On Thursday, the Australian Competition and Consumer Commission (ACCC) issued its final determination to deny authorisation to 16 insurance companies to jointly impose a cap of 20 percent on commissions paid to motor vehicle dealers who sell their add-on insurance products.
The ACCC stated that it has denied authorisation to the insurers to impose the joint cap on commissions because the ACCC believed that the joint cap was not likely to change sales incentives for add-on insurance products, improve quality of the add-on insurance products being offered for sale, or improve the information given to consumers about those products. Furthermore, the ACCC stated that the proposed joint cap on commissions would benefit insurers at the expense of car dealers and would create more opportunities for collusion and shared knowledge between insurers.
In addition, the ACCC stated its concern that a joint cap on commissions could, if implemented, significantly delay the development of more effective solutions to the ‘problems’ identified by ASIC in the add-on insurance product market.
The insurers’ application was made in response to an ASIC report in September 2016 which made findings that were critical of the market for add-on insurance products sold through motor vehicle dealers. In that report, ASIC also stated that insurers who failed to address ASIC’s findings will be subject to further regulatory action by ASIC.
In the absence of authorisation by the ACCC of the proposed joint cap on commissions, a collective step taken by insurers to cap sales commissions for dealers would run the risk of contravening the prohibitions against cartel conduct in the Competition and Consumer Act 2010.
It is open to the insurers to seek a review of the ACCC’s determination by the Australian Competition Tribunal (which can affirm, set aside or vary the determination). An application for review must be submitted within 21 days.
To read the ACCC’s full media release click here.
AADA Convening ‘Town Hall Meetings
The Australian Automotive Dealers Association (AADA) has invited dealers to attend a series of special ‘Town Hall’ style meetings to discuss important policy initiatives and other member matters which will form AADA’s 2017 policy agenda.
The meetings will include discussion on flex commissions, add-on insurance, data sharing, private imports, the Australian Consumer Law review and other policy and membership matters.
The town hall meetings will be conducted by AADA Chairman, Terry Keating and AADA CEO, David Blackhall. They will take place from 20 – 24 March 2017 in Melbourne, Adelaide, Perth, Brisbane and Sydney.
The notice and agenda of the meetings can be found here.