18 December 2020

For some time, KIA has led the Australian market for new car warranty ‘generosity’. Its 7-year/unlimited kilometre warranty pressured leading makes such as Toyota and Hyundai to increase their warranty length from 3 years/100,00 km to 5 and 7 years to compete.

Under the KIA warranty there is no need to have service performed by an authorised KIA dealer.

Mitsubishi Motors Australia Limited (MMA) has sought to trump KIA by offering a 10-year/ 200,000 km vehicle warranty on all new Mitsubishi vehicles sold in Australia, conditionally on the vehicle being serviced by authorised MMA dealers or service centres.

Alternatively, MMA’s standard five-year warranty will still apply to those vehicles and does not require buyers to have services performed by an authorised MMA service provider or dealer.

MMA imports and distributes Mitsubishi-manufactured vehicles in Australia, via a franchised dealer network that sells the vehicles and offers servicing and repairs. MMA also licenses other standalone service centres to repair and service Mitsubishi vehicles.

The ACCC has confirmed that despite the “Exclusive Dealing” ban in the Competition and Consumer Act, it does not currently object to MMA’s ‘exclusive dealing’ notification relating to its 10 year warranty.

Exclusive dealing can breach the Competition and Consumer Act if it is has or is likely to have the purpose or effect of substantially reducing competition in the relevant market. In theory, MMA is offering its 10 year warranty on terms that could breach this ban.

If an exclusive dealing notification is lodged with the ACCC, protection for the relevant conduct starts automatically.

The ACCC can revoke protection at any time, where it is satisfied that the notified conduct:

• has the purpose or likely effect of substantially lessening competition; and
• in all the circumstances, it will not result in a likely public benefit to outweigh the likely public detriment.

How did the ACCC justify its decision?

“The ACCC carefully considered…a large number of submissions from independent mechanics, aftermarket parts suppliers, members of the public and associations.”

“While a number of consumers will no doubt value a longer warranty, we recognise…that the requirement to use Mitsubishi dealers and service centres may have an impact on independent mechanics’ ability to provide competition.”

“The ACCC has no basis at present to conclude that the notified conduct has the purpose, effect or likely effect of substantially lessening competition.”

“If, as this warranty arrangement is implemented, the evidence shows that it is materially harming competition, and we consider at that point that the public benefit does not outweigh the public detriment, we are able to move to revoke the notification.”

Implications-

• This is a significant shift to the principle that a new vehicle owner can have services performed by any independent qualified garage without affecting the manufacturer’s warranty.
• MMA has no doubt calculated that the commercial benefit of directing service revenue to its authorised agents and dealers will outweigh the potential cost of the extended warranty!