Merc dealers rev up for legal dispute
MERCEDES-BENZ dealers across Australia are in discussions with lawyers over a legal challenge over the German auto giant’s move to sell cars to consumers at a fixed price, saying they were not offered compensation for the impact on their bottom line.
The prospect of a legal challenge comes as the auto retailing scene undergoes huge transformation in Australia, including the scrapping of the Holden brand by General Motors, a change to the franchise code, and a move by Japanese brand Honda to a fixed price model in July.
Starting from January 2022, Mercedes-Benz will ditch the traditional franchise-based way of selling cars to dealers and adopt an agency model, selling cars at a fixed price through dealers, who receive a fixed commission.
The car brand has trumpeted the move as one that will increase transparency in pricing while killing the practice of haggling over a new car, but dealers say they were pressured into signing on to a less profitable new arrangement. It could also help consumers overcome a global shortage of new cars caused by Covid-19 interruptions to microchip manufacturing, with customers able to pick a vehicle from a nationwide stock selection.
But Australian Automotive Dealer Association CEO James Voortman said that although the nation’s 52 Mercedes dealers signed on to the deal by last Friday’s deadline, most did so under duress, with a failure to sign meaning they would lose their status as a dealer.
“They feel like Mercedes-Benz Australia has applied intense pressure on
them to sign this agreement and have demonstrated very little willingness to negotiate on the terms of this agreement,” he said. “These dealers have invested so much capital, time and skill in their businesses over a long period of time and they feel like all that goodwill is essentially being taken by MercedesBenz free of charge.”
Mr Voortman added that the vast majority of Mercedes dealers were considering a legal challenge.
“While these dealers have signed, they have done so under protest and are reserving their rights,” he said.
“They are currently considering their options.”
A regional Mercedes dealer speaking on the condition of anonymity said the profitability of their business would take a hit under the new model.
“The margin, or commission, available to dealers is substantially reduced,” he said.
A Mercedes spokesman said the company had been working in close collaboration with its dealers for years,
and extended the final signing date for some dealers.
“We are pleased that all existing Mercedes-Benz Cars retail partners in Australia have reconfirmed their commitment to the brand under the new agency model,” he said.
Mr Voortman said car companies had a right to change their model, so long as adequate compensation was paid. “This is not about dealers being opposed to the agency model,” he said.
“If manufacturers want to change their distribution model they have the right to do so, but they should fairly compensate the Australian businesses that established and grew the brand in Australia.”
They feel like MercedesBenz Australia has applied intense pressure on them to sign this agreement James Voortman