HOPES that politicians from both sides of the aisle would understand the need to protect Australia’s car retailers from predatory behaviour by foreign car importers appear to have been dashed as the federal government’s draft automotive franchising regulations “leave dealers vulnerable”.

The Australian Automotive Dealer Association (AADA), the peak body representing Australia’s franchised new-car dealers, says that the regulations, which are intended to address the major power imbalance between new-car dealers and offshore vehicle manufacturers, gives dealers less protection than franchised fast-food outlets.

The AADA said in reaction to the draft regulations that they “fall well short and will continue to leave Australian dealers vulnerable”.

The CEO of the AADA, James Voortman, said in a statement: “Australia’s car dealers need strong regulatory protections similar to those in force in other advanced countries. Unfortunately, the regulations as drafted will have very little effect on the status quo.

“Global car manufacturers are using Australia’s lax regulatory regime to squeeze their dealers and they see our market as an ideal place where they can experiment with alternative distribution models, usually at the expense of dealers.

“Such behaviour is simply not possible in a country like the United States which does have strong automotive franchise laws,” he said.

“It is so important that these regulations are bolstered before they are finalised, particularly at this time when sales of new cars have been going backwards for 22 months and a number of regional dealerships have had to close their doors,” he said.

Mr Voortman said that the biggest factor influencing the power imbalance is insecurity of tenure for dealers.

“It was identified by the Australian Competition and Consumer Commission (ACCC) as an issue of concern in its retail market study, but to date it has been left out of the draft regulations,” he said.

“There are dealers in Australia who over the course of many years have invested millions of dollars in facilities, stock and equipment at the behest of manufacturers, only to be given a one-year agreement.

“To put that into perspective, there are fast-food franchisees with substantially lower capital investment requirements which are given 20-year agreements by their franchisor,” he said.

“While we acknowledge improvements in end-of-term obligations, manufacturers are still not required to purchase back the stock which they have compelled their dealers to purchase from them.

“We are also extremely concerned that end-of-term arrangements seems to only apply for dealer agreements of 12 months or longer, creating a perverse incentive for manufacturers to offer agreements with durations of less than 12 months,” Mr Voortman said.

He said that the key issues of dealers being denied warranty payments and manufacturers pressuring dealers to dismiss ACL claims from consumers have also not been covered in the draft regulations.

“The AADA believes it is crucial that these draft regulations are strengthened before they are finalised and will be raising concerns directly through the consultation process,” Mr Voortman said.

By John Mellor