Dealers launch $650m legal action against Mercedes-Benz

More than 80% of the Australian Mercedes-Benz retail network has launched a $650 million legal action in the Federal Court of Australia against the German manufacturer. 

The action seeks to prevent Mercedes-Benz from forcing major changes which will decimate the local industry say the franchise dealers.

Mercedes-Benz recently introduced new contract arrangements which would see Australian franchise dealers shift from being independent operated businesses which own their inventory, to become agents and resellers for the German manufacturer.

“The changes forced on the Australian Mercedes-Benz dealer network have major long-term implications for the automotive industry, Australia’s franchise industry and consumers,” Australian Automotive Dealers Association (AADA) chief executive James Voortman says.

“At the heart of this industry are Australian family businesses who have built up their businesses with ingenuity and hard work.  The dealer network has invested hundreds of millions in growing their businesses only to have that value taken from them with the stroke of a pen in Stuttgart,” he says.

“This is also bad news for Australian consumers who will pay more for cars, see less competition and will no longer be able to shop around for the best deal.

“Mercedes-Benz makes public claims it has consulted widely with the local dealers. Well, this is consultation with a gun to the head.  It had the dealers over a barrel, forcing them to sign oppressive new agreements at short notice with the threat they could lose their businesses in the entirety if they did not sign and without paying any compensation for the value built up in these businesses.

“If Mercedes-Benz is successful in forcing this change on Australian dealers without paying them appropriate compensation for the loss of their goodwill in their dealerships it will set a dangerous precedent for other global franchisors to implement similar changes.

“The decision to launch this legal action was a last resort for the dealers. Mercedes-Benz has ignored the dealers’ rejection of the ‘agency’ model and it has consistently failed to negotiate with dealers on the issue of compensation for goodwill,” he says.

The Australian dealer group is advised by a legal team led by Senior Counsel Tim Castle, and automotive industry lawyer Evan Stents at HWL Ebsworth.