What are the Implications of the Proposed Changes to the Franchising Code of Conduct?
Following on from last year’s review of the Franchising Code of Conduct by Mr Alan Wein (see here), the Government has recently released an exposure draft of amendments to the Franchising Code of Conduct and relevant provisions in the Competition and Consumer Act 2010 (‘the CCA’), along with a ‘Future of Franchising’ statement on the policy reforms.
Although the implementation of the Wein report recommendations was expected, the drafting of the amendments goes beyond what the Wein report provided and has therefore been the cause for some concern.
For your reference, the key amendments to the Code include:
- The inclusion of penalty provisions for breaches of the Code of up to $51,000 (including the ability for the ACCC to issue an infringement notice of up to $8500 without obtaining a court order);
- Deleting the Annexure 2 short form disclosure document;
- A provision requiring franchisors to provide a risk statement to franchisees;
- Inserting an obligation for parties to a franchise agreement to act in good faith, including a requirement that the parties act honestly and not arbitrarily and cooperate to achieve the purposes of the franchise agreement. The amendments include penalty provisions where a party is found to not have acted in good faith;
- A provision which effectively requires dispute resolution to be conducted in the state where the franchisee is based, not where the franchisor is based;
- A provision modifying restraints of trade clauses in franchise agreements which allow franchisees (in certain circumstances) to continue to operate as an independent after the end of the franchise agreement.
There are also numerous other amendments that have been made. The new Code has been reformatted and renumbered so it is not easy to compare it to the old Code. New additions to the disclosure document requirements mean that additional sections will be included in the disclosure document and the numbering in the disclosure document must be updated.
There is the opportunity for yet more feedback on the draft legislation with submissions closing on 30 April 2014. Unfortunately this allows little time to respond, especially given the upcoming Easter holiday period. We will be closely monitoring the submissions regarding the amendments to the draft Code and will provide updates regarding the finalised Code provisions.
You can visit the Australian Government’s Treasury website for more information on the Code amendments, how to make your submission of feedback and access to the Future of Franchising statement. Please see the links below, or don’t hesitate to contact Peter McLaughlin on (07) 3852 5055 or email firstname.lastname@example.org to discuss any aspect of this Franchising Code of Conduct review.
View the government’s summary of the exposure draft and information on making your submission for comment:http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2014/Franchising-Code
View the Future of Franchising Statement and the government’s Impact Statement examining the costs and benefits of the changes: http://www.treasury.gov.au/Policy-Topics/Business/Small-Business/Codes-of-conduct/Franchising/2014-Future-of-Franchising-Reforms
View the current Franchising Code of Conduct and further information on the Franchising Code of Conduct: http://www.treasury.gov.au/Policy-Topics/Business/Small-Business/Codes-of-conduct/Franchising