Mercedes-Benz described dealers as ‘baby pigs’

“The whole thing is they really forgot the dealers, to use a cliche; they forgot who dug the well for them.”

On Friday, Mercedes-Benz counsel Robert Craig, SC, argued that the agency model idea stemmed from the car maker’s Australian branch, led by Horst von Sanden at the time, rather than a coordinated long-term plan from Stuttgart.

“The Australian leadership were actively looking at the business model and were agitating for change,” Mr. Craig told the court.

“No deception, no deceit, no subterfuge – just direct communication.”

Competition from new players

Mr. Craig said Mercedes-Benz was worried about being “disrupted”, alluding to companies such as electric vehicle manufacturer Tesla breaking new ground in recent years with a model that allows customers to buy cars directly online.

He said the 96-year-old car maker had legitimate reasons for wanting to change its model and was acting in good faith when it sought to negotiate with Australian dealerships in the face of “disruptors” and “profitability threats”.

But Tim Castle, SC, the legal council acting on behalf of the Australian Mercedes-Benz dealerships, told the court earlier this week that these negotiations were a “disguise” for a decision that had already been planned for as far back as 2016.

Mr Castle presented emails between high-level Stuttgart executives showing discussions regarding the “price optimization” that would stem from a model change and strategies to convince Australian dealers that Mercedes-Benz “are not the enemies, and we are doing this to protect you” .

In one internal presentation, Mr. Castle describes a slide where the dealers are depicted as baby pigs and their commissions described as a “cost of doing business”.

Mercedes-Benz held a number of meetings with Australian car dealers to discuss the new agency model, but once they were shown a copy of the new agreement the dealers unanimously rejected it.

Mr Castle said the consulting process – which included workshops with auditing firm Deloitte – were a “disguise” to convince dealers they wouldn’t suffer profitability loss if the customer relationship was transferred to that of Mercedes-Benz.

“Mercedes-Benz is moving from being a wholesaler to the retailer, so they can capture the extra profit,” Mr Castle said.

In what Justice Beach described as a “distracting sideshow” on Thursday, Mercedes-Benz had asked for the release of private correspondence between Labor senator Deborah O’Neill – a long-time champion of franchisees in Australia – and lobbyists and angry car dealers earlier this year.

Under the protection of parliamentary privilege last April, Senator O’Neill alleged that Mercedes-Benz had misled an inquiry into whether its new sales model would leave Australian franchisees out of pocket.

The German car company, which has made a concerted effort to redact and suppress documents it deems as “strategic and confidential”, argued that it needed the contents of the private communications to better mount its case.

But Justice Beach, who had already pushed back on the Mercedes-Benz counsel for its persistent interruption regarding “confidential documents” this week, blocked the release on Thursday afternoon.

The case continues next week.

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