In a video message at the AADA Convention, the Minister for Industry, Science and Technology, Karen Andrews, confirmed that the Government would be introducing mandatory regulations before the end of the year to reform franchise relationships in the automotive sector.

The AADA is working with the Government to ensure that, among other things, the regulation will cover:

  • alternative distribution models, such as an Agency model
  • a direct link between investment made by a Dealer and the length of the Dealer Agreement
  • requiring OEMs to buy back stock, parts and tools in the event of a non-renewal
  • a framework for warranty and ACL claims
  • protections for Dealers against unfair contract terms, and
  • a better dispute resolution mechanism.

Minister Andrews said a range of reforms to automotive franchising arrangements will be considered after consultation with the public as well as the industry.

“We have heard the concerns of those within the sector and are committed to creating a level playing field. It’s about ensuring everyone gets a fair go, including our small and family car Dealers,” she said.

“Most players in the sector are already doing the right thing, but when the few don’t, the consequences can be significant.”

The Government says its reforms will provide for more transparent and cooperative end of term and capital expenditure arrangements. It says these changes will strike an appropriate balance between the concerns raised by new car Dealers and the flexibility car Manufacturers require to manage their dealership networks.

The Government has also established an inter-agency Franchising Taskforce to carefully consider the Parliamentary Joint Committee’s Fairness in Franchising report. The Committee considered broader reforms across the franchising sector.

Minister for Employment, Skills, Small and Family Business, Michaelia Cash, said the Government was committed to helping Australian small and family businesses, including those in the franchising sector, to grow and prosper.

“The franchise sector has been a powerhouse, helping to drive economic growth in this country for many years. We know that when they are supported more jobs are created for hardworking Australians,” Senator Cash said.

“There are over 1,300 franchisors operating in Australia and around 97,000 franchisees, predominantly made up of small and family businesses. They make a significant contribution to the economy, with revenue in excess of $182 billion dollars and employ over 594,000 people.”

The Government will continue to consult industry on draft automotive regulations in the coming months.

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AADA CEO, James Voortman, welcomed the Government’s commitment to level the playing field between Australian new car Dealers and powerful offshore Manufacturers.

“The existence of a power imbalance has been clearly demonstrated through various inquiries and reviews and the announcement that there will be reforms to automotive franchising arrangements is a significant step in the right direction,” he said.

“These reforms will address end-of-term and capital expenditure arrangements, which are key issues that have been raised regularly by our members. We will also be urging the Government to address issues of tenure and consumer law issues.”

Mr Voortman assured Dealers that AADA would work closely with Ministers Andrews and Cash, the Department of Industry, Innovation and Science, and other industry participants to make sure that the reforms were implemented.

“The AADA has worked tirelessly to develop broad support for industry-specific protections for franchised new car Dealers, and the Minister’s announcement today represents significant progress,” he said.

“Reform in the Automotive retailing sector enjoys the support of the Government, the Opposition, the Small Business and Family Enterprise Ombudsman, the Franchising Council of Australia and most bodies in the Automotive sector.”

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