October 17, 2023
By Barrie Charapp Beaty
Mahdavi Bacon Halfhill & Young, PLLC
In the 2023 legislative session, some states, like Virginia, passed groundbreaking legislation to prevent the manufacturers to effectively turn dealers into delivery centers and service locations so the manufacturers could enter into direct sales with the consumer. The state associations fought to protect dealers from the agency model because the associations saw what was happening in other parts of the world, particularly in Australia.
In a highly publicized case, 38 Mercedes dealers in Australia sued Mercedes Benz because Mercedes went to the agency model in Australia. On August 30, 2023, the case decision was rendered and unfortunately, the Mercedes dealers lost that fight in the Federal Court of Australia because of the non-renewal option in the Mercedes Benz franchise agreements. Essentially, this case centered around contractual duties and rights rather than the franchise statutes to protect those dealers because Australia does not have the same extensive franchise protections that dealers in America do.
Even though there are key differences in franchise protections in America from Australia, it does not mean manufacturers have stopped attempting to circumvent the state franchise laws or sprinkle agency aspects into agreements. What can dealers do?
- Support the state associations so that the associations can pass legislation that protects the dealers from coercive and injurious actions by the manufacturers.
- Know what the terms of the documents that the manufacturers are asking you to sign.
- Know what your rights are under their state laws and use the protections afforded to you in them.
- Do not sign a DSSA under the belief that your existing agreement is expiring because it is not. Remember in the US, your franchise agreements do not terminate. Your DSSA may be terminated only against the wishes of the dealer if the franchisor goes through a termination process. You can simply continue under your existing agreement terms until it is replaced with a document to which you do agree.