FOUR automotive retail groups have taken up the Australian consumer watchdog’s sanctioned collective bargaining tool to improve their business and their relationship with their franchisors.

Franchisees of Ford, Mitsubishi, Isuzu Truck and Thrifty Car Rental have become some of the first to take up the Australian Competition and Consumer Commission’s (ACCC) offer that started on June 3 this year after being legislated.

Collective bargaining allows around-table discussions between franchisors and franchisees as a means of ensuring fair work practices and harmonious relationships to improve the businesses of both parties.

It is seen as a pre-emptive move to the provisions within the recently overhauled franchise code for dealers.

The Victorian Automotive Chamber of Commerce (VACC), which has been advocating collective bargaining for many years, said the ACCC’s move was about clarity in the franchise agreement.

The VACC’s industry policy advisor, Michael McKenna, told GoAutoNews Premium that the four franchise groups who have registered for an exemption with the view to take discussions to the table with their franchisors “should be congratulated.”

“They have been organised and smart enough to do it,” he said.

“The VACC has been behind this for a long time. Most new-car franchises are big enough to take care of their own relationships with their franchisor and now have more tools to help them do this.

“Now we are concentrating on the farm and industrial machinery, truck and motorcycle dealers and showing them that there is an opportunity for them to talk more openly with the manufacturer.

“These other vehicles and machinery dealers are every bit as sophisticated as the car dealers and carry the same obligations and risks.

“They are no different and should never be treated as such as far as collective bargaining and franchise protections are concerned.

“That will give the opportunity for these dealers – the next time their franchise contract comes up for renewal – to all go to the manufacturer as a collective and negotiate the terms they want in their contracts.”

Mr McKenna said “the VACC has been meeting with farm machinery, truck and motorcycle dealers regarding collective bargaining and in particular the process required to begin a discussion”.

“We are assisting with dealer council formation and secretariat as well as supplying initial legal advice,” he said.

“The issues we are seeing are identical to what we have seen and heard from new-car dealers for many years.

“The franchisor does not have to come to the table and bargain, but it’s a bad business sign if they do not and the franchisor may come to the attention of the ACCC.

“It’s all about clarity in agreements. For example, if you are a machinery dealer and the franchisor demands all dealers get a 15 per cent market share, dealers may think that is not possible and can negotiate to review the franchisor methodology for arriving at that figure.

“Dealers are held by their franchisor who could argue they aren’t performing if they don’t achieve that market share. But meeting that target may not be possible – the market may have changed or there may be 15 competitors now rather than five previously.

“So in this case, the dealers could collectively go to the manufacturer and point out that the demand is unfair and find a solution. Dealers can also collectively bargain on issues such as warranty work, where the labour rate may be difficult for the dealer to make the business viable.

“It could cost the dealer to do warranty work if they are being paid a factory-based rate that sees the dealer actually lose money when doing warranty work, for example.”

Mr McKenna said businesses can collectively bargain on a wide range of issues to be entered in the franchise agreement apart from the prescribed items in the franchise code.

He said that while some dealer groups had gone to their manufacturers with issues, there will be some that don’t have to.

“We are pleased that Ford dealers have taken the bull by the horns and lodged their collective bargaining exemption notice,” he said.

“Isuzu trucks have done it and Mitsubishi dealers have done it. It may not be all of the dealers, but it’s a big enough portion to have an influence on the manufacturer when the time comes to bargaining. We are now pushing farm machinery and motorcycle dealers to use this tool.

“The mentality is strength in numbers.”

The ACCC said that collective bargaining class exemption allows eligible small businesses to bargain without breaching competition laws. It said that it applies to:

• Businesses with an aggregated turnover of less than $10 million in the financial year prior to them forming or joining a bargaining group to collectively bargain with customers or suppliers, and
• Franchisees and fuel retailers to collectively bargain with their franchisor or fuel wholesaler (respectively) regardless of their size.

The class exemption is available for businesses to use from June 3.

“Groups wishing to rely on this class exemption must complete a one-page notice form and provide it to the ACCC when the group is formed and to each target business when the group seeks to negotiate with the target business,” the ACCC said in a statement.

“Once the notice is lodged, legal protection from competition laws commences automatically.”

More details are available on the form notice on the ACCC website.

By Neil Dowling