The Australian Competition and Consumer Commission’s (ACCC) investigation into capped-price servicing would appear to have the potential to affect a number of car-makers beyond just Kia, CarAdvice has learned.
Each of Australia’s top 10 brands has a form of capped-price servicing, which sets a ceiling for what its dealers can charge customers for a scheduled maintenance visit. These plans cover a given number of years and kilometres.
The point to consider is that, based on a look at the terms and conditions of other capped-price servicing plans, some companies may potentially be open to similar action to Kia, given the ACCC’s rationale.
Several car companies are indeed already reviewing their capped-price plans as we speak.
So, what is the core of the ACCC’s investigation?
As reported, the ACC this week issued a statement about Kia and its capped-price servicing offer, stating that a provision in its terms and conditions that allowed the price of scheduled services to be increased over time was “misleading”, given the scheme supposedly implied the price of a scheduled service was fixed for the entire term.
In other words, Kia’s conditions said it could scale up the price of a capped service, likely by either linking it to the CPI or passing on increased parts of labour costs, at any time after purchase, couched with the fact that a ceiling — albeit a higher one — would remain in place.
This, according the the ACCC, contravened statements on Kia’s website starting in 2012 which, in its words, represented to consumers that its scheduled service prices were capped at a maximum price set upon purchase.
Kia has since amended its terms and conditions to ensure that its service prices were “genuinely capped”; written to affected consumers confirming the applicable capped service prices for their vehicle; and offered to refund any amounts paid by consumers above the capped service prices that applied to their vehicle when it was purchase.
The company has also introduced systems to ensure that consumers are not charged higher prices than the capped service prices which applied when their vehicle was purchased.
This means that if you buy a Kia vehicle with a capped servicing price over a given term or number of kilometres, you’ll continue to pay for each service the exact sum agreed to. However, the door is open to someone who buys a Kia next year paying more for each of their services, so long as it’s agreed to on purchase.
In other words, cost increases would be passed on, but no service over the life of a given owner’s individual plan would increase over the period. But next year’s buyer can still cop a higher (agreed-to) capped price.
The next step beyond Kia? It would appear the ACCC now needs to determine if the marketing around the capped-price servicing policies of any other brands, just like Kia, at any point implied that the service costs were set in stone. Looking at various wording, does this not appear possible?
If the answer is yes, and if any brand in this position has hiked the price ceiling of a buyer’s service even if its terms and conditions state that it might do just that, it would appear open to similar action as that dished out to Kia, based on the principal of precedent.
The ACCC, a government body, re-iterated to us today that it was “reviewing other offers made by other manufacturers”, but would not discuss if it had decided to pursue other brands beyond Kia.
Consider for a moment that each of the top 10 brands, which account for more than 80 per cent of sales here, have some form of capped-price service program, and that numerous smaller brands do as well, and you can see that this might have the potential to affect a lot of new-car buyers.
Trawling through the terms and conditions of numerous capped-price schemes out there, it is clear that at least a few brands — if not more — explicitly reserve the right to scale up agreed-to-pricing, either by linking it to the CPI or potentially passing on other cost increases of their own.
Again, it’s early days and little is clear, but this is one to watch. We would also point out that Volkswagen appears to have removed all references to capped-price servicing on its website.
“Based on the interpretation by the ACCC we are reviewing our own service program,” a Volkswagen spokesman told us.
Other companies gave us statements by deadline, including Mazda, which said:
“All new Mazda vehicles come with Mazda Service Select. This delivers peace of mind for Mazda customers, as they will not pay more for a scheduled service performed by a Mazda dealer than the advertised price on mazda.com.au at the time the scheduled service is carried out.”
Subaru Australia also furnished us with comment.
“Subaru Australia is aware of the media release issued by the ACCC on Monday 23 February 2015 regarding Kia’s capped price servicing program. Subaru Australia has not been approached by the ACCC regarding its capped price servicing program and has not increased the price of services under its program since the launch in July 2014.
“Nevertheless, in light of the concerns expressed by the ACCC regarding the Kia capped price servicing program, Subaru Australia will be undertaking a thorough review of its program,” it said.
Honda’s public website also said it would “periodically review the price of the Honda Capped Price Services and amend them from time to time in line with our costs and CPI. Honda reserves the right to alter or discontinue this program.”
Likewise, Hyundai’s site states: “Hyundai publishes the maximum price that customers will pay for Scheduled Maintenance Services on eligible vehicles at Participating Hyundai Dealers. These are published at www.hyundai.com.au.
“The published maximum price is valid for an applicable effective period. New maximum prices may apply at the expiry of that effective period.”
Nissan added: “The ACCC has put all manufacturers on notice that it is looking into Capped Price Servicing programs for Australian customers. We are currently reviewing our program to ensure it complies with all requirements.”
These are just a few examples, and we could mention numerous other brands.
We wish to stress that no ACCC action has been taken, but we will be watching this space eagerly.
CarAdvice has contacted the Federal Chamber of Automotive Industries (FCAI) for comment. It us understood the Chamber has contacted car companies.