FRANCHISING Code of Conduct changes, announced today and to come into effect on July 1 this year, mark a significant step to address the power imbalance between car-makers and their Australian dealers, said industry bodies.

The Australian Automotive Dealers Association (AADA) said it would bring greater fairness to the commercial relations between dealers and car manufacturers.

AADA CEO James Voortman said it would provide dealers with more certainty in terms of the investment they undertake and the compensation to which they are entitled, and will ensure that new agency models are subject to the same rules.

“These reforms are all about fairness and Australian dealers will now be in a better position when a car manufacturer leaves the country, reduces its network or changes its business model,” he said.

“I congratulate the Morrison government for standing up for Australian dealers and implementing these changes.”

The Motor Trades Association of Australia (MTAA) said it would improve disclosure, coverage, adequacy of terms to secure a return on investment, dispute resolution, and compensation requirements.

It said the announcement of the impending regulations and the schedule for car dealers and other reforms in the broader Australian Consumer Law “represent the most significant tranche of reform in the past 20 years impacting automotive industries.”

“The reforms will help address the substantial power imbalance between internationally headquartered car manufacturers and their Australian dealership networks,” the MTAA said in a statement.

“The MTAA welcomes the inclusion of voluntary principles as mandated requirements in the announced reforms, including appropriate time to recoup significant capital expenditure, the inclusion of ‘agency’ type agreements, and proper compensation arrangements.

“The reforms that now require manufacturers (as franchisors) to specify how they will buy back or provide compensation for new vehicle inventory, parts, and special tools in the event of early termination or non-renewal of the agreement is an essential requirement.

“The MTAA welcomed requirements that stop manufacturers from including any provision in agreements that deny the dealer compensation if the agreement is terminated early for reasons other than a breach by the dealer.”

Mr Voortman said: “These changes come after a difficult 18 months for Australian dealers which saw Detroit-based General Motors terminate every Holden dealer without adequate compensation.

“It is clear that other manufacturers are considering making changes to dealer networks which is why these reforms are so important,” he said.

“These changes will bring a degree of balance to the relationships between new car dealers and the manufacturers to which they are franchised.

“The reforms are sensible and fair and will bring all manufacturers up to the standard already being employed by ethically-minded car brands operating in Australia.

“Dealers in regional towns and cities all across the country will be welcoming these reforms.”

The changes will primarily take effect from July 1, 2021 and expand on the specific schedule of amendments for new car retailing and significant changes to the broader Franchising Code.

It follows exhaustive representations and advocacy by the AADA and MTAA to achieve a better balance for all automotive franchisees.

The MTAA and AADA said they were “particularly pleased” with the streamlining of dispute resolution frameworks under the Australian Small Business And Family Enterprises Ombudsman (ASBFEO) and will continue to work with the Ombudsman’s Office and industry to develop specific processes for automotive franchisees further.

“We look forward to working with the government on the upcoming consultations on dispute resolution and the merits of a separate automotive code,” Mr Voortman said.

The MTAA and AADA said they “thank the Morrison government and ministers Karen Andrews, Michaelia Cash and Stuart Robert for listening and acting on the constructive and considered representations of MTAA over a long period to secure these outcomes for new car dealers and other automotive franchisees”.

The associations added that they would also “continue to work with government to ensure the inclusion of motorcycle and farm machinery dealers in specific arrangements while recognising these groups will benefit from the broader reforms announced today.

By Neil Dowling