The Australian Government has released a discussion paper that seeks stakeholder views to help Government assess the practical benefits of a standalone automotive franchising code and options for mandatory binding arbitration, and how best they could be implemented. The paper also seeks views on broader scope considerations for the Franchising Code related to the contribution of other vehicle types.

Franchising arrangements (for all sectors of the economy) in Australia are legislated through the Competition and Consumer Act 2010. Part of the Act, the Franchising Code of Conduct provides the regulatory framework specific to franchising arrangements. The Franchising Code is administered by the Australian Competition and Consumer Commission (ACCC).

Following on from a ACCC market study of the new car retail industry, in June 2020 a new vehicle dealership agreement schedule was added to the Code of Conduct – the first time industry sector specific regulations were added to the Franchising Code. It covered matters relating to end of term obligations, capital expenditure disclosure and dispute resolution.

The Code of Conduct was amended further in June 2021 with a raft of requirements in relation to dispute resolution, pre-entry disclosure and exit arrangements, amongst others. The specific new vehicle dealership provisions (Schedule 11) were also strengthened to include agency arrangements (like Honda has recently introduced) and the requirement for compensation arrangements to be included in franchise agreements.

The decision by General Motors to exit the Australian market in 2020 had a significant impact, not least on its dealer network. There were widespread concerns with GM’s compensation package, dealers’ perceived lack of bargaining power and dispute resolution mechanisms.

A Senate inquiry (released in March 2021) that considered in great detail GM’s decision and related actions provided a number of recommendations including mandatory best practice principles and mandatory and binding arbitration during contract negotiations where other dispute resolution mechanisms have been unsuccessful.

As part of its response, the federal government committed to consult further on automotive franchising reforms to:

• ensure appropriate protections for automotive dealerships from unfair contract terms in their agreements with manufacturers;
• consider the merits of a standalone automotive franchising code; and
• consider options to achieve mandatory binding arbitration for automotive franchisees.

The discussion paper seeks input to these matters, along with the views on extending the new vehicle dealership provisions of the Franchising Code to other sectors of the automotive industry. In other words, what more needs to be done?

Specific questions are provided to guide to responses. Members are invited to respond to all or any of the questions in the discussion paper to assist the preparation of MTA Queensland’s submission. These responses should be forwarded to info@mtaq.com.au by 6 September 2021.

17 August 2021