The Federal Chamber of Automotive Industries welcomes today’s decision by the Full Court of the Federal Court to dismiss the appeal brought by a group of dealers, reinforcing the right of automotive brands to modernise their operations in line with evolving global business practices and consumer expectations.
The court decision relates to a matter concerning the commercial arrangements between Mercedes-Benz Australia/Pacific Pty Ltd and 38 Mercedes-Benz dealers.
FCAI chief executive Tony Weber said the decision affirms the principle that private businesses in Australia should be free to structure their operations to best manage their business without excessive regulatory interference.
“This decision is a clear recognition from the courts that businesses have the right to choose how they go to market,” Mr Weber said.
“The agency model is one of many approaches being explored internationally. Preserving the freedom to adopt such models ensures Australian consumers are not left behind as the global automotive market evolves.
“Calls for increased red tape and compensation schemes tied to traditional distribution models ignore the fact that many dealerships today are part of multi-billion-dollar enterprises on the Australian Securities Exchange.
“Automotive brands and multi-site, publicly listed dealership groups have a sophisticated commercial relationship. This is no longer a sector defined by small family operations. Dealerships are highly capitalised businesses that should not be shielded from commercial evolution.”
According to 2024 Australian Automotive Dealer Association data, 12 per cent of dealership gross profit is generated by new car sales[1].
“This demonstrates that the profitability of a successful dealership is more than just new car sales, but the total customer experience,” Mr Weber said.
The FCAI rejected claims that the agency model diminishes competition or harms consumers.
“The agency model has long been used by many sectors of the economy, in many countries around the world, including Australia,” Mr Weber said.
“The suggestion that less competition or higher prices will follow from this ruling is not supported by the evidence.
“The agency model delivers greater price transparency and consistency for all buyers.
“Using the levers of government to restrict the evolution of business models is a recipe for higher costs and fewer choices for consumers.”
[1] AADA (2024, April 8), Dealernomics Automotive Statistics, p 11 https://www.aada.asn.au/wp-content/uploads/2024/04/Dealernomics-Automotive-Statistics-2024-Final.pdf