Mercedes-Benz dealers may have been misled on fixed-price business model – report

A number of Mercedes-Benz dealerships across Australia may have agreed to switch to a fixed-price business model based on potentially misleading information, it has been alleged in Federal Court.

According to the Australian Financial Review, audit and accounting consultancy Deloitte admitted to using flawed sales data to create modelling for Mercedes-Benz which incorrectly showed dealers would benefit from the change.

It’s alleged a number of affected dealerships may have been worse off under the new non-negotiable fixed-price ‘agency’ model.

Under the new structure – which is at the centre of a protracted Federal Court case – dealerships no longer own showroom stock (which is instead owned by Mercedes), and consumers no longer have the ability to negotiate on price.

If independent dealers were to set fixed prices among themselves it would be illegal under Australian Consumer Law. However, because Mercedes-Benz now owns all the showroom stock, it side-steps anti-competition rules and, for now, it is legally allowed to set fixed prices across all outlets because it is, in effect, one entity.

Since the introduction of the new Mercedes fixed-price business model from January 2022, more than three quarters of the national network of its dealers have taken Mercedes-Benz to Federal Court – a case which could set a precedent for Australian law and for other car companies considering a similar move – arguing they were pressured to agree to the new sales structure.

Mercedes-Benz argued the switch would mean fairer and more transparent pricing for customers, while dealers would enjoy equal access to available stock – with modelling and presentations by accounting firm Deloitte showing the network of dealers would benefit from the change.

However, the AFR reported, Deloitte partner Lee Peters admitted under cross-examination the firm used data from 2018 – one of the worst-performing years for Mercedes in recent times, but also the most up-to-date information available at the time – to create the favourable modelling for the manufacturer.

According to the AFR, when the same modelling was applied to other years, the results showed dealerships would suffer significant financial losses.

Mercedes-Benz Australia engaged Deloitte in 2019 as an independent consultant to help facilitate dialogue and ease the transition to the new business structure – despite the auditing company also working closely with a significant percentage of Mercedes dealerships, the AFR reported.

Lawyers acting on behalf of the dealerships raised questions about the independence of Deloitte’s actions.

Mercedes-Benz provided a number of “key assumptions” to Deloitte when developing the new business model, but the accuracy of those assumptions were questioned in court.

The case continues.

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