7:30 am, September 1, 2023
Car dealers in Australia have lost their court battle to claim millions in compensation from Mercedes-Benz over its switch to agency sales.
Hearings began a year ago in the federal court Down Under after the AUS$650m (circa £331.8m) action was launched in 2021.
However, following nine agonising months of waiting because of the complexity of the case, the 38 Mercedes dealers who brought the class action out of Australia’s 49 Mercedes dealerships were told on Wednesday (Aug 30) that all their claims had been dismissed.
Delivering his 567-page verdict, which followed seven weeks of proceedings, Judge Jonathan Beach labelled the case ‘forensically complex although legally straightforward’, reported The Conversation – an independent news analysis source that sees academic experts working with professional journalists.
The 38 dealers claimed that Mercedes-Benz had bullied them into accepting the no-haggle agency sales model, which sees the manufacturer keeping ownership of the vehicles and fixing the selling price, with dealers being paid a fixed commission instead of being able to set their own margin.
They had contended that the agency model meant the end of ‘customer goodwill’ and as their interaction with customers would be reduced, so would their profitability.
But lawyers for the manufacturer said it was entitled to make the change, which didn’t breach the country’s franchise code, adding that it had acted in good faith since it had to respond to competitors that were changing their sales models.
The judge said the case brought by the dealers was ‘successful on many issues of fact’ but it failed on fundamental law issues.
His verdict upholds the right by Mercedes-Benz to replace its franchisee contracts with agency agreements.
Justice Beach also rejected the dealers’ claim that they were made to agree to the agency model under economic duress, and threw out the goodwill claim as well.
Responding to the verdict, the Australian Automotive Dealer Association (AADA) said in a statement: ‘This is clearly a very disappointing outcome and AADA will work hard to understand this judgment and fight for a better system for franchised new car dealers.’
It also emphasised, as did The Conversation, that the judge had pointed out that the case ‘although unsuccessful, concerns statutory unconscionable conduct’, adding that ‘further consideration needs to be given to the terms of the franchising code and possible modification’.
Pictured via Google Street View is Mercedes-Benz’s head office in Australia
