NEW rules governing corporate mergers and acquisitions, including dealership buy-sell transactions, are being opposed by Australia’s peak automotive retail association, which says the recently introduced bureaucratic requirements risk obstructing dealership sales and mergers.

A report commissioned by the Australian Automotive Dealer Association (AADA) said the new reporting regime would impose substantial costs on both dealerships and the Australian Competition and Consumer Commission (ACCC), which administers the rules.

The AADA said this week that the mandatory merger notification regime, which took effect on 1 January 2026, would adversely affect many franchised dealership transactions.

The association has lodged a submission with Treasury based on a report prepared by BDO Australia. It outlines what the AADA says are significant disadvantages for dealerships, with little corresponding regulatory benefit.In its submission, the AADA said capturing dealership buy-sell transactions on the basis of business revenue was misleading because a large proportion of dealership turnover reflected the high value of each vehicle sold, rather than the underlying scale or profitability of the enterprise.

The AADA said the high-turnover, low-margin nature of automotive retailing meant “even small and regional family-owned dealers are likely to exceed the notification thresholds”.

It said this was not because “the combined business would yield market power, but because vehicle prices are high and volumes are sufficient to generate substantial gross revenue”.

“This report demonstrates that dealership acquisitions are driven predominantly by succession, viability, and continuity imperatives, and that the ACCC regime risks imposing disproportionate regulatory costs and delays on transactions that pose negligible competitive risk, in turn consuming a disproportionate amount of ACCC resource,” said the AADA in the BDO submission.

“The AADA respectfully submits that Treasury should introduce an exemption for franchised dealership transactions or, at minimum, a formalised low-cost and expedited clearance pathway that reflects the commercial and competitive realities of the sector.”

AADA chief executive officer James Voortman

AADA chief executive officer James Voortman said the findings highlighted a significant unintended consequence of the new framework.

“This report confirms what AADA has been saying since the merger reforms were announced – franchised new-car dealerships are not the type of businesses these laws were designed to target,” he said.

“Unlike other industries, dealership competition is already heavily shaped by manufacturers through franchise agreements, dealer network planning, and ownership limits.

“Dealership acquisitions are typically driven by owner retirement, succession planning, increasing compliance costs, margin pressure, and the need to achieve scale.

“They are not about accumulating market power or reducing consumer choice.”

Mr Voortman said the timing of the reforms could not be worse for dealers already navigating unprecedented industry change.

“Dealers are investing heavily to meet manufacturer requirements, manage the transition to EVs and adapt to the impacts of the New Vehicle Efficiency Standard (NVES), all while facing rising costs and intense competition,” he added.

The report identifies the federal government’s NVES, rising compliance obligations, and increasing capital investment requirements as key factors driving dealership succession and consolidation across the sector.

“Dealers are under pressure from the NVES, rising compliance costs, major facility investment requirements and shrinking margins,” continued Mr Voortman.

“When a dealer sells, it is typically about succession, viability and business continuity, not market power.“As part of the upcoming review of the merger laws, the government should introduce an exemption for smaller franchised dealership transactions that pose no realistic competition concerns.

“Dealers are already grappling with the impacts of the NVES, growing compliance burdens and significant investment requirements.

“The merger regime should not create another barrier to business succession, regional investment and dealership viability.”

Under the Competition and Consumer Act 2010, franchised new-car dealers have been subject to a mandatory merger notification regime since 1 January 2026.

In a high-profile example, the notification requirements have ostensibly delayed the proposed merger of listed retailer Peter Warren Automotive Holdings Limited and Wakeling Automotive.The transaction was first proposed by Peter Warren Automotive on 19 December 2025 and remained under ACCC assessment in June this year.

The AADA believes the case demonstrates the disadvantages of the regime.

“While the policy objective of the regime more broadly is to prevent anti-competitive concentrations of market power, its practical effect in the franchised automotive retail sector is to impose significant compliance costs and delays on transactions that are, in our view, structurally incapable of lessening competition and unintended participants in the notification regime,” the submission said.

In its request for a review of the legislation, the AADA identified six issues supporting its advocacy to Treasury and the ACCC for an industry-specific exemption or streamlined pathway for franchised dealership transactions.

1. The franchised new-car dealer market is structurally and intensely competitive

Australia currently hosts 67 automotive brands, a figure projected to reach 75 by 2031, with about 3910 franchised dealerships operating under strict original equipment manufacturer franchise agreements.

These agreements govern pricing bands, stock allocation, facility standards, and primary market areas.

Intra-brand competition between dealers representing the same brand in adjacent primary market areas is widespread and reinforced by OEM-imposed sales targets. Most dealer groups are small.

2. Most operators hold between one and five franchises.

The AADA benchmark report prepared by BDO indicates that a high-performing, single-location dealership with $100 million in annual turnover generates a net profit of about 3.5 per cent.

The report said this represented a thin return that was highly sensitive to economic conditions.

Average dealer return on sales was lower still, with BDO estimating it at less than 2.0 per cent for non-benchmark dealerships.3. Small transactions with no change in competitive profile will be captured

Despite their modest size and limited market influence, the high-turnover nature of vehicle retailing means even small and regional dealers are likely to exceed the $200 million combined-turnover notification threshold when the acquiring group’s revenue is included.

4. Acquisitions are driven by succession, viability, and continuity pressures

The report said dealership buy-sell activity was commonly prompted by owner retirement, a lack of family succession, capital-intensive OEM facility requirements, and margin compression caused by cost-of-living pressures.

Other factors included the proliferation of Chinese brands and the complexity of managing the transition to electric vehicles without sufficient scale.

The AADA said these transactions were not primarily motivated by a desire to gain market control.

5. The costs of the regime are disproportionate

A waiver application costs $8300 in filing fees, in addition to substantial legal preparation costs.

For an average dealership transaction captured by the notification regime, particularly where the business is being sold because of poor financial performance or insufficient capital, the costs could represent a material and potentially deal-breaking impost.

A Phase 1 notification attracts a fee of $56,800 with legal preparation adding substantial professional expenses.

BDO said it had observed cases in which legal costs exceeded the notification fee itself.6. Historical buy-sell volumes indicate a substantial regulatory workload

Based on historical volumes and its involvement in advising on dealership transactions, BDO estimates that between 20 and 30 franchised dealership transactions occur in Australia each year.

Activity has remained elevated because of succession concerns, higher operating costs, and margin compression since vehicle supply chains began returning to normal after the COVID-19 pandemic in late 2022.

The report concluded that the franchised dealership market was not concentrated, was not consolidating in a manner that threatened consumer welfare and was not an appropriate target for merger notification requirements intended to address large-scale horizontal consolidation.