The automobile sector: A bumpy ride averted

The government reversed its decision on the new criteria it previously set for the import of reconditioned vehicles. Now, cars aged up to four years can again be imported, while for trucks, the age limit is six years. However, the government maintains its decision not to grant any new license for used car dealers. It is a decision that had caused a serious outcry among importers and dealers of second-hand vehicles. On Friday 24 June, the Cabinet agreed to the decision of the Minister of Industry and Commerce to revise the conditions surrounding the importation and sale of used vehicles. The main aim was to protect consumers in the wake of several complaints received about damaged cars being refurbished and sold. The ministry initially decided that the age limit of used vehicles to be imported would be three years. Importers are also required to produce additional certificates and information from the country of origin on vehicle imported, such as road worthiness certificate, certificate of identity, vehicle identification, complete history of vehicle and deregistration certificate. Furthermore, the government decided not to grant any new license to importers for the next two years because there are too many of importers at the moment. According to official figures, the country has about 91 importers of second-hand vehicles. Finally, the bank guarantee which must be provided by car dealers was also increased from Rs 2 million to Rs 5 million.

Figures At 31 May 2016, there were 495,040 vehicles on our roads. The figure includes 116,317 two wheelers. From January to May this year, 7,017 new vehicles and 3,739 second hand imported vehicles were registered in Mauritius. The figure for second hand imported vehicles includes 3,510 cars, 111 vans and 57 trucks.

As expected, used car dealers immediately reacted to the new regulations imposed on them. The ‘Imported Vehicles Dealers in Association (DIVA) said it was not happy with some of the measures introduced. According to its president, Zaid Ameer, the measures spell the death of the sector given that between 75% and 80% of imported used cars are aged over 3 years. While they agree that consumer protection is a must, the dealers argue the ministry was not properly advised of the socioeconomic consequences on some of the measures, especially their negative impact on small entrepreneurs and on families with low income. The association met the Minister of Industry and Commerce, Ashit Gungah, last Wednesday to present its grief and submitted its counter proposals in writing the next day. The association also met the press to explain their discontent. Finally, the government backtracked on some measures, much to the satisfaction of the importers. Malpractices For the ministry, the new conditions were necessary because there were too many fraudulent acts and malpractices detected in this sector. Importers on their side argue that there have been about 100 cases of malpractices on over 7,000 sales, a proportion that does not justify the ministry’s decision to tighten the screws and penalise the majority of law abiding dealers because of a few unscrupulous players. [[{"type":"media","view_mode":"media_large","fid":"21476","attributes":{"class":"media-image size-full wp-image-35755 alignleft","typeof":"foaf:Image","style":"","width":"400","height":"224","alt":"flooded-cars"}}]]The age of vehicles In Japan, motorists normally change their car after three years. So it is next to impossible to find cars less than three years to import. For trucks and buses, Japanese companies have their fleets renewed after five years minimum. Thus, if the age criterion was maintained, there would be a shortage of used vehicles in Mauritius. Regarding buses, many individual operators are now contemplating the import of used low floor buses from Japan. Therefore, the new age criteria would be detrimental to them. For these operators, it is much better to use a used Japanese bus instead of a new Chinese one. Regarding vans and trucks, it is rather the small and medium enterprises, farmers, taxi drivers and truckers who are the main customers of the used vehicle market. A review of the allowable age limit would have severely penalised those entrepreneurs who would not be able to afford new vehicles without incurring heavy debts. Consumer protection It is in the spirit of enhanced consumer protection that the ministry decided to review the conditions in the used car market. To protect consumers, the Ministry of Industry and Commerce wants every imported used vehicle to have a complete history. Documents must mention if the vehicle has ever been involved in an accident. Authorities believe vehicles that were affected in floods in Japan or Europe have landed in Mauritius and sold to unsuspecting customers. [[{"type":"media","view_mode":"media_large","fid":"21477","attributes":{"class":"media-image aligncenter size-full wp-image-35756","typeof":"foaf:Image","style":"","width":"500","height":"295","alt":"vehicle-inspection"}}]]

What the CCM says

Does the restrictive policy contravene the Competition Act? A spokesperson of the Competition Commission of Mauritius (CCM), explains that “the CCM is mandated to investigate into restrictive business practices, by enterprises which are defined as legal entities which are engaged in commercial activities for gain or reward (as per the definition of the Competition Act 2007). The Competition Act 2007 covers three main types of restrictive business practices: (i) Abuse of Monopoly situations, (ii) Merger reviews and (iii) Collusive agreements between enterprises, which are also referred to as ‘cartels’. Section 30 (a) of the Competition Act empowers the Executive Director to “keep the operation of markets in Mauritius and the conditions of competition in those markets under constant review”. On the premises of Section 30(a) and pursuant to Section 19 of the Act, the Commission can “give advice to the Government on any action taken or proposed to be taken by the State or any public body that may adversely affect competition in the supply of goods and services”. With regard to the present issue regarding car dealers the CCM says that policy decisions by the State “would not fall under the definition of restrictive business practices.  As such, the Executive Director cannot investigate into such matter.  However, Executive Directors can pursuant to Section 30(a) of the Competition Act look into it if he believes that the conditions of competition in the market are likely to be affected.” In such circumstances, the Executive Director will follow the due process of initiating an enquiry and consequently assessing the matter. The preliminary steps of conducting an enquiry must therefore be undertaken before the CCM can conclude on any competition issues which could arise.   If it is found that there are competition concerns from the decision of the Government in this sector, the Commission could issue an advice to the Government, with respect to the matter at hand.