Honda Australia must pay penalties totalling $6 million following a Federal Court ruling that found it had engaged in “misleading or deceptive conduct”.
The judgement said Honda “made false or misleading representations” to customers of three former authorised Honda Australia dealerships: Brighton Automotive Holdings Pty Ltd (Astoria), Tynan Motors Pty Ltd (Tynan) and Buick Holdings Pty Ltd (Burswood).
The Australian Competition and Consumer Commission (ACCC) alleged that between January and June 2021, Honda Australia represented to customers of these dealerships that these locations either would close or had already closed and could therefore no longer service Honda vehicles.
It alleges these misrepresentations were made in emails, text messages and phone conversations with customers.
For example, call centre employees used wording like “that dealership is closing down”, while reminder text messages about vehicle servicing said “your previous service dealer has closed”.
The ACCC commenced legal action against Honda Australia in April 2022.
These three dealerships had had their franchise agreements terminated as part of Honda Australia’s restructuring and the change to an agency sales model, however they were still able to service and repair vehicles – including Hondas – as they continued to operate as independent service centres.
Honda Australia admitted that, with certain statements, it had breached Australian Consumer Law (ACL) by making misleading representations that the dealerships had closed and would no longer service Honda vehicles. However, it contested other statements were in breach of the ACL.
Astoria and Tynan ceased to be authorised Honda dealers on January 29, 2021, becoming independent service centres; Burswood ceased sales on October 1, 2020, and then ceased to be an authorised Honda dealer on March 31, 2021.
“Although the contraventions of s 29(1)(j) were not deliberate, they were nevertheless serious,” said Justice Moshinsky.
“The number of contraventions is large. The contraventions took place over a period of several months.
“Honda is a large company; a large penalty is therefore required to achieve specific and general deterrence. Honda’s cooperation with the ACCC is a factor that reduces the penalty that would otherwise be imposed.”
He characterised Honda’s cooperation with the ACCC was “substantial”.
“Honda Australia has cooperated with the ACCC throughout the process, and we acknowledge the court’s decision,” said a spokesperson for Honda Australia.
“Honda takes compliance with Australian consumer law seriously. We value our customers and, as we look ahead, we remain committed to providing a great customer experience.”
“We took this case because we believed Honda Australia’s conduct harmed the dealerships and their customers,” said ACCC commissioner Liza Carver.
“Honda Australia deprived consumers of the opportunity to make an informed choice about their options for servicing their vehicle. It also caused likely financial loss to the dealerships by the false claim they were closing or had closed.”
“The substantial penalty sends a strong message to all businesses about the consequences for making misleading statements to consumers.”
The consumer watchdog had called for a penalty of $7-9 million to be imposed on Honda Australia, with the car company contending a penalty of $1-3 million was appropriate.
Justice Moshinsky has ordered $5.5 million to be paid by Honda Australia for the misleading service reminder communications, plus $500,000 for the 17 misrepresentations made by its call centre.
Honda Australia terminated 36 of its dealerships’ franchise agreements effective from June 30, 2021 as part of its restructure and shift to an agency sales model.
Astoria and Tynan had both been selling Honda vehicles for approximately 50 years.
In a submission to the Senate Inquiry into the relationships between car manufacturers and dealers late in 2020, Brighton Automotive Holdings alleges it was told “without any prior notice” on March 23, 2020 that its agreement would end on June 30, 2021.
Their agreement had been set to end on June 30, 2023.
It further alleged the compensation methodology used by Honda and Deloitte “grossly” undervalued the loss the dealer suffered.
Legal action regarding this issue is ongoing.
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