A behind-the-scenes stoush between car dealers and distributors is set to go public next year when Mercedes-Benz dealers who are poised to have their businesses decimated through a business decision by the giant German manufacturer take their case to the Federal Court in February.
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The case, before Justice Jonathan Beach, will be a critical test of Australia's Franchising Code of Conduct and Australian Consumer Law, with potential far-reaching implications for every franchise business in the country should a precedent be established in a court of law.
Mercedes-Benz is the second major vehicle franchise - Honda was the first - seeking to introduce a new business model which will see its dealers shift from being independent, self-run businesses who own their own inventory to become agents and re-sellers.
The dealers, most of whom - including Canberra's John McGrath - have invested millions of dollars to build and operate premium premises befitting the German brand's prestige status, are incensed over the move.
They are now seeking compensation from Mercedes-Benz to recover the "goodwill" they have invested over decades, with the claim set at $650 million.
John McGrath, one of Canberra's most successful prestige dealers who took the gamble on building a brand new showroom in a then-unlikely location on Canberra Avenue and Tom Price Street in Fyshwick six years ago, is one of the 80 per cent of Mercedes national dealers involved in the legal action.
Last year, his successful dealership sold 456 Mercedes-Benz cars and 75 vans to customers in the ACT and across the region.
He declined to speak to The Canberra Times about the legal action given the pending court case.
The head of the national dealer representative body, James Voortman, described the court action as a "watershed issue for Australian consumers and the entire Australian franchise industry".
"If Mercedes is successful in forcing these changes on the industry, history shows competition will go down and car prices will go up," he said.
"Every franchise owner will be watching this case closely because if the colossus Mercedes-Benz can appropriate the goodwill of Australian car dealers without compensation, any franchisee could be at risk of the same threat.
"Fundamentally, franchisees are the backbone of Australian small business. Most are family businesses who have built up the value in their business through sheer hard work and created real value for themselves and their local communities.
"If Mercedes creates a precedent, where that value can be captured for its own benefit without compensating franchisees, then any franchisor will be able to do the same."
The Mercedes-Benz move on dealers comes less than a year after the much-respected Horst von Sanden, who had run the company's distribution in Australia and New Zealand for 18 years, decided to leave the company.
Car distributors and their franchisees are also locked in a separate dispute which stems directly from Holden's sudden decision last year to "retire" from the Australian market altogether, leaving hundreds of dealers out-of-pocket from their decades-long investments in the famous brand.
The ruckus over that action reverberated through Federal Parliament and has resulted in an Exposure Draft Bill which would increase the eligibility threshold for the protection from businesses employing less than 20 employees to those employing less than 100 employees.
