The Commonwealth Government today released a discussion paper to seek views on the merits of a standalone Automotive Franchising Code of Conduct and options to achieve mandatory binding arbitration for automotive franchisees. The paper also seeks evidence to support expanding protections for new vehicle dealerships to other parts of the automotive sector.
The discussion paper is intended to build on the reforms to the Franchising Code of Conduct introduced on 1 July this year by the Commonwealth Government as they relate to the automotive sector.
A Standalone Automotive Franchising Code of Conduct
The discussion paper states that options available to the industry are to:
- maintain the status quo with the present Franchising Code and amend it and its specific automotive provisions to address emerging issues as they arise; or
- establish a standalone automotive franchising code. A new standalone code for automotive franchising could provide more tailored regulation that meets the unique needs of the automotive franchising sector and better communicates expected behaviours.
Expanding protections for new vehicle dealerships to other parts of the automotive sector
The automotive-specific reforms introduced to the Franchising Code on 1 June only apply to new motor vehicle dealership agreements of new passenger road vehicles or new light goods road vehicles. The amendments were only intended to cover new road motor vehicles and excludes all other motor vehicles such as motorbikes, farm machinery and trucks given there was limited evidence submitted at the time to support expanding the scope beyond new cars. The Government is now asking stakeholders to provide evidence to support the consideration of expanding protections for new vehicle dealerships to other parts of the automotive sector.
Binding arbitration
Mandatory binding arbitration allows one of the parties to bring a dispute to an independent third party (arbitrator) for a determination, and both parties are bound by the arbitrator’s decision. The benefits of arbitration include it being confidential; a more efficient and economical exercise than litigation; and parties can secure a determination in circumstances where mediation has failed. The Government has also stated that arbitration also carries costs and risks for industry participants, including those that arise from being required to accept contractual terms set by a third party, and the risk of discouraging compromise in negotiations prior to arbitration. However, it may encourage parties to reach agreement prior to pursuing formal dispute resolution processes.
Under the current Franchising Code reforms, arbitration is permitted but can only be adopted if both parties agree to the process.
The discussion paper sets out a number of binding arbitration models and seeks stakeholder input into these models.
The discussion paper is available at www.treasury.gov.au/consultation
Stakeholders are invited to provide a submission to smallbusinessfranchising@treasury.gov.au by 13 September 2021.
This article was written by Evan Stents, Partner – Automotive Industry Group.
