Kate Carnell

THE Australian Small Business and Family Enterprise Ombudsman Kate Carnell this week strongly pushed for the introduction of a specific automotive industry franchise code of conduct, saying it was unacceptable for OEMs to treat dealers in a way “reminiscent of banking behaviour”.

Her comments are part of a sudden outbreak of strong sentiment in the motor industry community against what many see as unconscionable behavior by overseas car-makers towards their dealers.

Calls are coming from many quarters for rules that will even the balance of power OEMs have held over their retailers, including from the Labor Party (see main story).

Ms Carnell, said the government should support an industry-specific legislated code of conduct for automotive dealerships that will be enforced by the Australian Competition and Consumer Commission (ACCC).

“The power imbalance between vehicle manufacturers and car dealerships is a major issue that is consistently raised with us, in both our dispute support area and our policy work,” Ms Carnell said.

“Manufacturers continue to use their market power to constrain car retailers, which in turn disadvantages customers.

“We consider the contract between the manufacturer and dealer as unfair. One-year agreements are just not sustainable for the dealers trying to run a profitable small business when you take into account the substantial amount of capital required upfront.

“Manufacturers being able to terminate an agreement with little notice, despite dealers meeting or exceeding performance targets, is reminiscent of banking behaviour and should be prohibited.

“It is unacceptable that manufacturers will not buy back vehicles, stock, parts, tools or equipment when the dealer agreement ends. The dealership has little say in the numbers as the manufacturers determine the stock.

“Some features in warranty policies are also on our radar. Not only is the consumer out of pocket, but the dealership is often not reimbursed for the cost of warranty work, its reputation is damaged, as is its relationship with the manufacturer.

“We want to see a level playing field for the small businesses and family enterprises that operate car dealerships, and would welcome involvement in bedding down an enforceable code of conduct.”

Ms Carnell’s comments that the government should proceed with a specific code for dealers follows the earlier announcement by the opposition at the Australian Automotive Dealer Association (AADA) conference in Queensland to forge ahead with the specific code.

By Neil Dowling