warranty has to be honoured as long as certain criteria are met,' said Donnelly, whose independent family-run business has been in operation for more than 60 years. 'Crofton Motors can buy pretty much every part of any car and fix them.'
The Competition and Consumer Protection Commission (CCPC) and Donnelly seem be on the same page. In a rare move last week, the authority made public an eight-page letter it had sent to the motoring industry warning companies that they had to comply with competition law.
After investigating and contacting three unnamed car companies about alleged abuses of competition law, the commission decided to look across its helpline and complaints mailbox to see if the activity was widespread. It found more than two dozen complaints going back over two years.
The complaints included motorists being warned by authorised dealers and repairers that their vehicle warranty would be rendered void if they had their cars repaired at independent garages, or if they used non-original or non-manufacturer supplied spare parts.
In other cases, independent garages said they were unable to access diagnostic tools or onboard diagnostic data for certain cars, meaning they could not repair those cars.
Tara Kelly, head of competition, anti-trust and foreign investment at Mason Hayes & Curran, a law firm, reckons the commission's letter is 'very significant'.
'It is a very clear signal from the CCPC that it has serious concerns about the effectiveness of competition in the motor vehicle aftermarket,' she said.
'Having said that, as with most things context is key and it cannot be automatically assumed that any restriction on an independent garage or operator gives rise to competition concerns. There may very well be very legitimate reasons why a distributor may refuse access to vehicle data or refuse a motor warranty claim.'
Early in her career, Kelly worked on various international cartel cases in the autoparts industry.
The potential fines for those found in breach of competition law are headline-grabbing — businesses can face fines of up to €50 million or 20 per cent of their annual worldwide turnover.
Yet the reaction from the motor industry was muted. The Society of the Irish Motor Industry (Simi), which represents repairers, authorised dealers and distributors, did not issue a response. It declined to talk to The Sunday Times for this article, due to what it said could be a conflict of interest.
Many dealers shrugged their shoulders. One owner of a large Dublin dealership, who asked not to be named, said: 'It's not a dealership issue, it's a manufacturer issue. They set the warranties and we abide by whatever warranties they put in place.'
He added that as long as cars were serviced by competent people and the parts were approved by manufacturers, the warranties remained intact.
As confirmed by the CCPC, the main focus of the preliminary investigation is on the manufacturers and main distributors of cars in Ireland that have set up authorised networks for dealerships.
Under a European law known as the Motor Vehicle Block Exemption Regulation (MVBER), the industry is allowed to operate a franchised dealer network and control who sells its products. The regulation effectively provides a safe harbour for vertical agreements within the motor industry.
But the regulation expressly protects consumer rights on service and repairs.
In some cases manufacturers own the main distributors. For example, the automaker Kia owns Kia Ireland. The Kuwaiti-based Al Babtain family own the Irish operations of Nissan and Renault, as well as the retail group Windsor Motors. There is no suggestion that any of these companies were the subject of the CCPC's letter, nor that they are under investigation or in any way under suspicion.
Nissan Ireland did not return a request for comment. A spokesman for Kia Ireland said: 'Our seven-year warranty does not mandate works to be completed in a Kia dealership. Instead, work needs to be completed by qualified technicians using parts of a similar standard. All terms are available in our vehicle warranty books.'
A number of other car distributors did not return requests for comment. Volkswagen Group Ireland, owned by the German manufacturer, said it 'respects its obligations under European and Irish legislation'. There is no suggestion that the VW division was the subject of the CCPC's letter or that it is under investigation or in any way under suspicion.
The commission's letter has put a spotlight on the motoring industry, which employs nearly 50,000 people across Ireland and continues to evolve with the growth in electric cars and safety features on cars.
The aftermarket in the EU is worth €240 billion annually, on spare parts and labour alone.
In Ireland last year new car registrations topped 121,000, with the exchequer pulling in €949 million in new vehicle registration taxes. The average price paid by consumers for petrol or diesel vehicles was €35,000, while an average price of €49,000 was paid for electric vehicles.
Separately, while revenues may be high in the trade, margins are tight. Joe Duffy Motors, the country's biggest car retailer, for example, had a turnover of nearly €584 million in 2023, translating to a profit before tax of €38 million. That is a decent return, based on economies of scale, but most operators are much less profitable.
Western Motors, which has locations in Galway and Louth, had revenues of just under €83 million in 2023 but a pre-tax profit of €2.4 million.
Service income for many dealers can represent a small part of turnover, although it often accounts for a much larger chunk of profits. For example, of Bright Motor Group's €177 million-plus revenues in 2023, about €13 million came from parts and workshop sales.
Industry sources say that the sale of new cars is the least profitable part of a car dealer's business and most rely on trade-ins, spare parts and servicing to make money, to help make a return on large investment in building high-spec showrooms.
Dealers don't expect the CCPC investigation to be detrimental to their business.
Paraic Mooney, managing director of EP Mooney's, a Dublin-based Hyundai dealer and garage, said: 'People in my position know their responsibilities and take them seriously and deal with them appropriately.'
Sales at the company, an authorised Hyundai agent that employs 85 people, topped €82 million in 2023, with a profit of just over €728,000.
Mooney is of the opinion that consumers themselves increasingly choose dealers to service and repair their cars. With the advent of electric cars and technology advances in safety systems across all engines, there is a rising complexity under the bonnet.
'It is in people's best interest, if they spend €50,000 on a car, to bring it to the manufacturer's agent. They are not dealing with a washing machine,' Mooney said.
'I started as Fred in the Shed in Crumlin. I've loads of respect for these guys but these days they often don't have the capacity or the investment in the equipment that we have to maintain cars.
'There's huge investment on behalf of people like [EP Mooney's] in technology to maintain cars and environmental control systems. A lot of people in [smaller garages] are quite capable of doing an oil change, filter change, but are not capable of updating software.'
Perhaps unsurprisingly, independent garage owners disagree with Mooney's comments. One independent garage owner in Cork, who asked not to be named, said: 'My team is fully trained.' He has access to diagnostic tools sourced from Snap-on, an S&P 500 tools supplier, and Autel, a Chinese tech intelligence company. The garage owner paid €7,000 for one tool and must pay €1,500 for software updates annually. He estimates he can diagnose 95 per cent of issues.
He argued that independent garages were mostly run by very qualified professionals who got their start in dealerships. He gave the example of a price of €350 that his company recently charged for one service compared with €700 that a nearby dealer had quoted the client.
The garage owner said he saw anti-competitive practices in the industry 'all the time', with the increase in the sale of electric cars exacerbating the problem.
'We give out leaflets to our customers explaining how the block exemption works,' he said. 'Many say they have been told by the salespeople of their cars that their warranty will be void if they don't service their cars with the dealer.'
Mooney said he had no fear that he would lose business as a result of the CCPC's letter. The company's aftersales division was incredibly busy, he added.
The motor industry more generally has been reporting a chronic shortage of experienced technicians for several years now.
A large number of garages and dealers appear in the employment permit statistics on the Department of Enterprise, Trade and Employment website, which lists companies that have employed people from outside the European economic area. These include Joe Duffy Motors, Windsor Motors and Kearys of Cork.
In its accounts, Fitzpatrick Garages, a dealer based in Kildare, Carlow and Offaly, which had revenues of €95 million in the year to the end of March 2024, said it had increased its workshop capacity by developing its apprenticeship programme and recruiting technicians from outside the EU.
In 2023, Western Motors increased the capacity of its service facilities by 40 per cent to cater for growing demand.
For now, the CCPC investigation may be no more than an administrative headache for all those who received the letter. They must submit documents, including copies of any agreements and warranties, by August 6.
Sylvia Gotzen, chief executive of Figiefa, the international federation of automotive aftermarket distributors, said it appreciated 'the vigilance of the CCPC in reminding vehicle manufacturers and their authorised dealers and network of consumers' right to choose who provides repair and maintenance services for their vehicles'.
'We would like to emphasise that the MVBER underpins the independent operator's right to compete, but it is only effective if properly enforced,' Gotzen added. The MVBER regulations are under review, as current legislation is due to expire in 2028.
The solicitor Tara Kelly said that 'if the CCPC concerns are legitimate, the investigation is good news in the sense that it should translate into more choice for consumers and a broader customer base for independent dealers'.
At the commission's urging, independent garages have been getting in touch over the past week to report what they see as negative experiences of unfair restrictions. Some have come with receipts.
The investigation has no set timeline, according to Craig Whelan, head of antitrust at the CCPC. The next steps will depend on what information it receives from the industry, as well as the public.
If the evidence shows a consistent trend of anti-competitive behaviour from a specific company, the commission will prioritise that business for follow-up action. Whelan said he was expecting a good level of co-operation from the industry.
'We are encouraging people to come forward with detailed information. The sooner we get the information, the sooner we can progress to the next stage of our investigations,' he said.
Joe Duffy MotorsGavin Hydes, a Scot, runs the biggest car retailer in Ireland. Nivag, the holding company, has a stake in Vertu Motors, a quoted UK car dealer. Turnover in 2023: €583.6 million Profit before tax: €38 million Employees: 602
Nissan Ireland (owner of Windsor Motors)The Kuwaiti-based Al Babtain family own Nissan Ireland, which includes Windsor Motors. In 2023, they took over the Irish operations for Renault and Dacia.Turnover in 2023: €471 million Loss before tax: €4.6 millionEmployees: 445
MSL Motor GroupAlongside Motor Distributors, MSL is owned by the O'Flaherty family. It sells Mercedes, Mazda, Skoda, BYD, Smart and Xpeng cars. Turnover in 2023: €415 million Profit before tax: €24.9 million Employees: 340
Kearys Motor GroupOwned by Brendan, Sinead and Sarah Keary, Kearys has operations in Cork, Dublin and Limerick.Turnover in 2023: €320 millionProfit before tax: €6.3 millionEmployees: 381
OHM Group (Owner of Spirit Motor Group)Based in Dublin and Wicklow, the company is owned by Gabriel Hogan and the families of the late Declan McCourt and Conal O'Brien. Turnover in 2023: €301.4 millionProfit before tax: €7.1 million Employees: 272
Bright Motor GroupSet up in 1982, Bright is owned by Matthew Smyth, Ciaran O'Riordan and Henry Flanagan. It bought the retail arm of Gowan Group in 2023.Turnover in 2023: €177.5 millionProfit before tax: €3.6 millionEmployees: 184
Johnson & PerrottIn operation since 1810, the Cork-based company is now majority-owned by the Whitaker family. Turnover in 2023: €170 millionProfit before tax: €9.9 millionEmployees: 216
JA Boland & SonsOwned by the Boland family, it operates locations in Dublin, Wexford and Carlow.Turnover in 2023: €166 millionProfit before tax: €4.7 millionEmployees: 198
Auto BolandOwned by another set of Bolands, the Waterford-based Auto Boland is a dealer for Volvo, Honda and Land Rover among other brands. Turnover in 2023: €148 millionProfit before tax: €6 millionEmployees: 178