The sudden and shock shutdown of the Holden brand last year has prompted sweeping reforms that will better protect consumers – and car dealers – from being abandoned by foreign automotive giants in the future.
In a move that will give motorists greater peace of mind about ongoing parts, service and warranty support in their local area, the Federal Government today announced plans to address the “growing power imbalance with multi-national car companies and new-car showrooms” – by introducing fines of up to $10 million for misconduct under a revised franchising code.
It means foreign car companies can be fined if they “unilaterally” change contracts, offer insufficient compensation for closing a dealer, or knock back legitimate warranty claims.
The changes come as a handful of Holden and Honda dealers remain in negotiations with their respective manufacturers after disputing the amount of compensation they are owed after having their showroom contracts terminated.
The new franchising code will allow dealers to invest in facilities and employees knowing they have a secure future – and that car companies must honour their obligations for warranty, parts, and service back up.
Under the previous conditions, foreign car companies could terminate a dealership with little warning and often under dubious conditions, leaving customers in the local area without parts, service and warranty support.
“We stand up for Australian jobs and Australian businesses,” Prime Minister Scott Morrison said in a media statement.
“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.”
Automotive dealers employ more than 60,000 Australians – including approximately 4000 apprentices – and contribute more than $12 billion in turnover to the economy.
The CEO of the Australian Automotive Dealers Association (AADA), James Voortman, said the reforms are “sensible and fair and will bring all manufacturers up to the standard already being employed by ethically-minded car brands operating in Australia.”
The new code of conduct will ensure dealer agreements are “captured by these regulations” and will set “appropriate fines for breaches of the franchising code”, the AADA said.
“Only (car) manufacturers who ride roughshod over Australian dealers have anything to fear from what has been announced today,” said Mr Voortman.
The Federal Government said the new measures announced today will:
- Increase available penalties under the Franchising Code to up to $10 million. This will strengthen penalties for wilful, 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.
In a media statement, the Federal Minister for Employment, Skills, Small and Family Business, Michaelia Cash, said: “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 decisive suite of reforms for automotive dealerships and the many local businesses, apprentices, charities and broader communities that they in turn support.”
The Prime Minster’s office said the recent recovery in new-car sales was “further proof the Australian economy is on the comeback” after “reaping the rewards of … the support from our supercharged instant asset write-off.”