The Automotive Franchising Code of Conduct

Public news

Following the release of the Federal Government’s Regulatory Impact Statement (RIS) to consider how best to address new car dealers’ concerns with their franchising relationship, the Federal Government is seeking input from the automotive industry to develop an Automotive Franchising Code of Conduct.

The automotive industry and the MTA have been working towards an Automotive Franchising Code of Conduct for 15 years and the announcement last month is a step forward for vehicle dealers.

Some dealers have indicated that they are experiencing a power imbalance under their franchise agreements and this review is an opportunity to assist them to create a fairer business relationship.

You can access the RIS by clicking here.

This is your opportunity to provide input ahead of our response to the Federal Government and we encourage dealers to participate in the MTA’s upcoming Working Group.

Registration is a matter of urgency! You have until this Thursday, 10 January to register for the Working Group and you can do so by clicking here.

The Statement identifies that the most significant issues requiring attention for dealers are:

1. End of Term Arrangements including:
(a) Insufficient notice periods for non-renewal of dealership agreements
(b) Franchisors providing reasons for non-renewal
(c) Stock buy-back arrangements when dealership agreements are not renewed

2. Ability to recoup capital expenditure during a dealership term by:
(a) Enhanced disclosure requirements
(b) Minimum tenure with right of renewal for the dealer

The discussion paper identifies four primary options as having the most benefit to dealerships experiencing difficulties with franchise agreements. These principal options are listed as:

Option 2A – Requiring manufacturers to provide at least 12 months’ notice when not renewing a dealer agreement.

Option 2B – Requiring manufacturers to provide a statement to a dealer whose agreement is not being renewed outlining why the agreement is not being renewed.

Option 2D – Requiring pre-contractual disclosure of significant capital expenditure to have a greater degree of specificity.

Option 2F – Enabling multi franchise mediation.

The paper also canvasses discussion on an additional four options, which have been assessed by the government as not having substantial benefits to dealerships:

Option 1 – Maintaining the status quo.

Option 2C – Mandating that manufacturers buy back stock when an agreement is not renewed.

Option 3B – Minimum five year terms with right of renewal.

Option 4 – Voluntary Code of Conduct.

For clarification on the above, contact the MTA’s Industry Policy Specialist, Nathan Robinson by clicking here.