Franchising

Stronger penalties required for franchising codes and UCT laws

Australia’s Franchising Code of Conduct needs strengthening to better protect franchisees, including significantly increased penalties for breaches, and requiring improved and more meaningful information disclosure to franchisees. These changes, in combination with stronger unfair contract terms (UCT) law, would help to improve the operations of franchise businesses in Australia.

ACCC Deputy Chair Mick Keogh called for these changes in a speech delivered today at the National Franchise Convention Legal Symposium in Melbourne.

ACCC Opening Statement - Parliamentary Inquiry into the Franchising Code of Conduct

ACCC Deputy Chair, Mick Keogh, told the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the Franchising Code of Conduct:

The ACCC welcomes the opportunity to appear before the committee of Inquiry today.

While recognising the benefits associated with franchise business models, we also recognise the vulnerability of franchisees due to the significant personal and financial investment they commonly make, paired with the imbalance of power that can exist between franchisee and franchisor.

Luxottica to improve transparency for franchisees

Luxottica Franchising Australia (Luxottica), the franchisor of eyewear retailers OPSM and Laubman and Pank, has committed to be more transparent about the structure and operation of its franchise system to franchisees.

The commitment follows an ACCC investigation that found Luxottica’s marketing fund financial statement and disclosure document were unlikely to comply with the Franchising Code of Conduct.

Luxottica cooperated with the ACCC’s inquiries and voluntarily committed to change the documents to give franchisees a more open and transparent account of the business.

Franchisee rights denied in Husqvarna code breach

The ACCC has accepted a court enforceable undertaking from Husqvarna Australia Pty Ltd after the outdoor power products subsidiary admitted it likely misled its franchisees when it stated that the Franchising Code of Conduct (FCC) did not apply to their contracts.

The ACCC took action over concerns Husqvarna’s “dealership agreements” may have contravened provisions of the FCC, and consequently section 51ACB of the Competition and Consumer Act (CCA), and made misleading representations in breach of the Australian Consumer Law (ACL).

Franchising, misleading behaviour continues to be an ACCC focus

Nearly 5000 small businesses reported various issues to the ACCC last year, with the most common areas of concern being alleged misleading conduct, consumer guarantees issues and wrongly accepting payments.

The ACCC took seven enforcement actions, including five for alleged breaches of the Franchising Code. It also did 29 compliance checks to ensure adherence with the franchising, horticulture, and food and grocery industry codes.

2018 compliance & enforcement priorities

In his annual CEDA address, Chairman Rod Sims launched the ACCC's 2018 Compliance and Enforcement policy. This year, the ACCC will focus on consumer issues in broadband services and energy, competition in the financial services and commercial construction sectors, systemic consumer guarantee issues, and conduct that may contravene the new misuse of market power and concerted practices provisions.

Pastacup to pay $100,000 for breaches of new Franchising Code

The Federal Court has ordered Pastacup franchisor Morild Pty Ltd (Morild) to pay penalties of $100,000 for breaches of the Franchising Code of Conduct (Franchising Code), following ACCC proceedings. The company’s co-founder and former director, Mr Stuart Bernstein, has also been ordered to pay $50,000 for being knowingly concerned in the breaches.

Mr Bernstein co-founded the Pastacup franchise in 2008 and has managed and been a director of two previous franchisors of the Pastacup franchise system that each became insolvent.

ACCC says Small Businesses just need a level playing field

The Australian Competition and Consumer Commission has taken action over the last six months to ensure small business have a level playing field, as revealed in the 14th edition of the ACCC’s Small Business in Focus report.

“The ACCC is committed to ensuring small businesses receive the protections of the new business-to-business unfair contract terms law, franchising and other industry codes,” ACCC Deputy Chair Dr Michael Schaper said.