Franchising reforms foster the potential for improved relationships

Tuesday, 1 June 2021 - Motor Trade Association of Australia

A suite of changes to the Franchising Code of Conduct announced today, including significant improvements to disclosure, coverage, adequacy of terms to secure a return on investment, dispute resolution, and compensation requirements. The reforms will help address the substantial power imbalance between internationally headquartered car manufacturers and their Australian dealership networks.

The reforms will primarily take effect from 1 July 2021, expand on the specific schedule of amendments for new car retailing and significant changes to the broader Franchising Code, and follow exhaustive representations and advocacy by MTAA to achieve a better balance for all automotive franchisees.

MTAA welcomes the inclusion of voluntary principles as mandated requirements in the announced reforms, including appropriate time to recoup significant capital expenditure, the inclusion of ‘Agency’ type agreements, and proper compensation arrangements.

MTAA says reforms that now require manufacturers (as franchisors) to specify how they will buy back or provide compensation about new vehicle inventory, parts, and special tools in the event of early termination or non-renewal of the agreement is an essential requirement. MTAA welcomed requirements that stop manufacturers from including any provision in agreements that deny the dealer compensation if the agreement is terminated early for reasons other than a breach by the dealer.

MTAA is particularly pleased with the streamlining of dispute resolution frameworks under the Australian Small Business And Family Enterprises Ombudsman (ASBFEO) and will continue to work with the Ombudsman’s Office and industry to develop specific processes for automotive franchisees further.

The MTAA says today’s announcement, combined with the inclusion of a specific schedule for car dealers and other reforms in the broader Australian Consumer Law, represent the most significant tranche of reform in the past 20 years impacting automotive industries.

MTAA thanks the Morrison Government and Ministers Andrews, Cash and Robert for listening and acting on the constructive and considered representations of MTAA over a long period to secure these outcomes for new car dealers and other automotive franchisees. MTAA will continue to work with Government to ensure the inclusion of motorcycle and farm machinery dealers in specific arrangements while recognising these groups will benefit from the broader reforms announced today.

Read the Letter from The Hon Stuart Robert MP to Mr Richard Dudley, MTAA CEO Here

Read the Directions in Australia's Automotive Industry Report 2021, Here