Honda Australia cleared of wrongdoing in switch to fixed-price model – report

A former dealership has lost a court case claiming $22 million in damages after Honda Australia changed to a new sales model in 2021.

A court has ruled Honda Australia did not engage in unconscionable or misleading and deceptive conduct during its switch to a fixed-price ‘agency’ model, website Lawyerly reports.

Former dealer Brighton Honda sued Honda in the Supreme Court of Victoria after the company broke a five-year contract with the dealership – alleging the act had denied it future profits, while also claiming damages to the amount of $22 million.

In 2021, Honda became the first car maker to change to the fixed-price model in Australia, a sales model which involves the company owning all the vehicle stock on hand at dealerships, while dealers became ‘agents’ for the brand. New car prices were locked in by the head office, and agents were paid a set fee for every car sold.

However, Honda Australia – which admitted to the breach of contract with Brighton – claimed the damages should only amount to approximately $5 million for the dealership.

The lawsuit, brought in March 2022, was originally led by both Brighton and Tynan Motors – another former Honda dealership, based in New South Wales – but only Brighton remained on as a plaintiff.

Brighton had also sought lost profits beyond the end of the 30 June 2023 contract end – arguing years of having its contract with Honda Australia rolled over into the next period was proof this was likely, had the car company not changed to the fixed-pricing model.

Despite the contract breach, Justice Patricia Matthews rejected Brighton’s allegation of unconscionable conduct by Honda Australia, also clearing the car company of engaging in misleading and deceptive conduct.

MORE: Honda could have left Australia without switch to fixed prices – executive

In awarding damages to Brighton Honda over the breach, Justice Matthews will defer to an expert to determine the amount.

“In this instance, it is beyond doubt that Brighton [Honda] had no contractual or other entitlement to a further contract with Honda Australia, whether that be as a dealer or as an agent,” Justice Matthews said.

“We welcome the Court’s findings that Honda Australia has not engaged in misleading or deceptive conduct or unconscionable conduct under the Australian Consumer Law, as per the judgement handed down by the Supreme Court of Victoria last week,” a spokesperson for Honda Australia told Drive.

“This case is related to Brighton Automotive Holdings’ termination as a Honda dealer as part of Honda Australia’s restructure of its business model in mid-2021.

“Honda Australia remains committed to supporting its Honda Centres and customers moving forward.”

While Honda Australia was cleared of significant wrongdoing in this instance, the car company was ordered to pay $6 million for misleading conduct by a Federal Court in December 2023.

Following the switch to the fixed-price model, Honda contacted thousands of customers and encouraged them to book their next service through the company’s website, telling them their preferred dealership had closed – despite the service centres remaining open, and being able to provide log-book services regardless of them no longer being Honda dealers.

MORE: Federal Court orders Honda to pay $6 million for misleading conduct

In May 2024, Honda revealed it may have been forced to abandon Australia as a market if it did not change to the fixed-price model.

Honda Australia may still have to deal with the fallout following the 2021 change. As reported by Drive in November 2023, Honda engaged international accounting firm Deloitte to manage the transition to the fixed-price model – despite Deloitte also being used separately by dealer groups for taxation and accounting.

The plaintiffs have accused Deloitte of using its access to internal dealer figures to help Honda Australia determine compensation, with several alleging their worst-performing sales years were used, rather than an average – allegations Deloitte denies.

However, Deloitte is understood to have admitted to using flawed sales data when it created modelling for Mercedes-Benz Australia, after it followed Honda in introducing its own fixed-price ‘agency’ model nationally in January 2022.

The post Honda Australia cleared of wrongdoing in switch to fixed-price model – report appeared first on Drive.