26th October, 2017 · Media Release

AADA calls for new car Retail Industry
Code of Conduct

The Australian Automotive Dealer Association (AADA) has called on the ACCC to recommend an industry-specific code of conduct for the new car retail industry when it brings down its final report on the Retail Car Industry in December.

The ACCC study has highlighted the structural imbalance between manufacturers and dealers which leaves both consumers and dealers vulnerable.  The imbalance is caused by one-sided dealer agreements, policies and procedures – including restricting what dealers are allowed to say to consumers.

AADA CEO David Blackhall said that the market study had expressed concerns that dealer agreements were limiting dealers’ ability to assist consumers.

“Under these agreements dealers are required to adhere strictly to manufacturers’ policies regarding warranties and potential product defect claims, they are not to admit liability and can be required to allow manufacturers to assume control of how dealers handle complaints,” Mr Blackhall said.

“Consumer complaints handling is only one feature of a relationship skewed very much in favour of manufacturers. Under the current system dealers have no security of tenure; are increasingly being served with non-renewal notices; have ineffective capital expenditure protections; and are subject to unfair end of term arrangements” Mr Blackhall said. This has the effect of giving manufacturers significant commercial leverage to force dealers to obey instructions given to them (even if that is to the detriment of consumers).

“Non-renewal notices are issued despite dealers fulfilling their end of the bargain by exceeding performance targets and injecting significant capital investment into their facilities,” Mr Blackhall said.

“The situation has hit rock bottom and dozens of dealers have been issued with non-renewal notices in recent months. The Franchising Code of Conduct does not take account of dealers’ specific and unique circumstances and has not served dealers and consumers well,” Mr Blackhall said.

“The automotive industry is very different to other franchised industries and an industry-specific code specifically designed for dealers will better protect consumers and dealers”, he said.

Mr Blackhall said new car franchise dealers have invested over $17 billion in buildings, facilities, employ around 70 thousand people and contribute just over two per cent to the national economy.