Further regulation of the automotive sector?

The Federal Government response on 3 September 2021 to the Senate Education and Employment References Committee’s report, Driving a fairer deal: Regulation of the relationship between car manufacturers and car dealers in Australia, confirms it has no major plans for further regulation or review of the automotive sector beyond those already announced.

The Government noted a range of changes it had made in recent times which aim to make the automotive sector fairer and more transparent for consumers, dealers and manufacturers, referencing:

• the amendments to the Franchising Code of Conduct that commenced on 1 June 2020, and focused on improving end-of-term notification periods, improving transparency for capital expenditure requirements, and clarifying options for dispute resolution;
• the announcement on 12 March 2021 of further reforms to the automotive franchising sector, a commitment to consult on the merits of a standalone automotive franchising code and options to strengthen alternative dispute resolution mechanisms for automotive franchisees through binding arbitration;
• amendments to the Franchising Code that took effect from 1 July 2021 and included mandating best practice automotive principles and confirming the Code applied to agents;
• Franchising Code amendments which included doubling the maximum financial penalties and introducing voluntary binding arbitration;
• increasing available penalties under the Franchising Code to up to $10 million to strengthen penalties for wilful, egregious and systemic breaches of the Franchising Code;
• changes to collective bargaining requirements, to allow franchisees to collectively negotiate with their franchisors without first having to seek ACCC approval;
• strengthening protections against Unfair Contract Terms (UCTs) in the Australian Consumer Law, including making UCTs unlawful, giving courts and tribunals the power to impose civil penalties applying the protections to more contracts and providing more flexible remedies to a court when it declares a contract term unfair;
• improving the Supplier Indemnification and Consumer Guarantees provisions in the Australian Consumer Law.

The Government declined to intervene in the ACCC investigations in relation to GM Holden or impose additional reporting obligations on the ACCC. It noted it is consulting on the merits of a standalone automotive franchising code and options to strengthen alternative dispute resolution mechanisms for automotive franchisees through binding arbitration.¹

Any further reform of consumer warranty laws will depend on the outcome of a regulatory impact assessment. The Government expressed satisfaction with the current operations of ASBFEO, and declined to undertake a further review into effectively enforcing alleged contraventions of the Competition and Consumer Act 2010 as it relates to the regulation of the relationship between car manufacturers and car dealers.

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Should you wish to discuss these developments further, please contact Kristen Hooke or Stephen Giles.