Honda Australia being sued by dealers over alleged data abuse by Deloitte

Professional services titan Deloitte is facing allegations of unethical behavior from disgruntled Honda car dealers. These dealers accuse Deloitte of misusing confidential data acquired during their franchise audits, according to a report by the Australian Financial Review.

This controversy arises amidst Deloitte's simultaneous engagement in tax accounting and auditing for numerous car dealers and their respective parent companies.

The conflict centers around Honda's shift to a centralized online sales model, which prompted a reevaluation of dealer franchise agreements. Dealers are currently suing Honda Australia for damages following the abrupt termination of these agreements. They allege that Deloitte, through its auditing role, gathered sensitive financial information, which was then allegedly used to reduce the compensation paid to them during the restructuring.

This situation echoes the recent PwC scandal where confidential Treasury information was used to assist global tech clients in tax evasion. In the case of Honda, dealers claim that Deloitte's access to their sales and profit data directly informed Honda Australia's strategy to minimize dealer compensation.

Concerns about conflict of interest have been escalating within the industry. Some Deloitte partners reportedly resigned due to these concerns. Similar issues were highlighted in Mercedes-Benz's restructuring process, where Deloitte was accused of prioritizing its work with the parent company over its commitments to Australian dealers.

Dealers argue that they were coerced into accepting low valuations for their businesses, with some franchises previously generating over $100 million annually. Deloitte's acquisition of approximately 300 dealer relationships from Sydney-based Horwath in 2007 further complicates the situation. This acquisition brought into question the potential conflict of interest, given Deloitte's pre-existing contracts with global manufacturers like Mercedes-Benz and BMW.

One particular case involves Mark Avis, co-owner of Astoria Brighton dealership, who is suing for what he claims was “intense pressure” by Deloitte to accept undervalued offers from Honda. He accuses Deloitte of using their detailed knowledge of the dealers' financials to their disadvantage.

Deloitte, however, has denied these allegations, asserting adherence to confidentiality obligations and denying misuse of information. Despite this, the controversy has impacted Deloitte's standing in the automotive sector, leading to the resignation of three partners and the loss of a significant client, Peter Warren Automotive, who switched their auditing partner to KPMG for commercial reasons.