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World’s dealers watch as legal battle hots up over Mercedes agency sales model down under

  • Court showdown set for Mercedes dealers in battle over new agency sales model
  • $650m claim from Aussie dealers after they say they were forced to sign new contracts
  • Dealers want compensation for the value they’ve built up in their businesses
  • Agency sales are being slowly introduced worldwide
  • Mercedes believed to be planning on introducing the model in UK

Time 7:45 am, December 7, 2021

The legal battle over agency sales in Australia is hotting up as Mercedes Benz dealers claim they were forced to sign new contracts ‘with a gun against their head’.

Some 80 per cent of the country’s Mercedes dealers are taking the manufacturer to the Federal Court over its plans to introduce fixed price agency sales on January 1, 2022.

The battle between the dealers and the manufacturer in Oz is being closely monitored across the world as car firms look to roll out similar plans elsewhere.

Agency sales are already starting to take hold in the UK with Mercedes said to be planning to bring it in here.

The VW Group has confirmed it plans to introduce agency sales for its electric cars in the UK.

The Mercedes dealers in Australia are angry that the value they have built up in their premises will be eradicated when the new deals come into force.

Dealers there say they have been forced to sign new agreements which hands control of sales to the manufacturer which will do so online, paying the dealers a fixed handover fee.

A large group of long-standing dealers told the website that they did so ‘under duress with a gun held to their head’. 

This sparked their $650m class action which calls for fair compensation for the ‘goodwill and significant customer databases’ they have worked on building for decades.

One dealer told the website: ‘[They] came in and effectively tool control of our business in a “take-it-or-leave-it” approach and took our customer base that we have built up over years or decades, leaving us with crumbs to run our showroom.’

James Voortman, CEO of the Australian Automotive Dealers Association which represents 3,000 car dealers across the country, said: ‘Mercedes-Benz is perfectly entitled to change its business model.

‘However, we do not accept the appropriation of hundreds of millions of dollars in value built up by the local Mercedes-Benz dealerships over many years without the payment of compensation.

‘Mercedes-Benz would have us believe that reducing competition will deliver better outcomes for Australian consumers – that is simply not the case.’

Mercedes Benz Australia has now filed a statement which explains its defence and says it consulted with the dealer network for years leading up to the changes.

The firm said: ‘We developed “retail of the future” in consultation with our passenger-car dealer network in response to changes in the industry, consumer behaviour, and in the way new passenger vehicles are sold.

‘Our objective is to establish a solid foundation for continued success in Australia for both our brand and our retail partners, now and into the future.’

The Australian Federal Court last month overruled attempts by Mercedes to delay the court action, which has forced it to file its defence now.

The case will now be heard in early January.

UK car dealers have voiced their concerns about agency sales taking hold here in the UK.

Recently, former Hyundai UK president Tony Whitehorn told Car Dealer that ‘most car makers are secretly planning an agency sales model’.

Andy Goss, chairman of listed dealer group Vertu Motors, told the Car Dealer Podcast that it’s something that should be ‘put to bed’.

He said: ‘For the manufacturers to think they’re better retailers than people like Eddie Hawthorne or Roger Penske or Michael Smyth is an absolute myth.

‘Their core competence is brand marketing, and bringing products to market demands creation. The retailer’s forte is demand fulfilment.

‘They don’t have the right skill set, they don’t even have the right type of marketeers. They’ve got brand marketeers, not performance marketeers.’

While Sytner boss Darren Edwards wrote exclusively for Car Dealer on his issues with agency sales.

He said agency sales would penalise the best dealers and stop them innovating.

‘I have heard OEMs say many times, ‘we are manufacturers, not retailers’, meaning that they don’t have all the answers when it comes to getting cars sold and on to driveways,’ he wrote.

‘So before OEMS transition to agency sales I believe that a great deal of consideration should be given to how to keep the best in their networks interested (and invested.)’

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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