A controversial Federal Court trial pitting Mercedes-Benz Australia against a big chunk of its dealer network will get underway in earnest soon.
A trial date has now been scheduled for August next year with the matter to return before Justice Beach earlier, in February 2022.
The Australian Automotive Dealer Association (AADA) says it’s a win after claiming “strenuous efforts by Mercedes-Benz to delay the start of proceedings”.
This is something Mercedes-Benz Australia for its part denies in strong terms.
“Mercedes-Benz Australia is pleased with today’s outcome and it has always been our position that this matter should be determined by the Court as quickly as possible,” a company spokesperson told CarExpert.
As reported at length here, a majority of Mercedes-Benz Australia’s independent dealers are seeking $650 million in compensation from the German luxury giant, citing good-faith aspects of franchise law being breached.
The context is Mercedes-Benz’s industry-shaping move to, just like Honda, pivot away from its current business and into an ‘agency model’ from January 2022.
The agency model will see Mercedes-Benz retain ownership of its stock rather than wholesaling it into franchise dealers, and set prices nationally with no room for haggling. Dealers will get a fee-per-sale, rather than their own margin after costs.
Mercedes calls the model a win for consumers because they will now get access to full national vehicle inventories and needn’t worry about price ‘gouging’ (prices north of RRP) or determined price negotiating.
It says it has been consulting with its dealers around the new business model for three years, and entered mediation after aspects of the final draft agreement were rejected by most dealers. Mercedes already uses the agency model in South Africa, Sweden, and Austria.
Dealers retort that it’ll in fact drive up costs for consumers by setting prices, while also hurting their revenues, hence the claim for compensation. This case is not about banning agency, but rather about seeking compensation for its allegedly forced adoption.
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While Mercedes-Benz’s 50+ Australian dealer operators have all signed up to the revised agreements (after existing dealer agreements all lapsed by design at the same time) they claim to have done so under duress, following legal advice.
Speaking on the matter today, the AADA – an advisory peak body – called the case “a critical test of Australia’s Franchising Code of Conduct and Australian Consumer Law with far reaching implications for every franchise business”.
“Mercedes is seeking to force through a new business model which will see Australian Dealers shift from being independent self-run businesses, who own their own inventory, to become mere agents and re-sellers for Mercedes with drastic implications for the future of their businesses,” it added.
Speaking on behalf of the dealers, AADA CEO James Voortman added:
“We are delighted the Federal Court agrees with us that the issues in our case are urgent and deserve to be heard as soon as possible. We can now take the fight up to Mercedes-Benz without delay to seek justice on behalf of the Australian industry.
“Despite strenuous efforts by Mercedes-Benz to delay the start of proceedings, we are pleased to have a trial date for next year and for a process that will see us back in court in February at the latest.
“This is a watershed issue for Australian consumers and the entire Australian franchise industry. If Mercedes is successful in forcing these changes on the industry, history shows competition will go down and car prices will go up.
“Every franchise owner will be watching this case closely because if the Colossus Mercedes-Benz can appropriate the goodwill of Australian car dealers without compensation, any franchisee could be at risk of the same threat.
“Fundamentally, franchisees are the back-bone of Australian small business. Most are family businesses who have built up the value in their business through sheer hard work and created real value for themselves and their local communities.
“If Mercedes creates a precedent, where that value can be captured for its own benefit without compensating franchisees, then any franchisor will be able to do the same.”
The dealer group is advised by a legal team led by Senior Counsel Tim Castle SC, and auto industry lawyer Evan Stents from HWL Ebsworth.
Mercedes-Benz Australia added in reply:
“We look forward to the launch of the Mercedes-Benz Agency Model, which will better meet the demands of modern Australian consumers.”
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