Dealerships, News , ,

ALL Australia’s Mercedes-Benz dealers have signed up for the move to an agency sales model but GoAutoNews Premium has been told that lawyers acting for all but 2 dealer groups have sent a letter to Mercedes-Benz Australia saying the dealers were forced to sign the new Agency agreement because they had no choice.

The Mercedes dealers, as they head down the path to being sales agents, have put the factory on notice that they were ‘reserving their rights’ because they ‘were forced by the circumstances to sign’.

This means that at some time in the future, if it is shown that the power balance between the parties was significantly greater by one party over the other, the more powerful party cannot claim that the weaker party willingly agreed to the changes brought about by the agency model. 

Many former Holden dealers are understood to have used the same device by lodging letters with the Australian Competition and Consumer Commission (ACCC) when signing up for their service agreements saying that Holden had left them with no alternative but to sign. 

While recent meetings with Mercedes-Benz dealers have resolved some outstanding disagreements, dealers are telling GoAutoNews Premium that two serious areas of contention remain.  They say that:

  • Mercedes-Benz is expecting its dealers to effectively hand over their businesses without paying for the loss of  the goodwill it is receiving under the agency structure
  • The agency agreements are for just four years with no agreement or written indication that an agency agreement will be renewed after that time has elapsed

The question of whether dealers are entitled to be compensated for any loss to the goodwill in their dealerships weighs heavily on the success of the project which is being watched by car makers around the world.

Dealers are saying that Mercedes-Benz is moving to the agency model without paying fair compensation for the goodwill contained within the existing businesses which are effectively being handed over to Benz. 

This is because the whole agency model is built on using the existing goodwill of the businesses of the dealers and their premises.

A Benz dealer, who did not want to be named, said: “They are using all our infrastructure and all our customer base in which we have invested millions to develop.

“If they didn’t have that network and started a greenfields agency operation in Australia, they would have to pay hundreds of millions of dollars to set up that network.  

“But they didn’t. They have paid nothing for it and all that goodwill that was sitting on the books of the dealers will now effectively sit on the books of Mercedes-Benz and they have paid nothing for it.”  

GoAutoNews Premium has been told that the big question to be resolved is whether there is an entitlement to compensation for the goodwill and much of that could rest on how well the agency model performs.

“That ultimately feeds into the one question. The less money the dealers make because of the agency model the less the goodwill will be worth,” a dealer said.   

”Under the agency model, an agent has almost no control over the key decisions and outcomes which determine profitability. Mercedes controls all stock ordered, all vehicle pricing, all brand marketing  etc and they have the sole power to change key parameters regardless of the impact on the agents profitability and viability.” 

GoAutoNews Premium has also been told the new agency agreement is for a fixed term of four years with no right of renewal. 

“There is no guarantee that we’ll be selling Mercedes-Benzes after four years,” one dealer said.

“This has a huge bearing on the goodwill the dealers can claim because the question is who is going to buy a Mercedes dealership now and what are they worth? 

“You wouldn’t be paying the sort of multiples for a Mercedes dealership that you once paid. 

“So what does no guaranteed renewal signal to the marketplace?”

“What signal does it send to the financiers and others who’ve loaned money to dealers to build or modernise their dealerships and to those holding all the other loans and other agreements for leases and property agreements?”

By John Mellor

Dealer Auction