ACCC calls for reforms to new car retail industry

19 December 2017

On 14 December 2017, the ACCC released its final report setting out recommendations it says will improve the new car retail industry for consumers. Importantly for new car dealers, the report recognises that there is a power imbalance between new car retail manufacturers and dealers and identifies a range of potential reforms to address this imbalance which may be considered as part of the next review of the Franchising Code of Conduct.

The final report comes following a market study of the new car retail industry over the last 18 months. According to the ACCC, the market study was undertaken because of a ‘deep concern about the level of non-compliance with the Australian Consumer Law’ in the new car retailing industry.

The final report set out three key observations:

  • Car manufacturers need to update their complaint handling systems and improve their approach to the handling of consumer guarantee claims;
  • A mandatory scheme should be introduced for car manufacturers to share technical information with independent repairers; and
  • New car buyers need more accurate information about their cars’ fuel consumption and emissions.

The final report also made a number of additional observations and recommendations that stand to affect new car retail dealers. These include that:

  • Dealer warranty claim reimbursement processes are unnecessarily complex, include arbitrary administrative and technical requirements and can lead to dealers being inadequately reimbursed or indemnified for remedies they have provided for their customers;
  • Car manufacturers should review their dealer agreements, policies and procedures to ensure that their commercial arrangements with dealers do not contain unfair contract terms – including in relation to the reimbursement by manufacturers of dealer warranty reimbursement claims;
  • The Australian Consumer Law should be enhanced so that consumers are provided with ‘additional clarity’ about when they are entitled to a refund or replacement under consumer guarantees; and
  • The ACCC should work with manufacturers and dealers to develop a concise and simple explanation of consumer guarantee rights under the Australian Consumer Law and their interaction with manufacturer warranties – to be provided to consumers when they buy a new car.

The ACCC has recently been particularly active in pursuing manufacturers in the new car retail industry for alleged breaches of the Australian Consumer Law.

The ACCC’s market study also considered submissions from the Australian Automotive Dealer Association (AADA) in relation to the imbalance of power between dealers and manufacturers in their commercial arrangements. The ACCC has stated that it considers these issues may require further examination, including:

  • Minimum tenure and capital investment requirements;
    • a required minimum term for dealer agreements with the objective of allowing dealers a sufficient period in which to recoup capital investment required by the manufacturer;
    • limitations on the level of capital investment that a manufacturer can require of a dealer based on the tenure of the dealer agreement offered;
    • enhancing a dealer’s rights to be compensated for capital investment required by the manufacturer in the event of non-renewal of the agreement;
  • Reasons for non-renewal;
    • providing dealers with reasons for non-renewal of a dealer agreement to enable an assessment of whether non-renewal has been exercised by a manufacturer in good faith;
  • Changes to commercial arrangements;
    • providing national dealer councils and/or dealers with a minimum period of prior notice of proposed amendments to dealer agreements, policies and procedures and the ability for national dealer councils and/or dealers to challenge proposed amendments;
    • exempting certain aspects of the commercial arrangements between manufacturers and dealers from unilateral variation by either party;
  • Reimbursement for remedies;
    • enhancing a dealer’s right to reimbursement to recover the costs of providing remedies where the manufacturer is responsible for the failure; and
    • strengthening the accountabilities of manufacturers and dealers when providing remedies to consumers.

The ACCC states in its final report that one possible option for this further examination of these dealer issues – and how they should be addressed – may be in the context of the next scheduled review of the Franchising Code of Conduct. The next scheduled review will occur in 2020.

A full copy of the ACCC’s final report is available by clicking here.

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