THE federal government has moved to strengthen the enforcement of the Franchising Code of Conduct and extend protections for small businesses from Unfair Contract Terms and Unfair Trading Practices to all businesses regulated under the Code, including all new car and truck dealerships.

The moves, which apply to all franchise operations but specifically include automotive, will give car retailers more certainty of receiving fair treatment from their OEMs – especially at a time of flux in car retailing where the rush of new brands may see the change of the retailing models (Mercedes-Benz and Honda) and outright retirement of brands (Holden).

The changes effectively lower the burden of proof of unfair treatment and seek to even up the power imbalance that exists in the daily operations between car importers and their dealers.  

A further key change for car dealers is that the government, under the NVES, will work to move the vehicle count under the rules from the point of entry to the point of sale. 

This has been a major concern for dealers who feared that car importers would seek to meet sales numbers to their advantage (to avoid penalties or accumulate credits) by using automatic release to load up car dealerships with cars they cannot sell. This was seen as potentially placing a heavy cost burden on Australian automotive businesses.

Jerome Laxlale, Member for Bennelong with the CEO of the AADA, James Voortman (centre) & Senator Deborah O’Neill

The government said it is committed to “a fair playing field in the franchising sector, which (in total) employs around 520,000 people and contributes more than $135 billion to the economy each year.

The government says it will provide $7.1 million over 2 years from 2025-26 to strengthen the Australian Competition and Consumer Commission’s (ACCC) enforcement of the Franchising Code of Conduct; effectively for the ACCC to run test cases to establish the rules.

The minister for small business Julie Collins said the funding “will increase its enforcement actions against those who do not act responsibly. It will enhance the ACCC’s engagement and education activities”.

The Minister for Small Business – Julie Collins

The funding “ensures appropriate enforcement of the recently remade Franchising Code, which comes into effect on 1 April 2025”.

“This includes the relationship between franchisors and their franchisees, many of whom are small businesses,” Ms Collins said.

“The government will also extend protections from Unfair Contract Terms and Unfair Trading Practices to businesses regulated by the Franchising Code, following consultation.”

She said that “franchisees may be vulnerable to Unfair Trading Practices given a franchisor controls key aspects of a franchisee’s business, such as branding, marketing, supply chains and operational processes.

“Unfair Contract Terms and Unfair Trading Practice reforms will help address the power imbalance that franchisees may face and improve the fairness of relationships between franchisees and franchisors.”

The government said that the moves will “improve the viability of franchising, attracting a broader pool of business talent and encouraging more investment in the sector.

The extension of these protections will progress alongside other work focused on addressing business power imbalances, including the statutory review of the 2022 amendments to the Unfair Contract Terms regime, due to commence later in 2025, and consultation on extending Unfair Trading Practices protections to small businesses.

These actions build on recent reforms to the franchising sector, as part of the government’s response to the Independent Review of the Franchising Code of Conduct by Dr Michael Schaper.

Dr Michael Schaper

“In addition, the government will prioritise work to count emissions under the New Vehicle Efficiency Standard at the point of sale, rather than when a vehicle is imported to Australia.

“Bringing this work forward now, ahead of a fulsome review in 2026, signals the government’s determination to ensure Australian automotive businesses are not adversely impacted by the business practices of international car companies.”

The Australian Automotive Dealer Association (AADA) said in a statement it welcomed the government commitment to extending protections against unfair trading practices and unfair contract terms to all franchisees, including Australian new car and truck dealers. 

“The government has also committed to prioritise work to ensure compliance with the New Vehicle Efficiency Standard is at the point of sale, rather than the point of import.

These reforms will go some way towards addressing the power imbalance which exists between new vehicle dealers and the global manufacturers to which they are franchised. 

“The AADA and its members have played an important and longstanding role in advocating for these additional protections.

“The automotive industry is undergoing a period of great change, driven by a worldwide transition towards new technologies and business models. As this shift unfolds, there will be winners and losers – but these new protections will level the playing field for dealers and allow them to make informed business decisions with greater security.

AADA CEO James Voortman said “These changes are a major step forward for Australian dealers who are navigating the most significant transformation in automotive history.

James Voortman

“The exit of Holden from the Australian market, along with the ongoing court cases between dealers and Honda and Mercedes-Benz, have underscored the urgent need for stronger protections. Dealers deserve fair treatment, reasonable contractual terms, and the ability to make business decisions with confidence. These reforms deliver on that need,” he said.

With the global automotive industry shifting rapidly due to electrification and the emergence of many new manufacturers to our shores, these strengthened protections come at a critical time. By establishing a fairer and more balanced framework for franchise relationships, the reforms will bolster investment in the market, secure jobs, and provide a level playing field for Australian businesses.

“The transition we are witnessing presents both challenges and opportunities,” Mr Voortman added. “Ensuring fairness in contracts and trading conditions is essential to allowing Australian dealers to compete and thrive in a changing world.”
“The AADA also welcomes the additional funding provided to the ACCC to enforce the Code and looks forward to working with the regulator to ensure franchisees are protected through a tough cop on the beat,” he said.

The AADA commends the government for its leadership on this issue and remains committed to working alongside policymakers to ensure a strong and competitive franchising environment for all Australian businesses.

The Albanese Government has listened to stakeholders, and taken careful, considered policy action that supports the needs of Australian people and businesses.

The Australian Automotive Dealers Association’s submission to the PJCCFS inquiry highlighted the power dynamics inherent in dealership franchisor-franchisee relationships, stating “New car dealers range in size and complexity from small, rural, family businesses, to publicly listed companies operating dozens of sites across multiple brands. The one thing they have in common is that they are all franchisees, in contracted relationships with franchisors that are very large, overseas-based manufacturers.”

Senator Deborah O’Neill, who has been a champion of car dealers ever since Holden pulled out of Australia, said the announcement creates crucial protections for car dealers, reflecting their status as important Australian businesses.

Senator Deborah O’Neill

“Unfair Contract Terms and Unfair Trading Practice reforms will help address the power imbalance that franchisees may face and improve the fairness of financial relationships,” she said.

“In 2018, the Motor Trades Association of Australia’s evidence to the PJCCFS inquiry stated:  “We are already seeing in rural and regional Australia the pain and suffering that is coming not just from the closure of businesses, but considering the input into that community that these businesses make.” 

“This announcement will make a difference to franchisees across the country, including in rural and regional areas, where car dealerships play a crucial role supporting families and businesses in their communities.

“It has been clear for some time that current policy and regulatory settings have been insufficient to protect franchisees, including car dealers. 

“Justice Jonathan Beach, in finding against Mercedes-Benz dealers, identified that “it may be that further consideration needs to be given to the terms of the franchising code and possible modification”, highlighting that franchisee and community expectation surrounding the franchising code was misaligned with its current state and legal confines. Today’s announcement directly responds to that reality.

Matt Hobbs, CEO of the Motor Trades Association of Australia (MTAA) said the association “has long called for bipartisan support for franchising reforms, highlighting that industry confidence is key to future investment. 

“The industry seeks certainty so they can invest with confidence. It is important that these reforms receive bipartisan support to ensure their successful implementation and help Australian businesses make long-term investments for the benefit of all Australians,” said Mr Hobbs.

Matt Hobbs

These reforms are not just about fair practices within franchising but are also a broader effort to address power imbalances in the industry. With this backing from the government, Australian automotive businesses can now face the global automotive industry with a stronger, more equitable foundation. This is a pivotal step forward for the automotive sector and the future of Australian businesses.

“Additionally, the Government’s announcement that it will bring forward the review of the New Vehicle Efficiency Standard (NVES) compliance point—shifting it from the point of import to when a vehicle is sold to a customer—is strongly supported by MTAA. This change would ensure that car companies cannot push stock onto dealers to meet NVES compliance, thus placing the dealer in a position where they must shoulder financing costs until the vehicles are sold.

Matt Hobbs said, “Emissions should be counted when the vehicle is sold. By looking to count the impact of CO2 at the point of sale, the Government will remove the temptation for car companies to push vehicles onto dealers, no matter the demand of consumers, just to hit a compliance number for a particular year.”

“These critical changes will assist Australian businesses to remain competitive and ensure they are not disadvantaged by unfair business practices, while encouraging greater investment and a more sustainable automotive future.”