ACCC Enforces Franchising Code as Complaints Rise

Complaints regarding franchises to the Australian Competition and Consumer Commission (ACCC) have increased as the ACCC intensifies its audits. A small business activities report released this week by the ACCC indicates complaints about franchises increased from 271 complaints in the first half of 2012, to 454 complaints in the latter half.

The complaints primarily concerned allegations of unconscionable or false and misleading conduct.

The deputy chair of the ACCC, Dr Michael Schaper, stated recently that the ACCC is keen to ensure more franchisees appreciate their rights under the Franchising Code of Conduct, and realise that they can contact the ACCC to make a complaint or obtain additional information.

The Franchising Code of Conduct is a compulsory industry code of conduct that has the force of law under the Competition and Consumer Act 2010. The purpose of the code is to regulate the conduct of participants in franchising towards each other and to ensure that they are adequately informed about a franchise before entering into it. The code also outlines a cost-effective dispute resolution scheme for franchisees and franchisors.

"In the most recent report, a big area we have seen an increase in is unconscionable conduct, especially for franchises," Dr Schaper says.

"We are putting more of an effort into letting businesses know about unconscionable conduct and when it will be a breach of the law; likewise in franchising, we are spending more time to educate both prospective and existing franchisees."

Dr Schaper confirmed the increased number of franchise audits and considered that the increase could be one of the reasons for the rise in complaints.

"We have picked up the number of audits we are doing on franchises to see if they are compliant with the Franchising Code of Conduct, we are trying to be proactive with it," he says.

"We are also doing random audits, which sends a message to the whole franchising community to make sure they know the ACCC is out there."

On 4 January 2013 the Minister for Small Business, the Hon Brendan O’Connor, announced the initiation of a review of the Franchising Code of Conduct, to be conducted by Mr Alan Wein.  The review of the Franchising Code is a chance for the Government to receive feedback from an independent person on whether that law is achieving its aims. 

The Franchising Code was amended in 2008 and 2010. In 2009 the Government committed to a 2013 review of the planned amendments. The 2013 review will consider the efficacy of the 2008 and 2010 amendments, specifically the provisions concerning good faith in franchising, the rights of franchisees at the end of their franchise agreements, and enforcement of the Franchising Code. In making this commitment, the Government stated that a 2013 review ‘would allow for a review after an adequate number of contracts, established after the amendments were implemented, have run their course (and that) the franchising sector deserves some certainty and stability before instigating another review’.

To read more about the Franchising Code review click here.

To read more about the role of the ACCC vis-à-vis the Franchising Code click here.

The Trade Practices and Competition and Consumer Acts are a part of one narrative with our Competition and Consumer Point-in-Time Service. Contact TimeBase for a free trial.