John Durie: Honda in hot water with ACCC over franchises, as regulator takes on big manufacturers

The Australian Competition and Consumer Commission (ACCC) has attacked Honda for making allegedly false statements about two car dealers that used to be franchised service operators.

The case is one of two bought by the new regime at the ACCC against car companies; the other is seeking a declaration that Mazda was guilty of “unconscionable conduct”.

Both are classic battles of big businesses trying to use their power against small businesses.

According to the ACCC, Honda last year terminated franchise agreements with Tynan Motors in Sutherland in Sydney and Brighton Automotive in Melbourne and then wrote to their customers saying the two dealers “would close and no longer service Honda vehicles”.

Both dealers are still running and still open to service Honda cars, and the ACCC’s Federal Court case against Honda alleges the company made false or misleading representations to consumers.

The case continues the ACCC’s battle against car manufacturers and their authorised dealers, which dates back to a 2017 market study that showed excessive service prices in the industry.

In the Mazda case, the Federal Court found the company had engaged in misleading and deceptive conduct but stopped short of saying the conduct was unconscionable.

Unconscionable conduct is defined as “so harsh it goes against good conscience” or is “unreasonably excessive”. The difference is between sharp business practices and those against conscience. 

The ACCC has tested the boundaries of this definition, which if breached, results in a civil penalty.

The Mazda claims related to seven cars of which six needed engines replaced, one three times, and four decelerated unexpectedly. The company denied requests for either refunds or replacement cars.

The ACCC filed an appeal against the court’s findings last week and will argue Mazda’s conduct “fell below the applicable norms of commercial behaviour, and was in all the circumstances unconscionable”.

The new actions come as Rod Sims’ term with the ACCC finished last month when he was replaced by Gina Cass-Gottlieb. Liza Carver was named as the ACCC’s new enforcement boss in February .