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Warning to car dealerships: Consumer Tribunal taking a harder line on unethical conduct

Warning to car dealerships: Consumer Tribunal taking a harder line on unethical conduct

New and second-hand cars must be fit for purpose – and dealerships cannot shirk their responsibility under the Consumer Protection Act.

Has the ​​National Consumer Tribunal acted more decisively against car dealers in recent times? A consumer attorney believes it has, after the tribunal ruled against numerous car dealers over the past 14 months for failure to comply with the Consumer Protection Act (CPA). 

Consumer attorney Trudie Broekmann told Daily Maverick that while trawling through 31 key cases on the tribunal’s website, she weeded out those dealing with the CPA and found 21 cases relating to vehicles – seven of which were declared to have been prescribed. In six cases, the tribunal imposed stiff fines on the offending supplier. Four of those were second-hand car dealers.

Citing two recent cases in which consumers bought second-hand vehicles that malfunctioned soon after taking ownership, Broekmann took aim at industry associations like the Retail Motor Industry (RMI), Independent Dealers’ Association and unnamed blue-chip dealers for having no understanding of consumer law, saying her firm has come across several operators who reassure their members they have no liability, when “that is highly inaccurate and dangerous advice”.

Two matters stood out

In the first matter, Mathevula v Willow Crest Motors, the applicant alleged the respondent had failed to comply with his request to repair his vehicle in accordance with section 56(2)(a) of the CPA.

He had bought a used 2012 BMW 328i, with 122,000km on the clock, from the respondent and took delivery of the vehicle on 28 August 2017.  

On 28 December 2017, the car broke down outside the Kruger National Park and had to be towed to safety. The following day, he reported the incident to an employee of the respondent, who indicated that he would escalate the matter to the sales manager in early January 2018.  

Two weeks later, the car was towed to BMW Modern Autohaus in Polokwane, which assessed it and concluded that the engine had no compression when trying to start it. There was damage to the engine, which could be replaced at a cost of R226,022.

A second analysis of the car, arranged by the respondent with a favourable outcome, concluded there was damage related to normal wear and tear, which was not the dealership’s fault. 

Taken to the Motor Industry Ombudsman of South Africa (“Miosa”), Miosa recommended that the respondent repair the vehicle, which it failed to do. 

The National Consumer Commission (NCC) issued a notice of non-referral, indicating that the alleged facts, if true, do not constitute grounds for a remedy under the CPA, so the matter was taken to the tribunal, which determined that the vehicle has still not been repaired and has experienced considerable deterioration. 

It found the respondent had failed in its statutory duty in terms of section 56(2)(a) to repair the applicant’s vehicle, which caused financial prejudice. It was therefore found to have engaged in prohibited conduct. 

The second matter, the NCC v ACS Pre-Owned, a dealership in Benoni, stems from a complaint received by the commission from a consumer, Mzukisi Zangwa, who alleged that the dealership sold him a faulty car. He purchased a second-hand 2017 Mercedes Benz E200 on or about 13 July 2020, which had an odometer reading of 41,400km.

The vehicle manifested symptoms of various defects the next day; first displaying a fault message relating to the headlights’ intelligence system. The complainant also noticed that the vehicle’s front number plate holder, moulding and rear name badge were missing, and immediately raised these defects with the supplier.

The consumer took the car to Star Motors, an approved workshop in East London, on 17 July 2020, who advised the complainant to approach an approved panel beater since there appeared signs of accident repairs on the vehicle.

The panel beater’s report indicated there was significant damage that would cost R110,957 to repair. In response to the report, the respondent at first requested a quotation to repair the vehicle, but finally altogether denied responsibility for repairing the vehicle.

A Miosa recommendation that the supplier should repair the vehicle went unheeded, and the office failed to take any further action, which is why the matter was brought before the NCC. 

The tribunal ruled that by failing to respect the consumer’s rights to return the vehicle at the supplier’s expense and to repair the defects, the respondent had not only exerted prohibited conduct, but also infringed on the complainant’s right to fair consumer practices and his right to safe and good quality goods. 

It also took aim at the respondent’s disregard of Miosa, saying the respondent’s continuous conduct was alarming as the Miosa finding gave direction to the parties, which the respondent chose to ignore.

The dealership was ordered to pay the complainant R589,900 – the purchase price of the vehicle – within 15 business days.

The CPA

Consumers are entitled to receive goods or services that are of good quality, in good working order and free of any defects. Section 55(2) of the CPA states that consumers have the right to receive goods that are reasonably suitable for their intended purposes. They have a right to goods that are of good quality and in good working order. Goods must be free of any defects and be usable and durable for a reasonable time – even second-hand goods.

Section 56 says that within six months after taking delivery of goods, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense, if the goods fail to satisfy the requirements and standards contemplated in section 55. 

The supplier must then – at the direction of the consumer – either repair or replace the failed, unsafe or defective goods or refund the consumer the price paid for the goods.

If consumers opt for a repair, and the repair fails for any reason within three months, the supplier must replace the goods or refund the consumer the price paid for the goods.

Car dealerships are not exempt from the CPA. 

Broekmann said in terms of section 56 of the CPA, a car purchased from a motor vehicle dealer that is defective and returned to the dealer within six months of the purchase date, must be repaired or replaced by the dealer or the dealer must refund the consumer the full purchase price.

Nothing in the consumer’s contract with the dealership or the vehicle finance provider can take away this right.

The tribunal will order the dealer to pay back the consumer if there is a substantial defect, something which affects the safety or drivability of the car, or makes a substantial difference to the value of the car, she said, adding that it will not assist consumers to demand their money back from the dealer in the case of a cosmetic or minor defect. 

These include rattles or scraping sounds, minor leaks, non-aligned boot lids, non-matching rims, minor faulty electronics, or where flaws were specifically pointed out to the consumer before purchase.

Consumers can claim repair costs for minor or cosmetic defects that were not pointed out to them before purchase.

“We see from the rulings that the tribunal will order the dealership to refund the consumer where there is clear evidence of a defective gearbox or engine trouble which causes the car to break down, a blown gasket, a serious oil leak, or poor prior accident repairs, combined with a variety of smaller faults which would cost over R100,000 to repair,” Broekmann added.

“The commission is notoriously inactive and by the time they submit the case to the National Consumer Tribunal, it has often already expired [prescribed]. This was the case in seven of the recent vehicle cases before the tribunal, which is heartbreaking.

“If a consumer refers the matter to the consumer commission and they drag their feet, the right procedure is to request a notice of non-referral from the commission and then immediately refer the claim to the tribunal,” said Broekmann.

Asked for comment about the National Automobile Dealer’s Association (Nada) understanding of the CPA, a spokesperson said as one of the drafters of the SA Automotive Industry Code of Conduct, Nada is a proud associate of the Retail Motor Industry Organisation (RMI), which takes “great pride” in promoting ethical business practices within the automotive industry.

“All Nada members are committed to upholding the highest standards of professionalism and integrity.

 “Nada firmly believes in supporting the right of recourse for consumers as outlined in the Automotive Industry Code of Conduct. We recognise the importance of providing a fair and transparent process for addressing any grievances or disputes that may arise between consumers and dealers.”

The spokesperson said unscrupulous elements within the industry undermine the trust and confidence of consumers, which is why Nada “fully supports the law, the code, and the legal process designed to protect all parties involved”.

Nada said it remains committed to working collaboratively with industry stakeholders, regulatory bodies and consumer protection agencies to foster a culture of accountability and ethical conduct within the automotive sector. DM

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