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New franchising reforms seek SME protections in auto industry

Adrian Flores
Adrian Flores
12 March 2021 1 minute readShare
SME protections in auto industry

The federal government has introduced new reforms to the Franchising Code of Conduct that are aimed at protecting family-owned automotive businesses from being exploited by multinational car companies.

A fine of up to $10 million could be given to international car companies that undertake systemic breaches under the new code, including unilaterally changing contracts, poor compensation and reneging on warranties.

The existing voluntary automotive principles will also be made compulsory and a new mandatory automotive code will be strongly considered following an industry consultation.

Further, the government is seeking to explore mandatory binding arbitration provisions within this new code, similar to those in the Media Bargaining Code, which was developed to curtail the power of the big tech platforms.

In addition, the government is seeking further consultation with the automotive franchising sector on:

  • Ensuring appropriate protections for automotive dealerships from unfair contract terms in their agreements with manufacturers;
  • Options to achieve mandatory binding arbitration for automotive franchisees, to address power imbalance when there is a dispute; and
  • The merits of a standalone automotive franchising code.

Minister for Employment, Skills, Small and Family Business Michaelia Cash said the reforms provide certainty for automotive dealerships and the many local businesses, apprentices, charities and broader communities that they in turn support.

“The government is fully committed to enacting reforms that are impactful and deliver for the nation and regions where transport is integral for economic and social needs,” Ms Cash said.

“I am looking forward to working together with the industry to ensure the reforms made will better the overall experience of consumers, who ultimately drive the demand that underpins the viability of the automotive sector.”

Responding to the reforms, small business ombudsman Bruce Billson said the suite of reforms seeks to specifically mitigate the power imbalance between multinational car manufacturers and Australian dealers.

“These proposed changes represent significant progress and, once passed, will go a long way to levelling the playing field in the automotive franchising sector,” Mr Billson said.

“They will ensure that franchise-like arrangements where dealers are operating as the car-maker’s new vehicle sales agent still benefit from the Franchising Code protections.

“The changes that apply to the automotive industry are welcome, as is the government’s commitment to continue working with the automotive franchising sector to examine unfair contract terms in their agreements.”

New franchising reforms seek SME protections in auto industry
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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