A group of Mercedes-Benz dealers in Australia are reportedly appealing against a Federal Court ruling from last year that found the German brand’s switch to a non-negotiable, fixed-price ‘agency’ model was lawful.
In August 2023, Federal Court judge Jonathan Beach dismissed the request from 38 of Mercedes-Benz’s 50 Australian dealers to be compensated for the brand moving to an agency model on January 1, 2022.
As reported by The Australian, 37 of the 38 dealers who originally took Mercedes-Benz to court have now filed an appeal against the Federal Court’s decision.
We’ve contacted Mercedes-Benz Australia for comment.
The move to the agency model resulted in Mercedes-Benz taking ownership of dealership stock, while removing the ability for customers and dealership staff to negotiate on prices – a change which dealers claimed would drive up prices of new models.
At the time, the 38 dealers were pursuing approximately $650 million in compensation.
Justice Beach said in his ruling that Mercedes-Benz didn’t act in an unconscionable manner, nor did the brand break any laws when it chose not to renew the contracts of dealers who chose not to sign up to the agency model.
Australian Automotive Dealer Association (AADA) CEO James Voortman says the dealers – represented by HWL Ebsworth lawyers – are optimistic of their appeal being successful.
“This appeal is a watershed moment for Australia’s $170 billion franchise sector and will be a major test of the rights of franchisees where a substantial power imbalance exists between franchisor and franchisee,” Mr Voortman told CarExpert.
“We are optimistic that a successful appeal will set clear boundaries for what is acceptable behaviour by franchisors.
“It is also a line in the sand for the automotive industry which has seen other manufacturers considering following the lead of Mercedes-Benz and force dealers to transition to an agency model.
“It is significant that the presiding Judge when handing down his judgment flagged the need for further consideration to the terms of the Franchising Code and possible reform due to inadequate protections in the Franchising Code of the investment dealers make in goodwill of their dealership businesses.”
A Mercedes-Benz spokesperson told CarExpert its focus is on continuing with the agency model following last year’s judgement.
“As we have stated, Mercedes-Benz welcomed the Federal Court’s decision and the comprehensive judgement of Justice Beach.
“Our focus continues to be on delivering luxury, high-performance cars for our valued customers around Australia, who have embraced the increased consumer choice and fairer pricing of the agency model. We have no further comment on matters that are now before the courts.”
The original court case – first filed in October 2021, just a handful of months before the agency model switch occurred – was seen as a litmus test for Australia’s franchise laws, given there are more car brands looking to switch to fixed prices.
Honda was the first ‘traditional’ manufacturer to move to the non-negotiable platform in July 2021 – a decision which has since resulted in it falling from the top 10 in Australia’s annual new-car sales charts, dropping to 13,734 sales in 2023.
Available VFACTS data dating back to 1997 shows this was Honda’s worst year on record.
Mercedes-Benz has also experienced a sales decline since its move to an agency model, with its passenger car division selling 24,315 vehicles in 2023 – down from 26,801 sales in 2022 and 28,348 in pandemic-affected 2021.
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