Dealers lose again in legal fight
A court’s decision to dismiss an appeal by a group of Australian dealers in their legal battle with Mercedes-Benz Australia/Pacific Pty Ltd has left industry associations across the ditch divided.
The Federal Chamber of Automotive Industries (FCAI), which represents the new-vehicle industry, welcomed the ruling, but the Australian Automotive Dealer Association (AADA) described it as a “significant blow”.
A group of 38 Mercedes-Benz dealers took legal action after being unhappy at the move to an agency sales model in 2022 and the marque’s local arm rejecting requests for compensation.
A Federal Court ruling the next year found in favour of Mercedes-Benz Australia/Pacific and said dealers hadn’t been misled about the agency move and the company hadn’t engaged in unconscionable conduct.
In 2024, the dealers appealed the decision but the Federal Court has dismissed that and again found in favour of Mercedes-Benz in a judgement released on July 9 this year.
James Voortman, AADA’s chief executive officer, says the association and Mercedes-Benz dealers across the country are bitterly disappointed by the outcome.
“Australian dealers have been fighting to stop Mercedes-Benz using their power over franchised dealers to force them into one-sided business relationships,” he explains.
“[The] decision is a significant blow to that fight, which will have detrimental effects on Australia’s franchising sector.”
He says the case highlights a need to protect Australian franchisees against unfair treatment from franchisors that arbitrarily change business models with no compensation.
“The presiding judge in the original court decision clearly articulated the need for further amendments to the Franchising Code to protect the investments dealers make in their businesses,” adds Voortman.
“[The] decision confirms that current laws in Australia do not adequately protect new car dealers against unfair conduct and particularly are not being supported against unfair decisions being made in head office overseas.”
AADA notes the decision comes after Holden dealers lost their legal action against General Motors (GM) this year when a judge found there was no obligation by GM to supply vehicles to Australian dealers under their franchising agreement.
A different view
In contrast, the FCAI supported the Federal Court judgement and say it reinforces the right of automotive brands to modernise their operations in line with evolving global business practices and consumer expectations.
Tony Weber, chief executive, adds the decision provides clear recognition from the courts that businesses have the right to choose how they go to market.
“The agency model is one of many approaches being explored internationally. Preserving the freedom to adopt such models ensures Australian consumers are not left behind as the global automotive market evolves,” he says.
“Calls for increased red tape and compensation schemes tied to traditional distribution models ignore the fact that many dealerships today are part of multibillion-dollar enterprises on the Australian Securities Exchange.”
Weber notes that automotive brands and multi-site, publicly listed dealership groups have a sophisticated commercial relationship and the sector is no longer defined by small family operations.
“Dealerships are highly capitalised businesses that should not be shielded from commercial evolution,” he says.
The FCAI rejects claims the agency model diminishes competition or harms consumers, saying it has long been used by many sectors of the economy, in many countries, including Australia.
