Slap on the wrist for tracking firms
The Competition Tribunal has lashed out at three vehicle tracking firms that together control over 90% of the market, for breaking its rules.
The tribunal says Netstar, Matrix Vehicle Tracking (now MixX Telematics) and Tracker Network, and industry association Vehicle Security Association of SA (VESA) contravened the Competition Act by setting standards that created barriers to entry.
Tracetec lodged a complaint in 2005, alleging that the three companies and Vesa had conspired to keep other players out of the market. Tracetec argued that it had not been able to become VESA accredited, and was not able to grow its business as a result.
The tribunal this week found that competitors were prevented from entering or expanding in the market, and consumers were denied the benefit of lower prices, greater choice and technological development.
No penalty has been imposed, although the ruling paves the way for a civil case to be brought against the respondents.
Chairman Norman Manoim wrote in the reasons document that the case is historical, as it dates back to 2004, and it was brought under a section of the Competition Act that does not allow for a fine.
Its findings were based on the fact that tracking companies needed to meet stringent VESA standards in order to be certified. VESA required that firms had to have been in operation for at least one year, have installed at least 3 000 units, and have made 100 recoveries.
The standards were developed by VESA's Stolen Vehicle Recovery (SVR) committee, which used to consist of Netstar, Matrix Vehicle Tracking and Tracker, before all three resigned from the committee in 2004.
Without VESA's stamp of approval, the insurance industry would not accept the tracking unit as a proper theft deterrent. This meant consumers were forced to install only VESA-compliant units.
“The tribunal concluded, based on evidence, that it was not possible for a firm to expand in the SVR market at the time, without having its product approved by VESA in the SVR category.”
In its decision, the tribunal explains that all major short-term insurance companies, represented through the South African Insurance Industry Association, would “not approve a customer installing a system that did not have VESA approval”.