Mercedes-Benz dealers lose $650 million lawsuit
Mercedes-Benz Australia has won against ex-dealer franchisees in court, despite sales be their lowest level in a decade thanks to the high-price fixing agency model. Here’s what it all means for consumers like you…
In a landmark decision the federal court of Australia has decided it's fine for Mercedes-Benz to treat its dealers the way its dealers have always treated their customers.
Fate, it seems, is not without a sense of irony…
- Morpheus
The federal court of Australia has determined that Mercedes-Benz are arseholes (the company), but that's not illegal. Can you imagine the prison system if aggravated assholery became an indictable offense?
In late 2021, some 38 rather cranky Three-Prong dealers attempted to insert a $650 million dollar lawsuit into the service department of their former Mercedes-Benz Australia mothership. Not unlike Will Smith and Jeff Goldblum in Independence Day.
You can read/watch the full director’s cut Benz dealer boning backstory here >>
Owing to what they doubtless still view as the evisceration of their ‘goodwill’ when three-prong boned them and adopted its ‘Shit Price Promise’ or agency model earlier that year, Mercedes-Benz sales have essentially collapsed in Australia.
They’ve gone off a cliff to the tune of 32,200 in 2018 (before the SPP) to 26,800 last year - well done, you commercial geniuses.
- Justice Jonathan Beach
Laying it out in a rather lengthy 650 page insomnia curing court document, Justice Beach says that, essentially, the dealers all invited themselves willingly into the situation by signing their contracts with Mercedes.
- Justice Jonathan Beach
Speaking for everyone on Earth who's ever bought a new car, it is impossible to feel sympathy for 38 car dealers who've been roasted in this way by a brand that champions the idea of poor aftersales care - especially as those dealers put the gloves on and got in the ring of their own volition.
That’s from the Australian Automotive Dealer Association’s CEO, James Voortman, whom I agree with. But don’t worry, the dealers will land on their wallets.
This case does however have potential ramifications for consumers which you should be aware of if you’re going to buy a car in the distant future, and here’s why.
That scraping sound you can hear across the nation is the sound of carmaker brands honing razor sharp edges on their dealer filleting machetes:
Mr Voortman again there, and again, I agree with him - a rare thing, you’ll know if you’re a regular viewer of this website and YouTube channel. Here’s why Voortman is right:
See, $650 million divided by 38 dealers is about $17 million per dealer, and if that's what it costs to cut off a dealer, as it would have been had Mercedes lost this case, then that makes it rather expensive to lop off 100 dealers or something if you're a mainstream brand. The cost of pruning back 100 dealers would have been roughly $2 billion - so probably not financially viable, one would think.
However, it appears that the precedent is set and it could well soon be open season on dealer lopping. Without dealerships and a sales person to negotiate with, consumers lose their ability to apply leverage via the threat of walking out the door and shopping somewhere else. At least that was how things used to work before the buyer’s market for new cars (a gluttony of stock) was eroded by unspecified global events of 2020-2021, into what’s now a seller’s market.
Technology has almost engineered out the requirement for a retail dealer network anyway. You can buy everything else online, so why not a car? Why not go direct?
Obviously you still need someone to do parts and servicing, but why not just configure and hit ‘buy now’? It's hardly as if sitting opposite some car salesman it's just such a valuable experience.
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Just fill in this form. No more car dealership rip-offs. Greater transparency. Less stress.
WHY BUYING CARS ONLINE COULD BE A BAD IDEA
I can think of only three reasons why going direct and buying your next new car online might be the ex-wife from Hell, in the domain of catastrophes.
Number 1: Mind the ‘knowledge gap’
Half of humanity is just too stupid to get the process right. Configuring a car is simply too hard for the median member of society not to get catastrophically wrong.
Having said that, humanity is also not very good at designing processes that are easy for the illiterate, technically hopeless and the downright moronic to interpret, understand and complete in a succinct and successful manner.
Example: Look how long it’s taken online banking to become not completely shit. It’s still clunky as hell and riddled with over-design, under-development and security buffer zones where you’re at the mercy of the bank, hackers and your own mis-placed fingers.
Number 2: MISSED OPPORTUNITIES FOR PROFIT
All of those opportunities to just bend you over face-to-face would just be lost. As a carmaker brand, your commercial model needs a smooth-talking, coercive sociopath in a suit holding your hand if they want to milk you for all you're worth over a new car.
The extortionate finance, the in-house insurance, the paint, fabric and rust protection you just don't need - it's the tip of the iceberg - and it never ends. More to the point, all that profit ends if they design an online purchasing model that gives you exactly what you asked for, like just a car.
Number 3: SAVVY CONSUMERS AREN’T STUPID, GENERALLY
Every time a carmaker tries this, their own spectacular, limitless greed is what upends them. The deal always ends up being worse for you, the consumer - not better.
Just look at how it’s going for Honda Australia with its bullshit agency model: rip-off prices for the Civic >>. The new HR-V is extortionately priced.
The Mercedes Shit Price Promise (not its real name) is such a classic example. If you buy a Merc today, you will pay the worst possible price, not the best possible price. It's a guarantee.
Boning the dealers and eliminating a middleman of this nature, whom you can negotiate the price on - because it’s called a ‘deal’ for a reason - should have resulted in a more efficient retail system and a competitive edge.
If that were the case, prices would simply have dropped, but they didn't.
Buying a new Mercedes today involves always being absolutely certain that you will pay a higher price which even the world's most inept negotiator would have been able to oppose initially.
I really don't think consumers are generally that stupid and it shows because Mercedes sales have plummeted >>
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