ACCC steps up

January 21, 2015
Inside Retail
The Australian Competition and Consumer Commission (ACCC) says its new powers following changes to the Franchising Code of Conduct will strengthen the local industry, with the watchdog also warning rogue franchise operators it can now seek significant penalties for serious Code breaches.
Since the introduction of the new Code on January 1, the ACCC has new powers to issue infringement notices of $8 500 for body corporates ($1700 for individuals and other entities) and seek penalties of up to $51,000 in court for serious breaches of certain Code provisions.
The changes introduce a good faith obligation into the Code. This obligation requires both parties to a franchise agreement to remain loyal to the contract that they have signed.
Acting dishonestly, for an ulterior motive or in a way that undermines or denies the other party the benefits of the contract would breach the good faith obligation.
Dr Michael Schaper, acting chair of the ACCC, said rogue operators should be on notice, however, these new powers will go unnoticed by the vast majority of franchisors and franchisees who do the right thing.
“Franchisees and franchisors will still be able to negotiate and make agreements in their own interest but this new obligation requires all parties to be honest and upfront in their dealings,” Dr Schaper said.
The code will also now require increased disclosure prior to entering a franchise agreement, greater transparency around the use of marketing funds, and clarity around whether the franchisor or franchisee can operate online.
The ACCC received more than 500 franchising related complaints last year. Of these, one third related to disclosure matters so the improved disclosure requirements in the Code will address a key concern.
“The ACCC will be focusing on particularly serious conduct and, as always, will take a common sense approach to enforcing the Code,” Dr Schaper said.
The new Code applies to all franchise systems and franchisees across Australia.