On 12 March 2021, the Australian Government announced a number of reforms for the automotive industry which will “protect Dealers against the worst abuses by some car companies and bring a degree of balance to the relationships between Dealers and Manufacturers”.

The Australian Automotive Dealer Association (AADA) and its Dealer members have been working for several years on regulations which compel Manufacturers to treat Dealers fairly, provide a system for mandatory and binding arbitration and appropriately penalise those Manufacturers who fail to comply. As a result, these new regulations are a “welcome response” by the Australian Government.

AADA CEO James Voortman said the announcement “will be welcomed by automotive Dealers and their 60,000 employees all across Australia. It will give these local businesses the confidence to employ more Australians, take on more apprentices, invest in their communities and continue to support local sporting teams and charities”.

These changes include:

Mandatory principles for new Dealer agreements

Establish best practice by transforming existing voluntary principles into mandatory obligations under the Franchising Code. This will address concerns multi-national manufacturers won’t follow voluntary principles.

Ensure Agency agreements are captured by franchising regulations

Ensure that the Franchising Code keeps pace with changes to business practice by explicitly recognising that Dealers operating as a Manufacturer’s Agent in relation to new vehicle sales are still protected by the Franchising Code.

Appropriate fines

Increase available penalties under the Franchising Code to up to $10 million. This will strengthen penalties for willful, egregious and systemic breaches of the Franchising Code by large and profitable multinational companies.

The Government will also explore the merits of a stand-alone Automotive code of conduct and mandatory binding arbitration provisions within this new code, similar to those in the Media Bargaining Code, which were developed to curtail the power of the Big Tech platforms.

While these changes are very welcome, the AADA Secretariat said they will continue to work with the Government on the merits of a stand-alone automotive code, binding arbitration and unfair contract terms.

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