24th May, 2019 · Industry Relations Policy

Automotive Industry Code

AADA Position

The AADA supports action to address the imbalance of power between powerful off-shore Manufacturers and Dealers.

Background

There is a power imbalance in the automotive industry between car Manufacturers (franchisors) and franchised new car Dealers (franchisees) that disadvantages both dealership businesses and consumers who purchase new vehicles from Dealers. Many Dealers enjoy good relations with their respective Manufacturers and work in a mutually beneficial partnership, but there remain many instances where Dealers are subjected to unfair treatment.

The franchising code of conduct only offers limited protection to new car Dealers. For a variety of reasons, car Dealers are entering agreements which contain oppressive contractual clauses and unfavourable termination, non-renewal and/or end-of-term arrangements.

Franchised new car Dealers are very different from the typical franchisees in terms of the scale of their investments and the nature of their business. Similarly, car Manufacturers are also very different from the typical franchisors in terms of scale, as they are very powerful off-shore multinational corporations.

In 2019, the Government developed an automotive schedule to the Franchising Code which offered limited protections. It has since gone a step further and committed to including mandatory principles for compensation.

The AADA will continue to pursue changes which guarantee security of tenure and fit for purpose dispute resolution mechanisms. Other areas of work include extending unfair contract term provisions, the ability to collectively bargain and improved processes for indemnification.