The National Automobile Dealers’ Association of South Africa (Nada) is to seek “designation” by the Minister of Trade and Industry in terms of the country’s Competition Act in a bid to challenge the terms of franchise agreements imposed on its members by manufacturers, writes Dave Cumming.

This follows a recent Competitions Tribunal hearing in which Nada challenged the takeover of a major franchise by DaimlerChrysler South Africa.

During the hearing the tribunal indicated it considered the terms of franchise agreements onerous but a finding on them would not be within the scope of the hearing.

Should the application for “designation” succeed, Nada would be free to approach the Competition Commission for a ruling on the agreements which could see South African dealers enjoying many of the benefits gained by their European counterparts under the new block exemption laws which came into effect at the beginning of this month.

In a memorandum to the Minister of Trade and Industry, Nada says the agreements are onerous, financially burdensome and stifle competition through the conditions manufacturers impose and the ability of manufacturers to terminate a dealership without fair compensation.