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THE federal government has issued a discussion paper designed to seek views on whether the automotive franchise code which went into effect on July 1 should be strengthened even further.

The discussion paper seeks views on three key areas that were not included in the current code but have been the subject of intense pressure from representations on behalf of dealers to be included in the rules governing the way auto retailers are treated by OEMs.

The discussion paper seeks views from across the industry on:

  • The merits of a standalone automotive franchising code of conduct
  • The options that might achieve mandatory binding arbitration for automotive franchisees
  • Evidence to support the view that protections under the code be extended to other dealerships in the auto sector including farm machinery, motorcycles, trucks etc.

Minister for Employment, Workforce, Skills, Small and Family Business, Stuart Robert, released the discussion paper saying that the Morrison Government was “continuing to bring significant reform to the franchise sector” and that is was seeking “further reform to protect Australia’s family-owned automotive businesses and their employees from the growing power imbalance with multi-national car companies.

Stuart Robert

“The Morrison Government has already delivered big wins for thousands of small businesses across the country – including auto dealers – as its franchising reforms were delivered earlier this year,’ Mr Robert said in a statement.

“Now, the Morrison Government is seeking feedback from family-owned automotive businesses and their employees to understand the extent of other potential issues in the sector and the possible need for further reform to contribute to providing a level playing field for automotive dealers and manufacturers.”

The Australian Automotive Dealer Association (AADA) welcomed the move saying: “The release of this discussion paper marks another significant step in reforming the imbalances that exist between dealers and some manufacturers.”

“We believe this provides an opportunity for our industry to come together and build on the progress that has been made towards a fair and reasonable set of rules that govern relations between dealers and manufacturers,” AADA CEO James Voortman said.

James Voortman

“The consideration of options for compulsory binding arbitration is such an important element of this process given the experience of Holden dealers in their dispute with General Motors. The prospect of a drawn out and costly legal battle resulted in most Holden dealers accepting inadequate compensation packages.

“Even the request by the then Minister Michaelia Cash for General Motors to attend arbitration was flat out refused by the Detroit-based manufacturer.

“You need only look at the Holden and Honda dealers who are currently involved in protracted court battles with their franchisors to understand why the current system favours larger multinational corporations over Australian businesses.”

The paper also flags extending the automotive franchising regulations which have been put in place over the past year to cover other categories of vehicle dealers, such as truck dealers and Motorcycle dealers.

“Many of our members are also truck dealers and we know they face the same challenges in their franchising relationships, often from the same manufacturers. The AADA will thus strongly support the extension of these protections to those truck Dealers as well as motorcycle and farm machinery dealers,” Mr Voortman said.

“We also look forward to working with the Government in considering the merits of a stand-alone Automotive Code relative to the current approach.

“Car dealers across Australia are incredibly appreciative of the efforts of the Morrison Government and the work of the Small Business Minister Stuart Robert.

“All of the reforms that have been progressed to date are fair and will establish an appropriate standard already being set by some of Australia’s most reasonable manufacturers.”

Meanwhile, the Federal Chamber of Automotive Industries (FCAI) has played the consumer card, saying that the discussion paper “ignores the consumer”.

In a move designed to paint dealers as the adversaries of car buying families in the eyes of politicians, FCAI CEO Tony Weber said that “by failing to consider the consumer, the discussion paper appears to put the interests of one component of the supply chain over Australian families”.

“The ink is not yet dry on far reaching industry regulations introduced last month. Their impact needs to be seen before more regulations are contemplated,” he said.

“The Government describes its franchising reforms as having already delivered ‘big wins’ to dealers, but where there’s a winner there’s also a loser – and in this case it’s the Australian consumer.

“Automotive franchising is a consumer issue, not an industry protection issue. It should focus on providing consumer choice not dealer protection at the expense of all others. Regulation should encourage innovation and flexibility for business, not leave it anchored in the last century.

“Australia already has extensive competition and franchising regulations and any further regulation would stifle the industry’s capacity to innovate to meet the changing needs of the Australian consumer.

“Over-regulation will not protect the industry but what will is a choice of sales models, better service and competitive pricing.

“The FCAI looks forward to working with industry stakeholders and the Federal Government on this important issue.”

By John Mellor