In a recent Australian Competition and Consumer Commission ( “ACCC”), the consumer advocate has called for strengthening of Australia’s Franchising Code of Conduct (the “Code”) in an effort to "better protect franchisees, including a significant increase in penalties for breaches [of the Code], and requiring improved and more meaningful information disclosure to franchisees."
On 22 March 2018, the Senate referred an inquiry into the operation and effectiveness of the Franchising Code of Conduct to the, with a report due by 6 December 2018. The terms of reference for the inquiry can be viewed .
The ACCC is responsible for regulating mandatory industry codes that are prescribed under the Competition and Consumer Act 2010 (Cth), including the Code. The activities of the ACCC in franchise matters include:
It is anticipated these changes, in combination with stronger Unfair Contract Terms laws (“UCT”), would help to improve the operations of franchise businesses in Australia.
In adelivered at the recent National Franchise Convention Legal Symposium, ACCC Deputy Chair Mick Keogh said the Code was “not as effective” as it could be:
Submissions to the inquiry focused on the operation of the Code, and various instances in which individual franchisees have been exploited by larger networks and, specifically, the level of disclosure currently taking place between parties.
The report is expected to recommend changes to the Code, which has been criticised by many as being “ineffective and titled in the favour of franchisors”. It is anticipated that any changes to the Code will help provide a barrier against exploitation for small businesses.
Recommendations made by the Franchise Council of Australia include that franchise systems be registered on a public register. However, Mr Keogh raised concerns this may create the perception that information provided by franchisors has been audited and verified, or “accredited”, and would result in fewer potential franchisees doing their due diligence.
Mr Keogh also raised a number of concerns with the Business-to-Business UCT laws, which work to protect small businesses from being forced to accept overly onerous or unfair terms in standard form contracts they are offered by big businesses. He said:
Some franchisors, including global food and beverage company Retail Food Group have rejected calls for more disclosure, outlining a belief that the current Code offers adequate protection. Speaking recently to, Michael Sherlock, founder of Brumby’s Bakery said:
Ms Jenny Buchan, UNSW Business School Professor has also called for better disclosure, also saying she was “disappointed in the regulator’s stance against creating a database for disclosure documents”.
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