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Tougher penalties for franchise sector



Franchising | News | Small Business

By Joe Kelly

The government has moved to introduce fines for businesses that breach the soon to be updated Franchising Code of Conduct and reduce costly disputes in the sector.

A bill introduced into the lower house last week strengthens the enforcement of the code and hands new powers to the competition watchdog. The code is currently being renovated and simplified by the present government after being introduced 16 years ago by the Howard government.

The legislation amends the Competition and Consumer Act to allow a pecuniary penalty to be imposed on those businesses that breach industry codes. The legislation, expected to pass the parliament, will hand the Australian Competition and Consumer Commission new powers to issue infringement notices to parties that have contravened key elements of the Franchising Code of Conduct. Pecuniary penalties may also be imposed by a court.

The upper pecuniary penalty for contravention of the code will be set at $51,000. An infringement notice issued by the ACCC will be set at $8,500 for a corporation and $1,700 in other instances. Mr Billson said the penalty regime was modest.

“Pecuniary penalties will only apply to provisions of the Franchising Code that are fundamental to the purpose of the Code and where non-compliance is likely to cause significant detriment to the other party,” Mr Billson said in his second reading speech.

“By allowing the ACCC to issue an infringement notice for a breach of the Code, the Government adds increased flexibility and agility to the regulator’s enforcement armory. Infringement notices allow breaches to be dealt with in a timely and cost efficient manner without the need for a court order in appropriate circumstances.”

Following the passage of the bill, the government will bring forward the updated Franchising Code of Conduct. It is expected to take effect from January next year.

The franchise industry is critical to the small business sector in Australia. Mr Billson said it employed over 400,000 people and produced an estimated sales turnover of $131 billion annually.

Executive Director of the Council of Small Business of Australia, Peter Strong, said the move to toughen up the enforcement of the Franchising Code of Conduct was positive. Mr Strong told Dynamic Business it would mean disputes could be resolved more effectively and reduce the need for recourse to the courts.

“You can have a code of practice all you want and it can be voluntary or mandatory, but if they are going to be no sanctions you might as well not have it,” he said. “If you do the right thing it won’t matter. But if you do lack any good faith in the way you deal with the franchisees then you’ll pay for it”.

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