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Not how the Mercedes-Benz: Prestige dealers launch court action

Business

Australian Mercedes-Benz dealers have launched Federal Court action against the German car giant, seeking to block major changes to their operations.

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The Australian Automotive Dealers Association says 80 per cent of the company’s Australian dealers have joined the action after the introduction of new contract arrangements.

The changes shift dealers from being independent, self-run businesses with their own inventory to being agents or re-sellers.

AADA chief executive James Voortman says new arrangements have major long-term implications for the automotive industry, Australia’s franchise industry more broadly and consumers.

“At the heart of this industry are Australian family businesses who have built up their businesses in some cases over generations with Australian ingenuity and plain hard work,” he said.

“The dealer network has invested hundreds of millions in growing their businesses only to have that value taken from them with the stroke of a pen.

“This is also bad news for Australian consumers who will pay more for cars, see less competition and will no longer be able to shop around for the best deal,” he said.

In a recent statement, Mercedes-Benz Australia said the agency model had been developed in close collaboration with its retail network over the past three and a half years.

While dealers were asked to sign up for the new agency model by the end of August, it told online automotive news service GoAuto that an extension of time was available to any dealer that wanted one.

The move by Mercedes-Benz is similar to changes implemented recently by Honda, which cut the number of its outlets across the country.

Honda’s sales have fallen by 38.5 per cent so far this year, though it has concentrated its efforts in the Australian market on a smaller number of models.

During the same period, sales of Mercedes-Benz cars have increased by 5.4 per cent.

In their action, the dealers argue the changes to be introduced by the company reduce the goodwill value of their businesses by a collective $650 million.

Voortman said if the company was successful in forcing the changes, without paying appropriate compensation for the loss of goodwill, it would set a dangerous precedent for other global franchises.

“The decision to launch this legal action was a last resort for dealers,” he said.

“Mercedes has consistently failed to negotiate with dealers on the issue of compensation for goodwill leaving them with no choice.”

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