Consumer watchdog upholds Yamaha insurance ruling

The Australian Consumer and Consumer Commission (ACCC) does not have the grounds to revoke the notification made by Yamaha Motor Australia in 2014 to require its franchisees to offer only Yamaha-affiliated finance and insurance in relation to new Yamaha motorcycle and marine products.

In its ruling, made on July 7, 2015, the ACCC said that it "does not intend to take any further action at this time", even though it said that there was a high level of concern among Yamaha franchisees about the conduct and that it would monitor the impact of Yamaha's decision over time "to assess its effect on competition".

In other words, the ACCC wasn't satisfied that Yamaha's conduct had the purpose, effect or likely effect of substantially lessening competition in a market, and that the benefits from the conduct are unlikely to outweigh the detriments from a lessening of competition.

Yamaha Motor Australia first lodged a notification on May 29, 2014, with the ACCC then receiving more than 35 submissions about the company's position — all opposing the measure. The majority were submitted by Yamaha franchisees, many of whom claimed confidentiality or requested their submissions be made available publicly only on the basis of anonymity. Other submissions were also received from industry associations representing Yamaha franchisees, and from insurers and finance providers currently distributing products at the point of sale (POS) through Yamaha franchisees.

According to the ACCC, many submissions stated that the notified conduct is likely to have a significant detrimental impact on a large number of Yamaha franchisees, many of whom have long-term relationships with competing providers of insurance and finance, as well as consumers coming back to a dealer to buy another motorcycle who may, for example, wish to acquire insurance at the POS with their previous insurer. Submissions also indicated that many dealers may lose revenue, not just from a reduction in sales of finance and insurance but from a loss of trailing commissions paid by insurers when insurance policies originally obtained through a dealer are renewed. Concerns were also raised by insurers, including that the notified conduct would significantly increase their cost of supplying competing insurance and finance products.

Here's what the ACCC arrived at its decision:

"The ACCC understands that POS has been very significant in the distribution of motorcycle insurance. The ACCC has concerns that the notified conduct is likely to lessen competition by preventing Yamaha franchisees from offering a range of competing motorcycle insurance policies at the POS. It will particularly impact consumers who do not shop around for insurance prior to purchasing at POS.

"However, consumers have a range of options available to them for purchasing motorcycle insurance elsewhere. In particular, the ACCC notes that insurance products are becoming increasingly convenient for customers to purchase online, and that Yamaha requires its franchisees to inform consumers that they are free to purchase insurance from a third party via non-POS distribution channels.

"For suppliers of motorcycle insurance, POS distribution represents one means of reaching customers. The notified conduct will remove the opportunity for insurers other than Yamaha to have their products distributed by Yamaha dealerships in relation to Yamaha motorcycles.

"The ACCC considers that insurers would continue to be able to compete to have their products distributed by other non-Yamaha dealerships or in relation to non-Yamaha motorcycles, by Yamaha dealerships that sell more than one brand of motorcycle.

"Insurers will also continue to be able to compete for both insurance on new and used motorcycles and insurance renewals through other distribution methods, including directly to customers.

"Given the availability of other options for consumers and insurers, the ACCC is unable to be satisfied that the conduct is likely to substantially lessen competition in relevant markets for the supply or distribution of motorcycle insurance. Further, the ACCC’s inquiries do not indicate that Yamaha implemented the notified conduct for the purpose of substantially lessening competition."