There was even an attempt by MBA/P to get access to communications between Senator Deb O’Neill and the parties representing the dealers.  Senator O’Neill was a leading protagonist in the Senate hearing into the whole car retailing affair including a claim under parliamentary privilege that Mercedes had misled the Senate in its Senate hearing evidence (which MBA/P has denied).

But the arguments over documents were really a sideshow and the real trial is going to be critical to all dealers facing a move by their franchisor into an agency sales model and how their investments in their dealerships will be treated under the new agency agreements. 

MBA/P says all it is doing is responding to the many disruptors which are arriving in the auto retailing space and is moving to the agency sales model because it seems to address so many of the competitive issues it sees coming at it.

While the dealers acknowledge that MBA/P has the right to reposition its business model, at issue is the way that the company has gone about disclosing the impact the change would have on cash flow and the financial impact the move to agency would have on their investments.

The dealers claim that MBA/P throughout its discussions over the agency arrangements constantly told them they would be no worse off but it was not until the issuing of the dealer agreements at the last minute that it looked like that was not going to be the case.

In particular the dealers are alleging that MBA/P under its agency arrangement has subsumed their investments in building up their Mercedes-Benz dealerships and customer bases and are seeking $650 million in compensation. 

While the trial is being  seen as dealers in the ‘fight of their lives’, its result will have repercussions for all franchisees who are counting on recovering the investments they have made in their franchise businesses and the customer bases they have created for the franchisor no matter whether they mow lawns, sell buns or sell cars. 

A person familiar with the franchise industry told GoAutoNews Premium that an adverse result for the auto dealers “would be chilling” not just for automotive but the total franchising sector.

“It’s hugely important. That’s why a few people have said it’s the biggest case in franchising ever, because it goes to the very heart of who owns this goodwill.

“Can it be that these franchisees come in and develop and build up these businesses, but then are they worth nothing at the end of the term? Can you just be not renewed and then the franchisor just take it all back for themselves?”

He said that it an adverse decision for the dealers could mean that any mature brand, once it had seen all the growth, once everyone spent all their money, all the franchisees had done all the investment, the franchisor could, on the next round of the agreement, turn around and say they are not renewing.

“They could take it all back; take over the leases, pay the written down value for fit out and run them as company stores,” he said. 

“But people have the right to ask what about their investment? They thought that was their retirement fund, that they were going to sell it on. They built it up for that reason so they could have something to sell that is going to be their superannuation.

“All that will go out the window. That’s what this case means.”

Meanwhile, Steve Bragg, Motor Industry Services lead at Pitcher Partners Sydney told GoAutoNews Premium that the case would set the precedent for dealers and the brands switching to agency.

“Importantly, post the case and transition to agency, the industry needs to find the win-win-win situation,” he said..

“The consumer needs to win by having a better overall purchasing experience, the car brand needs to win by getting more customer access, more control of the sales process and more margin, and the dealers need to win by maintaining their business profitability and being able to continue to service their local community.

Lose-win-lose doesn’t work…that’s what’s being proposed and that’s why dealers and consumers need to pay close attention to this trial,” Mr Bragg said.

Read more:

Mercedes agency decision today

By John Mellor