Government promises fairer car retailing

The federal government has committed to reforming the automotive retail sector in Australia, hot on the heels of a call from consumer advocate Choice for car companies to implement a 60-day refund measure as policy.

As reported earlier, Choice has named and shamed some of the car companies reluctant to accept the return of a known 'lemon' in exchange for a refund, despite that reluctance placing the company in conflict with Australian Consumer Law.

But while the government has since promised in a press release to "reform the new car retailing sector to make the system fairer for consumers, dealers and manufacturers", it stopped short of stipulating what the necessary measures would be. The press release, titled 'Delivering a fair and competitive car retailing sector', was issued jointly by MPs Karen Andrews and Michaelia Cash.

“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,” said Karen Andrews, the Minister for Industry, Science and Technology.

“Most players in the sector are already doing the right thing but when the few don’t, the consequences can be significant,” the minister was quoted as saying in the press release.

Although those words are reassuring for consumers, the press release was equally focused on the needs of franchisees – in automotive terms, the dealers that many consumers regard with suspicion.

The Australian Automotive Dealer Association (AADA), representing dealers around the nation, claims that they need help too.

“We very much welcome the Government’s commitment to level the playing field between Australian new car Dealers and powerful offshore Manufacturers,” AADA CEO, James Voortman was quoted as saying in the association's own press release.

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

In an interview with autotalk.com.au, Voortman explained the dealers' side of the conflict with their own customers.

“Consumers are struggling to enforce their consumer rights and dealers are often the meat in the sandwich between the consumer and the OEM [original equipment manufacturer – the importer/wholesaler],” he told autotalk's Scott Murray.

“Under the law, dealers that provide refunds and replacements to consumers have the right to be indemnified,” Voortman acknowledged.

“However, it is not that simple; as one dealer put it to me recently, seeking indemnification from the OEM is often like putting a target on your back.”

To date, the government has formed an inter-agency Franchising Taskforce to contemplate and act upon recommendations from the Parliamentary Joint Committee's 'Fairness in Franchising' report, which is not exclusively focused on franchising in the automotive sector. Both the committee and the taskforce are working towards 'fairness' for franchisees rather than fairness for consumers.

"The franchise sector has been a powerhouse, helping to drive economic growth in this country for many years. We know when they are supported, more jobs are created for hardworking Australians,” said Michaelia Cash, the Minister for Employment, Skills, Small and Family Business.

“There are over 1300 franchisors operating in Australia and around 97,000 franchisees, which are 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 Victorian Automobile Chamber of Commerce (VACC) and the Motor Trades Association of Australia (MTAA) are known to have presented a submission on behalf of their respective members to the Franchising Taskforce, supporting the recommendations of the Fairness in Franchising report, which can be downloaded here.