Government moves on automotive code of conduct

The Department of Industry, Innovation and Science is calling for input from the nation’s car dealers in anticipation of a proposed split from the Franchising Code of Conduct.

The newly released Regulatory Impact Statement (RIS) outlines a number of possible solutions for the tightening relationship strains between car dealers and manufacturers identified by the Australian Competition and Consumer Commission (ACCC) in 2017.

Concerns over the new car retailing market, in particular, the imbalance of power between large car manufacturers, dealers and repairers have seen many entities throw their support behind an industry-specific code.

In September, the Franchise Council of Australia (FCA) welcomed the Labour party’s proposed commitment to introducing a separate automotive code, suggesting a new code would address the industry-special challenges faced by those within the sector.

"It is important that in the preparation of any new code, the industry is comprehensively consulted and a proper balance assured that incorporates best practice compliance, consumer protection, competition and continued market innovation," FCA CEO Mary Aldred said.

That being said however, the RIS indicates that no firm agreement had been reached between car dealer franchisees and car manufacturer franchisors.

“While there may be some agreement on key concerns for dealers, as franchisees, in their dealings with car manufacturers, as franchisors, there is no firm agreement on the best way to address dealers’ concerns – whether through amendments to the Franchising Code or specific provisions within a standalone Automotive Code,” the statement read.

At present, agreements between dealers and manufacturers are regulated by the Franchise Code of Conduct, however the arrangements differ from regular franchise models in two distinct ways.

Specifically, new car dealers do not pay fees or royalties to car manufacturers for the use of their brand and new car dealers typically control the location of the franchise, with many owning the land on which the dealership is located.

While the government has committed to exploring the possibility of an industry-specific code, it remains to be seen whether this would take the form of a voluntary or mandatory scheme,

The RIS analysis however, suggests that a voluntary code would be ineffective.

“The benefits of self-regulation can only be realised where it is effective at changing the behaviour of industry participants. Previous attempts at addressing the problems identified in this RIS suggest that a voluntary code of conduct is unlikely to be effective.”

David Blakhall, CEO of the Australian Automotive Dealer Association (AADA) said the government’s proposed industry-specific code demonstrated a commitment to bettering industry conditions.

“This represents significant progress and the AADA will be working closely with the Government to make sure this much needed policy is implemented,” Blackhall said.

“The AADA has worked tirelessly to develop broad support for an Automotive Code of Conduct. We now have commitments from the Government and the Opposition as well as support from the Small Business and Family Enterprise Ombudsman, the Franchising Council of Australia and most industry bodies in the Automotive sector.”