Archives: Dealer Bulletins

In March of this year, the Morrison Government announced a set of changes to the Franchising Code of Conduct (FCC) aimed specifically at providing greater protections for franchised new car Dealers. These automotive specific principles have now passed into legislation as part of a wider reform package which strengthen the FCC to better protect franchisees and include significant increases in penalties applied to those found to be in breach of the regulations.

A full summary and further detail of the changes to the FCC is available in the final regulations and the Explanatory Statement.

DOWNLOAD FINAL REGULATIONS

DOWNLOAD EXPLANATORY STATEMENT

Of particular interest to Dealers in the statement is Schedule 11 (page 30) which details new obligations for Dealer Agreements.

Highlights from the reforms include:

• A revised definition of a motor vehicle dealership that includes those who act as an agent of a Manufacturer/Distributor.
• Improved clarity about the requirement for Manufacturers to act in good faith.
• An obligation for Manufacturers to compensate Dealers when they withdraw from the market, rationalise the network or change the distribution model.
• The components of compensation are specified and compensation cannot be contracted out of in the Dealer Agreement.
• Dealers must be given a reasonable opportunity to recoup Manufacturer specified capital expenditure.
• More broadly, applicable to all franchising agreements, legislates strengthened dispute resolution procedures and confers responsibility for administering them on the Australian Small Business and Family Enterprise Ombudsman.

The Government has also committed to further investigating the merits of a standalone Automotive Franchising Code and has indicated that consultations will begin shortly.

This legislation is due to take effect from 1 July 2021.

AADA’s Media Release can be downloaded below.

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The AADA is generally supportive of the measures announced in the 2021-22 Federal Budget which will help lead our economic recovery and will give automotive businesses confidence to invest and employ Australians.

Our public response to the Budget is available in the AADA Media Release issued last night.

Initiatives such as the extension of the temporary full expensing measures until 30 June 2023 Australians and the expansion of the apprenticeship wage subsidy should benefit our industry while tax relief provided to many middle- and lower-income Australian will also have a positive flow on effect for new car Dealers.

We have prepared the attached 2021-22 Budget Briefing paper for members which provides a summary and brief explanation of the measures that are relevant.

Further details are also available on the Government’s Budget Website.

Numerous AADA members have reported that they are suffering from crippling skills shortages, especially in the workshop where qualified technicians are proving very difficult to find. The issue appears to have become worse during the pandemic with the closure of the international borders preventing overseas workers from being able to enter the country, cutting off an important source of skilled technicians.

We are trying to determine how serious the issue is and would appreciate you sharing with us your experience.

Please click here to answer a small seven question survey which will provide us with further information.

Some Dealer Council representatives may have already responded to this survey, please disregard this notice if you have already submitted a response.

We are planning on taking up this issue with the Immigration Minister, Alex Hawke, and the Minister for Employment, Workforce, Skills, Small and Family Business, Stuart Robert so any information you can provide will be useful.

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The Australian Cyber Security Centre (ACSC) recently contacted the AADA and has asked that we inform members of the ACSC services and its role in protecting businesses in their dealings online.

The ACSC is a part of the Australian Signals Directorate, an Australian Government agency, and dedicated to improving cyber security and making dealing online safe and secure for individuals and businesses.

The ACSC achieves this by:

• Constantly monitoring and reporting on cyber threats from across the globe.
• Providing advice and information to businesses about how to protect themselves online.
• Maintaining a register of current and emerging cybercrime activity and providing guidance and advice on mitigation strategies.
• Providing a facility to report cybercrime.

Small and medium sized Australian businesses are particularly susceptible to cyber-attack and the ACSC is seeking to engage more closely with the business sector to support the integrity of online business activity.

Members can learn more and engage directly with the ACSC by:

• For small and medium businesses, registering as a Business Partner
• Larger member businesses (typically those with in house ICT departments) can register as Network Partners.

Businesses who register with the ACSC will receive exclusive and up-to-date cyber security information about the latest threats and vulnerabilities which are affecting SMBs and individuals.

For more general and up to date alerts, members can visit ACSC’s alerts page.

The ACSC has also developed a small business cyber security guide. This guide has been developed with small and medium businesses in mind as a starting point to upgrade businesses cyber security level by implementing a handful of simple yet effective controls and measures.

The centre also has advice regarding ransomware attacks as part of its “Act Now Stay Secure” campaigns. Advice regarding how businesses can protect themselves from ransomware and what to do in the event of a ransomware attack is available on ACSC’s website.

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Legislation which establishes a Scheme for sharing of service and repair information has been introduced into Parliament today. This Scheme has been in development for many years and the legislation is the culmination of a lengthy consultation and negotiation process between the AADA, other peak automotive industry associations and the Government.

The Scheme places an obligation on vehicle Manufacturers to make service and technical repair information available to independent repairers registered to and authorised by the Scheme, for a fair price.

One of the central principles of the Scheme is that information is shared on commercially fair and reasonable terms and the AADA is supportive of the legislation which adheres to this commitment and sets restrictions on sensitive information regarding safety and security.

The Scheme establishes the role of Scheme Adviser who will be appointed to handle administration of the Scheme, report to Government and manage any disputes that may arise. The Scheme Adviser will also work with the group of industry associations to help determine the day-to-day functions and operations of the Scheme and ensure compliance with the rules. There is further developmental work to be completed on the classification of technical information and the authorisation levels required for repairers to be able to access use the Scheme and access sensitive information.

The AADA will continue to work with the Government and other associations to structure the Scheme such that it meets its intent and treats all businesses involved in automotive repairs fairly and equitably. The Scheme is scheduled to commence no later than 1 July 2022. A copy of the Government announcement by Assistant Treasurer Michael Sukkar MP can be downloaded below.

DOWNLOAD SUKKAR’S MEDIA RELEASE

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Yesterday, the Senate Committee for Education and Employment released its final report into the Relationship Between Car Manufacturers and Car Dealers in Australia.

The inquiry was a comprehensive review into Manufacturer / Dealer relations and received over 70 submissions from interested parties as well as hearing public testimonies from several franchised new car Dealers.

The inquiry proved to be a very important platform from which the AADA and Dealers were able to demonstrate the effects of the power imbalance that exists between Manufacturers and Dealers.

The report makes seven recommendations, which are as follows:

• Recommendation 1
  3.92   The committee recommends that the Australian Competition and Consumer Commission should expedite its investigations into the behaviour and actions of GM Holden and should commit to provide regular public updates on this investigation and similar investigations into the relationship between manufacturers and dealers in the future.
• Recommendation 2
  3.93   The committee recommends that the Australian Competition and Consumer Commission proactively ensures that General Motors Australia and New Zealand is meeting its Australian Consumer Law obligations to Holden vehicle owners in relation to warranty and recalls, technical support and access to parts.
• Recommendation 3
  5.82   The committee recommends that the Australian Government prioritise the new automotive reforms announced on 12 March 2021 and implement the increased fines, mandatory principles and protection of dealers operating as a manufacturer’s agent by 1 July 2021.
• Recommendation 4
  5.83   The committee recommends that the mandatory best practice principles include a provision for the reimbursement for all reasonable expenses incurred in relation to warranty and recall work, including expenses associated with diagnosis, administration of claims and claim audits.
• Recommendation 5
  5.84   The committee recommends that the Australian Government introduce mandatory binding arbitration to resolve disputes during contracted negotiation in the automotive industry which are not able to be resolved by other dispute resolution mechanisms.
• Recommendation 6
  5.85   The committee recommends that the Australian Government appoint a senior officer in the Office of the Australian Small Business and Family Enterprise Ombudsman to investigate and coordinate dispute resolution investigations and facilitate mediation and arbitration arising from the transformation of the voluntary best practice principles into mandatory obligations.
• Recommendation 7
  5.86   The committee recommends that the Australian Government undertake a review into effectively enforcing alleged contraventions of the Competition and Consumer Act 2010 as it relates to the regulation of the relationship between car manufacturers and car dealers.

 

The full report is available for download from the Senate Inquiry’s website.

The Federal Government announcement last week regarding automotive franchising legislation is welcome news for Dealers and we are pleased that the recommendations contained in the Senate Committee report align closely with commitments already given by the Prime Minister and Minister Michaelia Cash on 12 March 2021.

Media Coverage

19 March 2021 – Senate inquiry into car dealerships prompts overhaul of franchising rules,by Rhiana Whitson, ABC News
19 March 2021 – General Motors slammed as un-Australian over treatment of Holden dealers by Senate inquiry, by Rhiana Whitson, ABC News
19 March 2021 – General Motors was ‘un-Australian’ and treated dealers with disrespect when Holden closed, by Royce Kurmelovs, The Guardian News
19 March 2021 – Long-awaited car industry report urges fix for broken dealership system, by David Ross, The Australian
19 March 2021 – Senate committee slams GM’s handling of Holden closure, by Sam Jeremic, The  West Australian
18 March 2021 – ACCC urged to push on with Holden probe, by Tim Dornin, Oberon Review
18 March 2021 – Senate inquiry measuring impact of Holden’s departure from Australia, by Tim Dornin, 7 News

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Following the Morrison Government announcement of landmark reforms to automotive franchising last week, the Small and Family Business Minister Michaelia Cash has asked us to send the attached correspondence to all franchised new car Dealers in Australia.

DOWNLOAD MINISTER CASH’S LETTER

This announcement was made on 12 March at a Dealership workshop and video of the Prime Minister and Minister Cash is available from the following link: https://youtu.be/jlPGgwJbGJc

The letter from Minister Cash provides additional detail and clarity about the incoming changes and also describes other measures that will benefit Dealers in the form of changes to the Unfair Contracts Laws, indemnification for suppliers under the ACL and imminent changes to the Collective Bargaining requirements.

The announcement of the changes to the Franchising Code of Conduct also comes with a commitment by Minister Cash to consider further Dealer protections by developing a mandatory binding arbitration scheme and investigation of the option to introduce a stand-alone automotive code.

The energy and vigour with which Minister Cash is approaching these reforms, combined with a commitment to engage in further consultations with the AADA and Dealers, is commendable and provides an unprecedented opportunity for Dealers to at least partially redress the power imbalance that exists between franchisee and franchisor.

On behalf of the AADA Board and the AMDC, we would encourage all Dealers to respond to Minister Cash’s letter and thank her for committing to these landmark reforms and inform her that we look forward to further consultations as we progress through these changes.

A copy of the transcript of the announcement can be downloaded here.

A copy the Government’s Media Release can be downloaded here.

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Today marks a landmark day for franchised new car Dealers. The Government has today announced reforms for the automotive industry which will protect Dealers against the worst abuses by some car companies and bring a degree of balance to the relationships between Dealers and Manufacturers.

The AADA and Dealer members have been working for several years on regulations which compel Manufacturers to treat Dealers fairly, provide a system for mandatory and binding arbitration and appropriately penalise those Manufacturers who fail to comply.

These new regulations are a welcome response by Minister Michaelia Cash and the Australian Government.

Dealers, their employees, and all of those other businesses who depend on dealerships for their welfare can now have confidence that they are protected from the devastating effects of those Manufacturers who seek to exploit their power and size advantage at the expense of their franchisees.

These changes include:

Mandatory principles for new Dealer agreements

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 Agency agreements are captured by franchising regulations 

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.

Appropriate fines

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.

 

The Government will also explore the merits of a stand-alone Automotive code of conduct and 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.

The changes come almost a week before the expanded Inquiry into the regulation of the relationship between car Manufacturers and car Dealers is due to release its final report and about a month after the responsibility of the issue has been shifted from Minister for Industry, Science and Technology, Karen Andrews, to Minister for Small and Family Business, Michaelia Cash.

While these changes are very welcome, the AADA Secretariat will continue to work with the Government on the merits of a stand-alone automotive code, binding arbitration and unfair contract terms.

The AADA will be encouraging members to write to the key members of the Morrison Government, thanking them for these reforms. We will provide members with any further detail and any further changes as they occur.

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The AADA has received an update from ASIC regarding their add-on insurance and extended warranty work. ASIC have made a significant departure from their previous approach and are treating insurance and extended warranty products through separate processes. The AADA secretariat has been consulting with ASIC for some time on its proposed changes and it appears that as a result much of what is being proposed is less onerous than originally anticipated.

ASIC have decided to refrain from using their Product Intervention Order (PIO) powers specifically for add-on insurance products in the automotive sector.

Instead, these products will now be subject to the economy-wide Deferred Sales Model (DSM) which is being applied by Treasury to all add-on insurance products. A summary of the new industry wide DSM can be downloaded below. This summary is taken from the explanatory memorandum to the Draft Legislation and is only intended as a guide regarding the incoming regulations. Members are advised to obtain specialist advice and speak to their add-on insurance providers for more details.

This DSM is a lot less onerous than what ASIC had been proposing in their draft intervention orders. Comprehensive car insurance is exempt from the DSM and the model will be in place as of 5 October 2021.

Members are strongly advised to work with their add-on providers to ensure they are prepared for the incoming changes and have the required consumer information.

ASIC will be issuing a new draft PIO for the sale of extended warranties. While we await the revised order, ASIC have stated that it will be designed to mirror the structure and operation of the industry-wide DSM. We expect that this means it is less restrictive than what was originally proposed, however will withhold judgement until we see a revised draft.

The secretariat will continue to work with the AADA F&I workgroup on the new changes and the incoming PIO on extended warranties. Members will be advised of any further changes as they occur.

DOWNLOAD DSM SUMMARY

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The expanded Inquiry into the regulation of the relationship between car Manufacturers and car Dealers in Australia will hold its final public hearings tomorrow, Friday, 5 February 2021.

The program and more information is available on the Inquiry’s homepage. The hearings can be streamed from the Parliamentary website.

The Senate Inquiry is scheduled to deliver its report on 18 March 2021.

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