ACCC Investigation Into New Car Industry Reveals Staggering Breadth of Consumer Law Violations

ACCC says consumer law violations in Australia are rife, and hints at further carmaker prosecutions

ACCC says consumer law violations in Australia are rife, and hints at further carmaker prosecutions

Corporate watchdog finally releases draft report detailing depths of consumer mistreatment, to which the car industry has stooped, here in Australia.

It’s pretty bad. Watchdog also leaks interesting dirt on dealership profit margins - and that might come in very handy if you're buying a car.

Around midnight on August 9, 2017, the ACCC released its somewhat cumbersome but also explosive draft report entitled ‘New Car Retailing Industry - a market study by the ACCC.’ Un-put-downable.

Read the report here >>

SNAPSHOT

Here’s a snapshot of the industry: Car dealer revenues in Australia are $64 billion between 1500 dealers. That’s $43 million in revenue - on average - per dealer. Obviously biased towards the big city dealerships, which generate much more than that, and the diminutive dealers in regional areas which generate considerably less.

Any way you look at it, claims that ‘there’s no money any more in new cars’ - a favourite car dealer bleat - are bullshit.

PROFIT MARGINS

The ACCC says the profit margin on retailing new cars is seven per cent on average. Ballpark $2000 for every $30,000 you spend, almost $3000 on a $40k car and $3500 if you spend $50k.

I guess that’s reasonable.

But not as reasonable as used cars, where bending you over on the trade-in pays even greater dividends when the dealer flips your former ride in the used car market. Ten per cent profit there, on used cars.

But frankly you could give the new cars away at cost and sell the trade-ins the same way, if you just kept the profit on parts and service.

The ACCC says the profit on parts is 21 per cent - and let’s not forget that this is a major driver of insurance policy cost increases. And in many cases - with bespoke parts - there are no alternative suppliers. You’re over that barrel.

Service is the big win on profit, however. A staggering 64 per cent profit margin there. So if you ever wondered why the defibrillator is located in the service department - that’s pretty much why.

If, perhaps, like me, you hold the distinct impression that dealers are such unjustifiably extortionate arseholes on service and repairs, it’s because they actually are. The ACCC just validated your parking ticket on that viewpoint.

But this is only the tip of the carmaker arsehole iceberg. You know two-thirds are hidden with neutral buoyancy below the waterline.

TSUNAMI OF CONSUMER COMPLAINT

Complaints to the ACCC about new car manufacturers have risen to more than 10,000 over the past two years. The ACCC is preparing unlubricated rough-sawn telephone poles for insertion into Ford, Volkswagen and Audi by way of the Federal Court. As we speak, for misleading conduct and other alleged consumer-violating arsehole offences.

And, happily enough, when presented with a similar ‘ironbark enema’ ultimatum, Holden appears to have inserted it for them. Literally turning the other cheek. So that’s nice.

More on Holden's ACCC arrangement >>
More on Ford's prosecution >>

Volkswagen Reports

Frankly I have won no friends with any of these brands, calling them out for their scumbag conduct since - let’s be kind - 2014 - and declaring them ‘don’t buy’ brands on the basis of risk management criteria alone, so on a personal note I can tell you it is very gratifying indeed to receive this validation (of sorts) of my advice to consumers from the ACCC.

It’s pretty clear I’m not wrong on this - the ACCC has (in practice) unlimited resources to throw at whatever it chooses to investigate. And thankfully its balls appear to have dropped on the car industry, at long last.

More prosecutions to follow, presumably. Fiat Chrysler has to be a dead man walking in this regard.

ACCC Chairman Rod Sims said:

 
“The ACCC is deeply concerned about the level of non-compliance with the Australian Consumer Law in the new car industry. We will continue to take action to address failures by car manufacturers and retailers to provide the remedies to which consumers are entitled.”
 

FIVE KEY INDUSTRY FLAWS

In the draft report the ACCC identified five key issues - the five foundational pillars of car industry consumer arseholery:

One: Pretending that warranties trump consumer law entitlements, and screwing over uninformed consumers on that.

Two: Coercing customers into agreeing to repairs when in fact they are entitled to replacement or refund under consumer law.

Three: Using illegal gag orders as leverage to shut consumers up about it if they agree to a refund or replacement, even in part.

Four: the complete absence of an independent umpire on disputes - leaving David (ie - you) to fight Goliath (the carmaker and its arsehole lawyers) if you weren’t entirely thrilled with the manner of your prison shower consumer violation by them.

Five: What the ACCC calls (quote): “Particular features of the commercial arrangements between car manufacturers and dealers.”

I think that means the anti-competitive ways they behave in respect of independent repairers - withholding key servicing information, and implying that independent repairers will void your warranty, which is bullshit. Of course, it might also mean collusion to deny warranty claims thereby pumping up the profits on the parts and the labour, bilaterally.

Thus turning a red entry on the balance sheet black, with the only casualties being the customer and the law itself…

GAG ORDERS & SERVICING RIPOFFS

At the risk of being typecast as the merchant of menace here, I reported on this objectionable practice of issuing gag orders (or non-disclosure agreements) more than a year ago now. It’s still happening.

I reported on the car industry’s anti-competitive disinclination to allow independent repairers access to critical servicing data. In this way the industry maintains its comfortable quasi-monopoly on this and (not coincidentally) its cushy 64 per cent profit on servicing.

That was back about 18 months ago. It’s still happening, too - and car industry lobbying arseholes continue to maintain the general stench in the halls of Parliament House, telling any gullible minister who will lend them their ear that it’s all good.

Despite an off-the shelf, zero-cost data sharing model functioning well in the USA - with regulatory oversight. I don’t know about you, but I really am quite sick of Australia being a third-world shithole a propos of buying and owning a new car…

And then there’s the implied threat that if you get your car serviced outside the dealer network, you’ll void the warranty. Which is bullshit.

I’ve been trying to dispel that anti-competitive myth since about 2014 on this channel, but there is one of me and a whole car industry sinking millions into anti-competitive spin. According to the ACCC, 30 per cent of consumers they surveyed still believed it to be compulsory to get services done at the dealership.

Provided you get a qualified person to do the service or repairs, provided the services are done on time, and in accordance with manufacturer servicing requirements, your warranty is safe as houses. You don’t even need to use genuine parts, as long as the alternative parts you do use are fit for purpose.

Consumers are not idiots, but the car industry is very proficient at peddling misinformation.

The good news here is that after apparently a long slumber the ACCC has awoken and is appropriately grumpy that the industry has devolved into such an abject Caligula-esque shambles of consumer rape and pillage.

CARMAKER INDUSTRY RESPONSE

The grandiose-sounding Federal Chamber of Automotive Industries - the car industry’s grubby, low-rent lobby group in Canberra - issued a double bacon deluxe nothing-burger of a press release in response to the ACCC’s draft report:

 
“The industry strives to deliver the best outcomes for its customers through offering world-class technology, safety, value and service to Australian consumers; a commitment which is underpinned by both consumer law and the manufacturers’ warranty and support mechanisms.  The industry looks forward to working closely with the ACCC to provide more information about the complex matters raised in the draft report.
 

No denial - I note - of the groundswell of consumer-law non-compliance alleged by the ACCC. In my view, those muppets at the FCAI could not competently raffle half a dead sheep in a pub on a Friday night. Personal opinion.

If that’s the best those miscreant apologists at the FCAI can do, it does not bode well for the car industry.

WHAT THIS MEANS FOR YOU

Perhaps the secondary silver lining for you in this somewhat bleak cloud of extensive consumer violation is that the ACCC’s radar is up, the car industry is on alert and - guaranteed - there have already been meetings at the highest level between carmakers and dealers to the effect of ‘don’t screw anyone else over for the time being’.

So if you’ve got a problem with a car - and it’s the manufacturer’s or dealer’s fault, do not bend over and cop it. There’s never been a better opportunity to exercise your rights under Consumer Law - and if you’re in line for a refund or a replacement, don’t cop any of that shit about being gagged either.

Those arseholes are not entitled to do that. It’s a grubby assault on the freedom of speech.

BRANDS TO AVOID

So stick up for yourself. If you’re in the market, as an ongoing risk management exercise, avoid the following brands: Ford, Holden, Volkswagen, Jeep (anything from Fiat Chrysler, basically). Don’t buy an Audi or a Skoda or a Mercedes-Benz.

They’re pretty much the creme de la creme of automotive shit sandwiches.

And to the car industry broadly I’d say: time to grow up and focus on maturity and customer satisfaction. The following anecdote from the ACCC’s report might serve as a barometer of the current climate within dealerships (quote):

 
“One woman reported to the ACCC she was having transmission problems with her new car. When she took it back to the dealer to try and enforce her consumer rights, she was blamed for the problem and advised to drive ‘more like a man’. This advice (still quoting) was provided even though the car model had a known defect with its transmission and she was entitled to a remedy.”
- ACCC statement
 

CONCLUSION

I must say is is rather nice indeed to have one’s position on this validated finally by the ACCC. But not nearly as nice as it is to tell you to keep your chin up - the end of the tunnel just brightened up considerably.


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