Mercedes-Benz dealers seek $650m compensation from German car maker in ‘fight of their lives’ – Michmutters

Mercedes-Benz dealers seek $650m compensation from German car maker in ‘fight of their lives’

Australian Mercedes-Benz dealers are in a $650 million “fight of their lives” against the luxury German car maker in a test case described as one of the most significant in franchise-law history.

Bob Craig sold his dealership of 48 years last year in frustration over Mercedes-Benz’s decision to move to a fixed-price agency sales model.

“I would love to have done 50 years with Mercedes,” Mr Craig said.

“In the last five years, there was a deterioration in relationships between the dealer and the manufacturer.”

Previously, dealers bought cars from Mercedes and could set their own sale price.

But under the agency model, which came into effect in January, the manufacturer retains ownership of the cars while dealers become agents that sell cars at a fixed price for a set commission.

Thirty-eight of the nation’s 55 Mercedes-Benz dealerships have launched legal action against the company in the Federal Court seeking compensation.

Dealers argue they were forced to sign new agency model deals with Mercedes that will dramatically reduce their profits and wipe out years of goodwill with customers.

Mr Craig is not involved in the court case because he sold his business in Orange before the agency model came into effect, but he is speaking on behalf of former colleagues too nervous to publicly criticize Mercedes.

“They’re all shattered, their livelihood is shattered,” Mr Craig said.

Bob and old photo
A photo of Bob Craig’s Mercedes-Benz dealership in Orange from the 1970s.(ABC News: Hamish Cole )

Dealers allege Mercedes hatched a secret plan in 2016 to switch to an agency model, undertook a sham consultation process, and pushed forward with a decision despite the majority of Australian dealers being against it.

They claim that in a bid to capture the profits of dealers, Mercedes has broken Australian Consumer Law by engaging in unconscionable conduct, along with breaching the franchising code’s good-faith provisions.

“This is an incredibly important case for the automotive industry,” Australian Automotive Dealer Association (AADA) chief executive James Voortman said.

“In fact, it’s probably one of the most important franchising cases in Australian history.”

James Voorten
James Voorten says dealers are arguing Mercedes-Benz has engaged in unconscionable conduct and breached its good-faith obligations.(ABC News: Matt Roberts )

Dealers involved in the case are seeking $650 million in compensation from the car marker.

“That takes account of all the millions of dollars of investment that has gone into facilities, but also equipment and the goodwill they’ve created,” Mr Voortman said.

“It’s a large claim, but it’s more than fair.”

“These are regional dealers, these are city dealers, they are Australian businesses, and they’re in the fight of their lives against a big multinational corporation.”

In March 2019, Deloitte modeled the impact of the agency model for dealers.

It found, for example, that under the agency model one particular dealer’s profits would decline by more than 50 per cent compared to the dealership model.

The case against Mercedes, which saw hearings begin in the Federal Court this week, is being funded by dealers involved in the legal battle, including billionaire businessman Nick Politis, the PR company working for AADA has confirmed.

“So many of these dealers have represented the brand for decades, they’ve invested so much money in the brand, and they’ve put in so much work to bring customers to the brand,” Mr Voortman said.

“And now all of that hard work is being taken away with change to a new business model.

“They need compensation for that change, and we hope that the court agrees with that.”


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