Government proposes standalone automotive franchising code

Automotive franchisees and other stakeholder groups have less than a week left to respond to the federal government discussion paper on automotive franchising.

The discussion paper, which considers a series of reforms to the regulation of automotive franchisers, was released on August 10 and the submission deadline is September 13.

It is a consultation process that follows a detailed inquiry conducted by a senate committee on regulating the relationship between car manufacturers and car dealers in Australia.

A series of problems were raised with the committee that arose from a power imbalance that exists between manufacturers and new car dealers.

Key concerns raised by car dealers were that manufacturers did not work with them to find ways for dealers to recoup capital investments, nor did they provide sufficient reimbursement for recall and warranty work.

There were also concerns about manufacturers failing to eliminate unfair clauses in contracts as well as not providing for adequate compensation when dealership agreements either lapse or are terminated.

Proposals floated in the discussion paper include the creation of a standalone automotive franchising code that could be solely focused on the one sector and set out the expected behaviours from manufacturers and the franchisees operating the motor dealerships.

The paper says administrative challenges might exist with a standalone code that could result in benefits available to other sectors not being incorporated into a standalone automotive franchising code.

“Codes evolve separately over time to meet different and emerging needs. Over time, a standalone automotive franchising code could become inconsistent with the broader Franchising Code, as has occurred with the Franchising Code and Oil Code,” the discussion paper states.

“This means some businesses may miss out on protections that other businesses have gained over time. Stakeholders may find these differences confusing and unfair.”

Any changes that make it easier for car dealers to negotiate fairer contract conditions with motor vehicle manufacturers, according to the consultation document, would be on top of other reforms to help small business owners and franchisees.

“The government has already committed to reforms to enhance the existing protections against unfair contract terms in the Australian Consumer Law (ACL), which were agreed by state and territory consumer ministers in November 2020. These reforms will benefit small businesses and consumers,” the discussion paper states.

“For small businesses, the reforms include increasing eligibility of the protections to capture a greater number of small businesses. The government will soon release the exposure draft legislation on the reforms to the unfair contract term protections for consultation.

“The government is also working with the automotive sector to ensure new vehicle dealerships are adequately protected from unfair contract terms.”

This article was first published by The Mandarin.