24th May, 2019 · Industry Relations Policy

Automotive Industry Code

AADA Position

The AADA believes the industry needs an Automotive Code of Conduct 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 December 2018 the Government published a Regulatory Impact Statement to consider options for addressing the industry’s concerns regarding the relationship between vehicle Manufacturers and new car Dealers. The RIS canvassed a wide range of options from ‘no action’ through to a stand-alone mandatory Automotive Code of Conduct. It suggested that the most efficient way forward would be to pursue an Industry-specific schedule to the Franchising Code, so that consistency across industry would be maintained. The AADA has provided feedback to the government on the RIS, outlining our preferred way forward.