In a major win for the industry, today the Government committed to banning unfair trading practices and the use of unfair contract terms in agreements between Australian new car and truck Dealers and OEMs, as part of significant reforms to the franchising code of conduct.
The Government also committed to prioritising work to move the point of compliance under the New Vehicle Efficiency Standard (NVES) to the point of sale, rather than when a vehicle is imported to Australia.
This is an acknowledgement of the power imbalance that Dealers as franchisees face in their relationships with OEMs and seeks to improve the fairness of relationships between franchisees and franchisors.
For many years, the AADA has advocated the need for expanded protections for Dealers against unfair contract terms and unfair trading practices, and today’s announcement is a very welcome step in the right direction towards a more level playing field.
As seen recently in the industry, the high bar required to demonstrate unconscionable conduct has at times benefitted manufacturers in disputes with their Dealer networks, and many challenges faced by Dealers are a consequence of the misuse of power by car manufacturers.
Unfair Trading Practices
While the details of the reforms are yet to be finalised, we expect the introduction of these significant reforms will ensure Dealers are protected from a whole host of unfair practices that would not currently reach the high bar of unconscionable conduct.
Some examples of these practices could include:
- Making unilateral significant changes to the business model with little to no negotiation with Dealers.
- Terminating Dealer agreements and pressuring Dealers to accept inadequate compensation within very tight deadlines.
- Offering short term Dealer Agreements with no prospect of recovering investment.
- Linking major investment to the renewal of a franchise agreement.
- Pressuring Dealers to take on additional stock and register vehicles as sold to improve market share of the manufacturer.
- Refusing to indemnify Dealers (a legal obligation) for work done to honour an OEM’s warranty and Australian Consumer Law obligations.
- Conducting random warranty audits, clawing back large sums of money by extrapolating the results from a small sample over an extended period of time.
- Setting unrealistic sales and performance targets and using failure to achieve targets to penalise Dealers financially.
The AADA will be heavily involved in the consultation process to develop the unfair trading practices prohibition, and ensure that the practices above are covered sufficiently under any regime design that is developed.
Unfair Contract Terms
While the Unfair Contract Term regime has been in place for a number of years, this expansion of protections against unfair contract terms will ensure all Dealers are protected from unfair terms in standard-form contracts regardless of turnover or employee count.
Some examples of these terms could include:
- Terms that give the franchisor an unconstrained ability to vary key aspects of the franchise agreement (including the terms under which the franchisee operates).
- Terms which place no constraints or limits on when, how or why the franchisor may unilaterally vary the operations manual.
- Terms that give the franchisor excessive authority to terminate a franchise agreement.
These vital reforms will provide Dealers with greater certainty, ensuring they can operate and invest with confidence in an evolving economic landscape, however, they will only apply to contracts entered into following the implementation date of the reforms.
NVES Point of Compliance
Today’s announcement means that the Government will prioritise this work to move the NVES point of compliance ahead of the planned 2026 review.
The AADA has continued to advocate a need for this change as part of the NVES and welcomes this announcement as a signal of the Government’s determination to ensure Australian automotive businesses are not adversely impacted by the business practices of international car companies.
AADA Members Webinar
To ensure all members are aware of this recent announcement and what this means for them, the AADA will be hosting a webinar where members can hear from the AADA and experts on these reforms and ask any questions they have.
Date: Friday 28 March 2025
Time: 11:30am – 12:30pm AEDT
Further details on this webinar and a link to register will be circulated later this week, and in the meantime, the AADA will be seeking further details on this announcement to provide to members.
