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ACCC verdict delivered in Holden investigation whilst Honda litigation continues…

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Holden Investigation

The ACCC has completed its investigation into the circumstances surrounding Holden’s exit from the Australian market and its dealings with dealers around the time of the exit.

Dealers claimed Holden had prior knowledge of its intended departure but had acted otherwise by doing things such as:

  • approving dealership buy/sell transactions; and
  • encouraging dealers to invest further in their dealerships.

The ACCC investigated whether:

  • there had been false or misleading representations; and
  • Holden’s conduct towards dealers was unconscionable or lacked good faith, including the compensation it negotiated with dealers.

Whilst the ACCC condemns the distributor’s actions, it has decided not to pursue matters further. Rod Sims, Chair of the ACCC, cited not wanting to prejudice the private legal action taken by some dealers as the main reason for this decision. However, it was noted that consequences have already been suffered by Holden in that its actions have negatively impacted the reputation of the brand and had ignited significant regulatory reforms for the automotive industry.

Honda Litigation

Honda Japan’s application to dismiss the damages claim by two former Honda dealers (Astoria Honda and Tynan Motors) following the termination of their dealerships, has been rejected. Like the discovery application made against Honda Australia (granted earlier this year), it is expected the dealers may seek discovery of records in Japan to demonstrate whether:

  • Honda Japan had known that Honda Australia was moving to an agency model on 1 July 2021, prior to the 2020 announcement; and/or
  • Honda Japan had contemplated a strategic review of its distribution model, particularly around the time dealer agreements were renewed in 2018.

What Next?

It was Holden’s exit that led to the Senate Committee hearings held last year, and many will recall the evidence given by Mr Klein about the impact of Honda’s decision to terminate Astoria Honda as a dealer.

Ultimately, it was found that there was a significant power imbalance between dealers and distributors in Australia and that regulatory reform was required to better protect dealers’ interests.

The recommendations from the report triggered the various reforms to the Franchising Code that were enacted in 2020 and 2021 and which have significantly strengthened dealers’ rights. Such reforms include mandating best practice principles for dealer agreements including a requirement for distributors to pay fair and reasonable compensation where a dealer agreement is terminated early as a result of:

  • a distributor withdrawing the Australian market;
  • network rationalisation; and/or
  • changes to their distribution model.

It is critical that dealers maximise the opportunities presented by the recent reforms if they want to be in a stronger bargaining position in their dealings with distributors. Our Guide to Navigating Recent Automotive Regulatory Reforms is a practical resource intended to assist dealers to better understand their rights and leverage the recent reforms. A second edition will be released early next year, stay tuned for a release date.

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