Standalone Automotive Sector Franchising Code

The Federal Government has released a discussion paper seeking stakeholder views to help the Government assess the practical benefits of a standalone automotive franchising code and options for mandatory binding arbitration.

History 

On 1 June 2020 the Federal Government introduced an automotive part to the Franchising Code of Conduct (the Franchising Code). The amendments to the automotive part of the Franchising Code included end of term obligations (including notification obligations on both the franchisor and the franchisee), capital expenditure obligations and multi-franchisee dispute resolution.

In August 2020 the Federal Government released it's response to the Parliamentary Joint Committee's Fairness in Franchising Report.  In its response the Government proposed amendments to the dispute resolution process including the introduction of voluntary binding arbitration across the franchising sector.

On the 11 December 2020 the Federal Government introduced voluntary best practice automotive principles to build on the Franchising Code automotive amendments. 

The March 2021 Senate inquiry report Driving a fairer deal: regulation of the relationship between car manufacturers and car dealers in Australia, recommended that the Government comprehensively assess whether a standalone automotive code of conduct would be a more appropriate approach for regulating the relationship between car manufacturer and dealers.

As a result of the Senate inquiry report, on 12 March 2021 the Federal Government announced that it would

• transform the existing voluntary best practice automotive principles into mandatory obligations under the Franchising Code; and
• explicitly recognize that new vehicle dealers operating as a manufacturer's agent in relation to new vehicle sales are still protected by the Franchising Code.

In addition the Federal Government committed to consult with the industry on potential further automotive franchising reforms to:

• ensure appropriate protections for automotive dealerships from unfair contract terms in their agreements with manufacturers;
• consider the merits of a standalone automotive franchising code; and
• consider options to achieve mandatory binding arbitration for automotive franchisees.

In June 2021 the Franchising Code of Conduct was amended. As foreshadowed, the Government included the existing voluntary best practice principles as mandatory obligations under the Franchising Code.

Options for Further Supporting the Automotive Industry

The Federal Government has set out two options for further supporting the automotive industry:

• Option 1: Amend the Franchising Code and its automotive specific provisions when required.
• Option 2: Establish a standalone automotive franchising code.

Options for Arbitration for Automotive Franchisees

The scope of arbitration under a mandatory industry code is limited by the Constitution as under the Constitution only Courts can exercise judicial power.

The Federal Government has set out two options for arbitration in a mandatory Code. Both options are limited to pre-contractual arbitration:

• Option 1: Pre-contractual arbitration model

The first option suggests a model similar to that used in the Sugar Code and the Wheat Code which deal with transactional agreements.

• Option 2: Arbitration model used in the Media Bargaining Code

The second option suggests a model similar to that used in the Media Bargaining Code. Under this model, arbitration can be used if the parties meet certain conditions.

Stakeholders have until 13 September 2021 to make submissions.

The discussion paper can be found here.

Disclaimer

The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.