19/10/2021 - 14:54

Dealers to sue Mercedes for $650m

19/10/2021 - 14:54

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Mercedes car dealers are taking legal action against Mercedes-Benz to fight a new business model they say could decimate their industry.

Dealers to sue Mercedes for $650m
Industry has contended a new business model implemented by Mercedes. Photo: Victor Sutty

Australian car dealers are taking legal action against Mercedes-Benz to fight a new business model they say could decimate their industry.

More than 80 per cent of Australian Mercedes Dealers are understood to be behind the action which has been put before the Federal Court of Australia.

The Automotive Dealers Association claims dealers were forced to agree to a new strucuture they say would change them from independent businesses to re-sellers with a “gun to the head".

Under the new business structure, car companies can issue fixed prices for their vehicles as opposed to a negotiation driven transaction between a buyer and seller.

Automotive Dealers Association chief executive James Voortman says implementing this structure could set a dangerous precedent for other global franchisors.

“This is the thin end of the wedge and should send a shiver down the spine of every hard-working franchise business in Australia,” 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 in Stuttgart.”

A similar model introduced by Honda earlier this year has dramatically reduced dealer numbers and is thought to have contributed to a 38.5 per cent decrease in sales during recent months, according to the association.

Mr Voortman said it’s not just dealers who would be impacted by the changes.

“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.

“The decision to launch this legal action was a last resort for Dealers but they were left with no choice.

“Mercedes has ignored the dealers' overwhelming rejection of the 'agency' model and it has consistently failed to negotiate with Dealers on the issue of compensation for goodwill.”

Senior Counsel and commercial litigation specialist Tim Castle and automotive industry lawyer Evan Stents at HWL Ebsworth are advising the dealer group on the case.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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