ACCC Delivers Report on Unfair Contracts – How it affects Dealers

On 10 November 2016, the Australian Competition and Consumer Commission (ACCC) released its report of common unfair contract terms identified in a number of industries. While the ACCC’s report did not specifically consider motor vehicle dealer agreements, it did consider a number of terms that are common in franchising – including in motor vehicle retailing.

The ACCC’s report makes it clear that it:

  • considers terms of a dealer agreement that allow a franchisor to unilaterally vary key aspects of a dealer agreement (such as dealer standards or manuals), especially in a largely unrestrained manner, are likely to raise concerns in terms of being ‘unfair’; and
  • is concerned about terms that grant a franchisor an unreasonable power to terminate a franchise agreement. For example, on notice without any breach by a dealer of the terms of the dealer agreement, or where there are breaches by a dealer of the dealer agreement but where there is no regard to the severity of the breaches or whether the franchisee had remedied them.

The ACCC’s Report comes in the context of the amendment to the unfair contract terms protection regime to small businesses. That significant legal reform may however have minimal impact on most dealers, by reason of it being restricted to ‘small business contracts’ which, by definition, seem to exclude most dealers.

However, the ACCC’s report is still relevant to dealers because there are existing laws which protect dealers from unfair contract terms. In particular, under the Motor Dealers and Repairers Act 2013 (NSW) (MDR Act), manufacturers and distributors are prohibiting from entering into unfair contracts with dealers and from entering into unjust conduct.

The MDR Act applies to any motor vehicle dealers who operate in New South Wales or, if they operate outside of New South Wales, whose dealer agreements are governed by the law of New South Wales. It is not uncommon for dealers based outside of New South Wales to have dealer agreements governed by the law of New South Wales. This usually occurs if the manufacturer’s head office is based in New South Wales and is a convenient way for dealers to access the rights available under the MDR Act and through association with AADA.

Importantly, under the MDR Act, AADA is approved and recognised as Australia’s peak ‘Motor Industry Group’ representing motor vehicle dealers.

If the MDR Act applies to a dealer, and that dealer has a concern about being forced to comply with unfair contractual terms, the dealer may:

  • lodge a complaint to the NSW Small Business Commissioner in respect of:
    –   un unfair contract, or unfair contract term; or
    –   unjust conduct by a manufacturer.
  • if the NSW Small Business Commissioner cannot resolve the issue, a dealer or AADA (as a representative body) can commence legal proceedings in the NSW Civil and Administrative Tribunal (NCAT) seeking declarations that:
    –   a contract, or term of a contract, is unfair; or
    –   conduct of a manufacturer is unjust.
  • seek orders such as:
    –  declarations that a contract is void or to be varied in part;
    –  requiring specific performance of a term in a contract; or
    –  compensation to be paid.

All disputes with manufacturers need to be carefully considered, especially having regard to the length of individual dealers’ tenure under it dealer agreement. However, dealers who are based in New South Wales, or whose Dealer Agreements are governed by the law of New South Wales, should seek legal advice if concerned about unfair contract terms or unjust conduct on the part of a motor vehicle manufacturer or distributor.

This article was written by Evan Stents – Lead Partner and Christian Teese – Senior Associate, Automotive Industry Group | HWL Ebsworth Lawyers.


Evan Stents
Lead Partner, Automotive Industry Group | HWL Ebsworth Lawyers

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