To convince Australian dealers to accept the new model, Deloitte gave several workshops and presentations on the financial implications of the change, but the court heard that the key assumptions had been provided directly by Mercedes-Benz, which also approved any “independent analysis”. Final arguments for the Mercedes-Benz dealership process are underway. Castle argued that these protocols contradict the core of the Mercedes-Benz case, which states that the automaker`s Australian arm was responsible for launching and rolling out an agency model in response to demand from car dealers. “Although we had to take legal action to stop the imposition of a business model that Australian dealers strongly opposed, Mercedes-Benz headquarters forced the introduction of the agency model in January this year. Deloitte`s involvement in the case caused consternation; The court heard that the accountant was collecting fees from Australian dealers through their long-standing audit services while working with Mercedes-Benz to deliberately conceal damage to profit margins. Deloitte worked for both Australian car dealerships and Mercedes-Benz`s parent company to convince them to change their business model. Dealers say Mercedes-Benz developed a secret plan six years ago to move into agency sales, held a fake consultation and rushed in, even though most Australian dealers were against it. For example, it found that under the agency model, a particular merchant`s profits would decrease by more than 50% compared to the merchant model. According to Australian broadcaster ABC, 38 of the 55 Mercedes-Benz Down Under dealerships have joined forces to fight the decision.
The case against Mercedes, in which federal court hearings began this week, is funded by dealers involved in the legal battle, including billionaire businessman Nick Politis, the public relations firm working for AADA confirmed. Tim Castle SC, on behalf of the 38 Australian dealers, questioned the independence of Deloitte`s analysis, referring to an email between Deloitte`s Peters and local Mercedes-Benz executives in which Peters confirmed he “understands the required realignment.” Dealer lawsuit challenges Mercedes-Benz headquarters` decision in Stuttgart to impose significant changes in the way the industry operates Buchan went on to say that the dealers` case was a reasonable expectation, not only for the auto industry, but for any franchisee who has experienced a similar thing. Franchisees became “agents” who sell cars at a fixed price for a fixed commission – a completely different and less lucrative model than the previous agreement, where dealers bought cars from Mercedes and sold them to the customer at their own price. The investigation also examined Japanese automaker Honda`s treatment of dealers when transitioning to a fixed-price agency model. But Bragg, who is an auto industry specialist, says auto brands and car dealerships need to find a win-win balance, not the win-lose situation right now. Deloitte`s consultants gave a series of presentations to local traders explaining how a change in business model would not affect their bottom line. The AADA says Australian traders have been assured more than eight times that no changes to the business model would be made if they did not agree. The strong resistance of dealers to the model was clear from the beginning: more than 90% voted against the change. Mercedes-Benz Australia officials have referred to dealers as “little piglets” in internal communications, according to evidence presented last week at the start of a trial in a $500 million lawsuit against the automaker. An attorney for the 38 dealers suing Mercedes-Benz said they were intimidated and threatened by the company as it transitioned to a business model that turns retailers into agents selling fixed-price vehicles.
Under the agreement, Mercedes owns the vehicles and dealers receive a commission for each sale. But under the agency model, which went into effect in January, the automaker retains ownership of the cars, while dealers become agents who sell cars at a fixed price for a fixed commission. In what has been described as the most important test of franchise laws in an Australian court, Mercedes-Benz dealers are suing the parent company for $650 million over a new fixed-price sales model that dealers say will decimate their profits.
