Newsletter No. 25 – 29 May, 2017

Plato was a phenomenally influential Greek philosopher. Along with his teacher Socrates, and his most famous student, Aristotle, he was responsible for laying the foundations of Western philosophical and scientific thought.1


Plato – b.428 – d.348 BCE

Plato once asked “If a physician does not cure his patient, ought that person be considered a physician?”

His answer was no.

Plato’s point was that the test of an expert is achieving the end to which expertise is intended. If he fails, he is no expert.2

That’s a tough standard, but from what I’ve read, Plato was just that type of guy. His place in the history of human thought says as much.

This is, however, an excellent test that we can apply to all forms of expertise, and is highly relevant in the regulatory environment in which we find ourselves today.

If regulation fails to correct market abuses or mitigate consumer harm as intended, then surely the experts who framed the rules must, on Plato’s test, be regarded as having failed.

A recent action by the ACCC provides an excellent opportunity to consider Plato’s test in the context of two important pillars of regulation in Australia, both of which impact our business:

  •  The ACL
  • The Franchising Code

First the ACL. As dealers, we hear often about the “ACL” – but, what is the ACL?

The Australian Consumer Laws (ACL) are constituted generally in Schedule 2 to the Competition and Consumer Act 2010. The ACL effectively is codified and uniform legislation applying as federal law and as the law of all states and territories.

The ACL replaced around 20 other disparate state and federal statutes. At introduction, it was touted as ‘the’ answer to the myriad challenges besetting competition and consumer protection.3

The Franchising Code of Conduct is a mandatory industry code administered by the ACCC. It applies to all parties to a franchise agreement and sets out obligations for the parties to act in good faith, and other standards of behavior, as well as proscribing penalties for breaches of the code.4

Unfortunately, on the accumulated evidence, we must conclude that the hard-working civil servants that created both these frameworks have failed the Plato test – we must judge them as no real-world experts.

This assertion is easily backed up by the many enforcement actions the ACCC has taken under both headings, the latest of which is against Ultra Tune (live link in footnote).5

Ultra Tune is the second largest independent motor repair organisation in Australia. It is a leading participant in the aggressive campaign conducted by the AAAA to have the OEMs hand over all our intellectual property at low or no cost to independents.

The ACCC is alleging serious breaches by this company under both the ACL and the Franchising Code.

While we can accept that there always will be outlier non-compliant behaviours in any industry, we must conclude, along with Plato, that if a company of the stature of Ultra Tune must be hauled into court to force compliance with the rules, then the experts have failed to regulate in a way that prevents non-compliant behaviours.

Should it really take the occasional litigation to promote compliant behaviour or should the legislation be sufficiently clear and should the associated penalties not only be clear but act as a sufficient deterrent to prevent non-compliant behaviours?

This matter will now work its way through the legal process, so we make no judgements around Ultra Tune’s culpability, or otherwise. It is fair to say however that experience shows that the ACCC never undertakes enforcement actions without a firm belief in the quality of their evidence.

In the broader context, it is relevant for us to pay close attention to the outcome of this ACCC action.

A successful prosecution would be a powerful reminder that the sharing of proprietary information and digital codes, as sought by Ultra Tune, brings with it significant risks that the recipients of such information may be capable of lapses in compliance that are inimical to the interests of franchised new car dealers, and our OEM partners.

We continue to work closely with the ACCC and other parties on these and related matters as part of the ACCC retail industry market study.

Our aim in so doing is to add to the collective pool of expertise so that we all, working together, frame up rules that pass the Plato test.

As ever, I wish you all…

Good luck, and Good Selling!

Kind Regards

Signature

David Blackhall
Chief Executive Officer
Australian Automotive Dealer Association Ltd

1 Encyclopaedia Britannica 2002
2 Friedman’s Weekly Newsletter – May 3, 2017
3 Kelly, Joe (31 December 2010). The Australian.
4 https://www.accc.gov.au/business/industry-codes/franchising-code-of-conduct
5 ACCC acts against Ultra Tune May 17 2017: https://www.accc.gov.au/media-release/accc-takes-action-against-ultra-tuneunder- franchising-code Industry

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