Wednesday, 17 March 2021

The Morrison Government has addressed a growing power imbalance between dealers and large companies by introducing new significant financial penalties for wrongdoing under the Franchising Code of Conduct.

A fine of up to $10 million could be given to international car companies that undertake systemic breaches under the Code, including unilaterally changing contracts, poor compensation and reneging on warranties.

The existing voluntary automotive principles will be made compulsory and a new mandatory automotive code will be strongly considered, following consultation. 

Senator McDonald said Queensland car dealers had been very vocal in their complaints about their exposure to production and supply decisions made by large suppliers, especially in the wake of General Motors announcing last year that it would retire the Holden brand.

“I have spoken to dealers who spent millions of dollars to secure franchising rights for major car brands who faced the prospect of ruin because these franchisors can suddenly pull products from production, change sales commissions and reduce servicing schedules, leaving the small business owners badly out of pocket,” she said.

“I’m extremely pleased that this feedback I and other Coalition MPs provided to Small and Family Business Minister Michaelia Cash has been acted upon so quickly and decisively to provide security for these business owners’ investment.

“Car dealers, especially in regional areas, are major employers and this decision will give them certainty to continue employing salespeople, mechanics, cleaners and receptionists.

“Losing these businesses from smaller centres would leave a gaping hole in the employment market, would reduce choice for consumers and also affect sporting and other clubs who rely on sponsorship by them.”

The Government will also explore 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.

Prime Minister Scott Morrison said Australia’s automotive dealers employed more than 60,000 Australians, including 4,000 apprentices, and contributes more than $12 billion to the economy.

“We stand up for Australian jobs and Australian businesses,” the Prime Minister said.

“We stood up to Big Tech companies and we will stand up to multi-national car companies who are riding roughshod over many family-owned Australia car dealers.

“By protecting these businesses, we will be protecting the thousands of jobs that rely on the sector, including many apprentices.

“Car sales are surging and it’s further proof that the Australian economy is on the comeback.  We need to ensure Australian family-owned automotive businesses continue reap the rewards of this growth and the support from our supercharged instant asset write-off.”

The new measures will:

* 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.
* 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 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.

Minister Cash said, “This is a decisive suite of reforms for automotive dealerships and the many local businesses, apprentices, charities and broader communities that they in turn support.

“The Government is fully committed to enacting reforms that are impactful and deliver for the nation and regions where transport is integral for economic and social needs.

 “This is a landmark set of reforms for the automotive industry, building on the critical work done by the Government, most recently with the announcement of the automotive principles to deliver for consumers in December 2020.

“I am looking forward to working together with the industry to ensure the reforms made will better the overall experience of consumers, who ultimately drive the demand that underpins the viability of the automotive sector”.

In addition, the Government is committed to working further with the automotive franchising sector and will consult on:

* Ensuring appropriate protections for automotive dealerships from unfair contract terms in their agreements with manufacturers;
* Options to achieve mandatory binding arbitration for automotive franchisees, to address power imbalance when there is a dispute; and
* The merits of a standalone automotive franchising code.