The Australian Franchising Sector: Some Observations

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The Australian Franchising SectorSome
Observations

• Dr Michael Schaper
• Deputy Chairman
• Australian Competition Consumer Commission
• www.accc.gov.au
• www.scamwatch.gov.au
• Address to the National Franchise Conference
• Burswood Hotel, Perth
• Monday 19th October 2009

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Overview

• Initial Observations
• 2. Trade Practices Act and Franchising
• How The ACCC Enforces The Law
• Common Myths
• The Future
• Conclusion

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The ACCC, TPA and Franchising Code

• Trade Practices Act (1974)
• - General requirements for all trading businesses
• Franchising Code of Conduct (1998)
• - Specific requirements for franchise systems
• ACCCs role
• Investigate breaches
• Enforce existing law
• Educate the business community

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The ACCCs Current Enforcement Tools

• Administrative resolution
• s87 undertakings
• GJ Gardner Homes, Netdeen Pty Ltd (building
  industry)
• Spray Pave (concreting)
• Austn Loans Management Active Money (finance
  broking)
• Court-based actions
• Allphones (telecommunications)
• Seal-A-Fridge (refrigeration seals)
• Personalised Chocolates 4 U (customised
  chocolates)

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Some General Observations

• Well-informed franchisees are usually good
  franchisees
• ACCC resolution of investigations is quickest
  with co-operative firms
• Effective in-house dispute resolution usually
  leads to less referrals to the ACCC
• Mediation a useful tool if in-house procedures
  cannot resolve matters
• Complaints to the ACCC can often result in
  lengthy investigations

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Common Myths

• Myth 1 Franchising Code the only body of law
  applicable to franchise systems
• Myth 2 All franchisor-franchisee disputes can
  be dealt with by the Code
• Myth 3 ACCC is the body for resolving all
  disputes.

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Complaints To The ACCC

• Between 1 January 2009 and 30 September 2009, the
  ACCC received 445 franchise related complaints.
• 115 were alleged breaches of the Code. Key
  issues
• Franchisor failed to comply with disclosure needs
  under the Code (18)
• Franchisor unlawfully terminated franchisees (5)
• Franchisor not complying with the conditions of
  the Code i.e. failing to provide cooling off
  period (3)
• Disputes regarding Application of the Code, i.e.
  franchise vs. licence agreement (3)
• 330 were non-Code related complaints. Key issues
  
• Allegations of misleading representations (27)
• Contractual issues (24)
• Allegations of unconscionable conduct (14)

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The Future

• Franchising Review
• Possible range of new measures, including civil
  pecuniary penalties, random audit powers,
  substantiation notices, public warning notices
• Govt still to announce its final response-
• Australian Consumer Law
• Will affect how businesses deal with consumers
• May include consumer redress, infringement
  notices, civil pecuniary penalties

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Conclusion

• Compliance is generally high
• ACCC will vigorously enforce the existing laws
• Need to dispel some of the myths
• Franchisors can build a culture of internal
  dispute resolution
• Prevention is better than cure
• ACCC will work with firms trying to create best
  practice

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How The ACCC Can Help

• Infocentre 1300 302 502
• Offices in each state and territory
• Regional outreach managers
• Website www.accc.gov.au
• Publications
• Codes Compliance Branch

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www.accc.gov.au