Specifically, the upcoming consultation process aims to prohibit manufacturers from failing to indemnify suppliers (dealers) and prohibits retribution by manufacturers against dealers who seek indemnification.
The move will further legislation which came into operation on January 1, 2011.
Under the legislation, a single generic consumer protection law – including a system of consumer protections and remedies in relation to defective goods and services – known broadly as consumer guarantees; offers protection against unfair contract terms and poor-quality goods and services.
Customers may be entitled to repair, refund, or even replacement of a vehicle under the law; often to the financial detriment of the dealer involved.
Dealers are legally obliged to comply with the requirements of the ACL’s consumer guarantees regardless of a manufacturer’s warranty policy, while manufacturers are required to indemnify dealers who have been found liable to pay damages to a consumer under the consumer guarantees.
But it doesn’t always work …
The AADA says it is important that the process of manufacturers managing a dealer’s response to an ACL issue – including indemnification failures – is carefully considered by governments looking to make changes to the consumer law framework.
The most recent consultation will seek to penalise manufacturers who actively discourage or penalise dealers from fulfilling their obligations.
“There’s a big culture change going on in the industry right now,” AADA CEO James Voortman told GoAutoNews Premium.
James Voortman
“Manufacturers see that governments are taking action and are trying harder to do the right thing on behalf of consumers, and they realise that the issues between the consumer, the dealer, and the manufacturer aren’t always as straightforward as they perhaps should be,” he said.
Mr Voortman said car dealers are often at the frontline in ensuring customers are afforded the best possible ownership experience practicable, and that their efforts in striving to meet consumer guarantees are often carried out at their own expense.
“New car dealers are very much focused on providing their customers with a first-class experience and we welcome the government’s efforts in trying to ensure compliance with consumer guarantees,” Mr Voortman said.
“It is encouraging that the regulation impact statement has identified options to strengthen supplier (dealer) indemnification. The ACCC’s market study into the new car industry highlighted the issue of manufacturers not indemnifying their dealers,” he added.
Mr Voortman said the power balance that exists between franchised new car dealers and manufacturers gives cause to warranty and ACL consumer guarantee arrangements that can lead to harmful consumer and dealer outcomes.
He said that there have been occasions where aggressive and unfair manufacturer policies have placed dealers in a “no-win” situation and left a trail of frustrated and dissatisfied customers with unresolved ACL claims.
In many situations, and while striving to satisfy customer expectations that their warranty claims are honoured, dealers are left to cover the cost of repair, refund, or replacement themselves, often with no certainty that they will be reimbursed for their time or materials.
“Too often dealers, which are the suppliers under the ACL, are the meat in the sandwich. They are caught between the customer and the manufacturer of the vehicle when there is a request for a remedy,” Mr Voortman explained.
“Motor vehicles are a high value purchase and require ongoing maintenance which is often conducted through the dealer network. Dealers often suffer significant financial loss by replacing or refunding a vehicle only to be told they will not be indemnified,” he added.
The AADA has previously expressed concern around practices such as warranty extrapolation or denial of warranty payments as well as:
- Terms in franchise agreements which prohibit dealers from making admissions of liability without prior approval of a manufacturer
- Requiring dealers to obey manufacturer instructions in relation to a consumer’s request, complaint, claim, or legal proceeding
- State that dealers will lose their right of indemnity if they did not adhere to such manufacturer instructions.
Mr Voortman said the AADA looks forward to working with the government and other stakeholders through this consultation process. Submissions and views from both dealers and manufacturers are open until February 1, 2022.
By Matt Brogan
