Written by Robert Toth<\/p>\n\n\n\n
<\/p>\n\n\n\n
What this decision means not only for auto dealers, but for Franchisors generally. <\/strong><\/p>\n\n\n\n Almost all Mercedes Benz dealers in Australia launched an appeal against a Federal Court judgement in August 2023 which dismissed a class action claim against Mercedes-Benz Germany.<\/p>\n\n\n\n The case ran for approximately 7 weeks in court in 2022 and Justice Beach took 9 months to deliver his judgement dismissing the dealers\u2019 claims against Mercedes-Benz.<\/p>\n\n\n\n The agency model meant a buyer could buy a car online directly as Tesla began doing in 2014 when they first began selling cars in Australia, followed by Honda in 2021 which put pressure on other dealerships. The dealers claimed the change to the agency model damaged the value of their businesses and stripped them of their own goodwill. The change also impacts the consumer as the new model means there will be no shopping around and negotiating the price. <\/p>\n\n\n\n <\/p>\n\n\n\n What Is Goodwill? The court did not agree with the dealers\u2019 claims they were bullied or under economic duress and upheld Mercedes-Benz\u2019s right to change the business model der economic duress. Justice Beach also stated that even though a dealer was financially worse off under the agency model compared with the previous dealership model, this did not mean Mercedes-Benz acted <\/p>\n\n\n\n <\/p>\n\n\n\n Key Take Away The Court rejected the $650 million compensation claim against Mercedes-Benz for replacing its traditional dealership model with a fixed-price, direct-to-customer agency model. <\/p>\n\n\n\n Justice Beach suggested the case brought by the dealerships, although unsuccessful, was more to do with statutory unconscionable conduct and suggested consideration needed to be given to the review of the Franchising Code. <\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n For advice on Franchising, Licensing and Distribution contact the Franchise team at Sanicki Lawyers.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":"
The Court found that Mercedes Benz as a franchisor had the legal right to change its business model from a traditional franchise dealership model where franchisees bought the stock and could negotiate prices with customers, to an agency model where the vehicles remain owned by the Mercedes Benz and as agents, the dealer had to sell them at fixed prices and then get paid a
commission. This meant the dealers could not negotiate prices with customer, nor add their own profit to the price of the vehicle. <\/p>\n\n\n\n
The dealers\u2019 stated Mercedes-Benz bullied them into signing the agency agreements.
<\/p>\n\n\n\n
<\/p>\n\n\n\n
<\/p>\n\n\n\n
<\/span><\/strong>Goodwill is an intangible asset and represents the value of a business over its book value (based on assets and liabilities) and includes the value of the brand, reputation, its customer data base, and intellectual property.
<\/p>\n\n\n\n
unconscionably or failed to act in good faith.
<\/p>\n\n\n\n
<\/span><\/strong>A key take away from the court\u2019s decision as Justice Beach stated was that there was \u201cno right at law for a franchisee to be compensated for goodwill on non-renewal of a franchise agreement\u201d<\/strong>. <\/p>\n\n\n\n
This issue may therefore be picked up by the Federal government as they will be conducting a review of the Franchising Code of Conduct before it expires in 2025 based on Dr Schaper\u2019s independent review of the effectiveness of the code.<\/p>\n\n\n\n
Contact: Robert Toth | Special Counsel | Accredited Commercial Law and Franchise Specialist |
robert@sanickilawyers.com.au | mobile \u2013 0412 67 37 57<\/p>\n\n\n\n\n\n\n\n\n\n\n\n
\n\n\n\n