New financial year - new law for consumers and franchisees

1 July 2010

Today new laws come into force which will provide greater protection to consumers and potential franchisees.

The laws strengthen protection against unfair terms in standard form contracts; and changes to the Franchise Code mean franchisees will have more relevant information to assist prospective franchisees make more informed decisions before entering an agreement.

The Australian Competition and Consumer Commission has developed new publications to assist businesses and consumers to understand the new laws (see links below) and is working with the Australian Securities and Investments Commission and state and territory consumer protection agencies to ensure consistency in the enforcement of the new laws.

Unfair Contract Terms

"Phone, internet, gym, power and travel – everyone has entered into a standard form contract at some stage," ACCC chairman Graeme Samuel said.

"From today the ACCC and other agencies will enforce new national laws which protect consumers from contract terms which are unfair.  These new laws are designed to protect consumers where they cannot effectively bargain and are offered contracts on a take it or leave it basis," Mr Samuel said.

Under the law only a court can determine whether a term in a standard form consumer contract is unfair.  A term found by a court to be unfair is not binding on the consumer.  However, if the contract can still operate without that term, it will.

"The unfair contract laws marks the start of new era for consumer protection in Australia as the ACCC, ASIC and all states and territories will be cooperating in the enforcement of a common law."

"Businesses using standard form contracts should review them now to ensure they comply with the law. To assist consumers and business, the ACCC has issued two new publications with a simple, easy to read overview of the new provisions, which complement the previously released A guide to the unfair contract terms law, which was developed jointly by the ACCC, ASIC and the state and territory consumer protection agencies.

“Those agencies will continue to work together to ensure that businesses and consumers receive consistent messages about the unfair contract terms law and that the law is enforced in a consistent way by all regulators," Mr Samuel said.

Franchising Code of Conduct

The changes to the Franchising Code of Conduct require that franchisors must disclose more information to assist prospective franchisees to make informed decisions. The dispute resolution procedures under the Code have also been strengthened.

"Franchising is a $130 billion industry in Australia and franchisors and prospective franchisees need to know about changes to the Code relating to the all-important areas of disclosure, transparency and mediation," Mr Samuel said.

"The changes also mean that franchisors have to make clear what kind of obligations the franchisee has in terms of future capital expenditure, or if there are any requirements to pay a franchisor's legal costs."

Mr Samuel said franchisors must now give six months notice if they are not going to renew a franchise agreement if the term of the agreement is six months or longer, which is important given many franchisees don't realise their agreements aren't necessarily ongoing.

The ACCC has developed a number of new educational tools including a new fact sheet and a DVD to explain the changes to franchisors and franchisees, and updated its website to ensure all parties to a franchise agreement understand the requirements.
 
The ACCC is also funding a free online education program which aims to help prospective franchisees make an informed decision when looking to buy a franchise. The program, administered by Griffith University's Asia-Pacific Centre for Franchising Excellence, begins today.

"The ACCC takes seriously its role in educating Australians about the Trade Practices Act and related laws," Mr Samuel said. "These new information products are part of the ACCC’s ongoing efforts to ensure that businesses and consumers understand their rights and obligations under the Act and are available in hard copy or on the ACCC website."

Release number: 
NR 128/10
ACCC Infocentre: 

Use this form to make a general enquiry.

Media enquiries: 
Ms Lin Enright - (02) 6243 1108
Mr Graeme Samuel - (03) 9290 1812