Exclusive Contracts Handicap Instructors
Author: Malcolm Hornsby
September 2004
It seems the Proprietors of some driving schools in Australia believe they have
been anointed as the chosen one to prevail over all their beasts of burden. Recently
I received a call from an instructor operating for a driving school in Melbourne.
He had replied to an advertisement I had placed in the Age newspaper seeking the
services of driving instructors. After I had explained our service to him he declared
that if he were to use the services of the Learner Driver website he would be dismissed
from his present position. I asked why? He went on to explain that he believed his
agreement with the Proprietor of the yet unnamed business he contracted for had
an exclusive agreement with him to supply one hundred percent of his customers and
furthermore to exclude any other form of service supply. No doubt this so called
contract is purely verbal and is therefore open to wild interpretation.
I would like to say this is a clear breach of the Trade Practices Act Part IV Anti-competitive conduct and restrictive trade practices
but unfortunately it’s not that simple. In short a person can contract themselves
to whatever agreement they like, the question is though, can the contract be enforced?
In this case exclusive dealing is clearly a matter that the Trade Practices Act
has seen fit to outlaw. And in that context these contracts are not worth the paper
they are written on. Just what possible reason would you impose such an obvious
disposition on a fellow member of the driver training fraternity? In short it’s
a control over the instructor that forces him to service this proprietor's customers
exclusively. If the instructor chooses to contract to one agent then so be it. Though,
it seems to me that driving instructors that contract themselves to a single agent
are destined for a short journey in the industry. Let’s take a typical example of
the damage caused by this policy of Exclusive Dealing as it is called.
Scenario A: an instructor operates for one agent (Exclusive Dealings).
This instructor is contracted by an agent to service the customers that have been
introduced by the agent to the instructor, after all a driving school is simply
an advertiser of the driving instructor's service. The instructor finds that he
is called upon to service many suburbs of a large busy city, he works hard, traveling
from one customer to the next is exhausting and frustrating and each year he spends
more and more time in travel time between customers, time that is not accounted
for in the service fee that his agent has set for him to be charged out for. The
effect, his vehicle has traveled many thousand of kilometers and is worn out far
before its time. Not only is his vehicle worn out, he is worn out from the daily
battle on the roads. For many the most frustrating part of their day is the drive
to work, imagine having to deal with that all day and then have to front up to a
customer with a positive frame of mind. The stress of operating a vehicle on city
roads has been known to lead to a heart attack and little wonder. In addition the
instructor finds his returns are diminishing, it becomes harder and harder to make
a living from the industry and he looks around for someone or something to blame.
He accuses the agent of charging too much in commissions, he makes accusations that
the territory is to large for him to service and in general he is a very unhappy
person to train young drivers how to be a calm and patient driver on the roads.
Scenario B: The enlightened one, an instructor that contracts to many agents
(Non Exclusive Dealings).
This instructor has seen the light and approaches many agents all over his city,
he knows that most driving schools advertise in broad range media and is sure that
they will be acquiring customers from far and wide. He approaches his prey with
all the stealth of a hungry animal knowing full well that if he misses his mark
he will go hungry.
Hi Mr. Driving School owner, my name is John and I am a professional driving instructor.
I'm looking for work in my suburb and I'm prepared to pay your standard commission
for the introduction to customers in my area, In addition I will represent your
company as if it were my own and also pay you a commission on secondary customers.
(Secondary customers are customers that are derived from the original customer a
recommendation directed to the instructor). Notice this instructor is not contracting
to operate exclusively for the agent and that he is requesting customers in a confined
area, with the result he reduces his travel and costs. I ask you who would you rather
be instructor A or instructor B.
Now lets investigate other scenario. I now look at (Non Exclusive Dealing) from
the point of view of the driving school owner.
The owner of a driving school wants to be able to advertise the services of his
business in the most economical form possible, in the past this has been in publication
like Yellow Pages and the like, however the advent of the Internet is making inroads
and soon will become a better, smarter and cheaper medium to advertise these type
of services. After all anybody can setup a web site right!! Getting back to the
subject, our proprietor also needs well trained operatives that can service customers
that his advertising attracts, there's no point in advertising in media that advertises
in locations that can't be covered. So he needs the services of many instructors
that will service his customers with grace over a large area. This in the scheme
of things is almost impossible, I say almost impossible as I am yet to see any driving
school achieve this Herculean feat, no doubt somebody will set me straight. Our
business owner sets upon a course to find driving instructors for his business but
finds few of the calibers he requires. He could design a training program to develop
new instructors from scratch. For this he will need to be a highly skilled trainer
or employ the like, or he could embark upon a policy of cooperation with trained
skilled instructors that have experience and grace. The details are unimportant
and I'm not going to discuss them here. The truth is that the practice of Exclusive
Dealings is deleterious to instructors, agents and customers through higher prices
and poor training, the bird is in your hands.