RIYADH — There are six indicators of monopolistic practices in the sectors of selling cars, after-sales services, and automobile spare parts in the Kingdom, according to a recent study, carried out by the General Authority for Competition
The report showed that exclusive distribution agreements concluded between Original Equipment Manufacturers (OEMs) and local distributors have contributed to creating barriers for the entry of new players due to abuse of dominance or prevention of competition from reaching the market.
The authority pointed out that the distributors own several competing brands, which create the possibility of increasing market power in retail prices or car fleet sales prices to achieve a higher market power for the distributor.
According to the authority, the third reason is tampering with fleet bids may have a negative impact on competition conditions, because most fleet sales lack transparency when a large number of sales are agreed upon before the official launch of the tender process.
The authority acknowledged that there are indications that the dominant position may be abused by OEMs or distributors by voiding the warranty of cars when they are repaired at independent repair shops, where after-sales services generate higher profit margins than car sales, which makes OEMs or distributors an incentive to link maintenance services to customers with their approved centers only during the warranty period.
The report indicated that the fifth reason is represented in restricting the supply of spare parts to competitors of approved distributors with the original equipment manufacturers, or supplying them at high prices, in addition to withholding information on repair, which represents an abuse of the dominant position and influence on competition conditions in the markets.
The report showed the existence of some regulations that create barriers for competition in the market, such as containing procedures that add certain restrictions to the supply of auto parts bearing the manufacturer’s mark, so that suppliers may only import from original equipment manufacturers or their distributors only, which reduces the number of potential suppliers. Also, suppliers may not combine the activity of supplying original spare parts with the supply of alternative spare parts.
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