Stronger ACCC powers to enforce the Franchising Code

The Government has passed legislation that will give the ACCC stronger powers and greater flexibility when enforcing the Franchising Code of Conduct, the mandatory industry code regulating the conduct of both franchisors and franchisees alike.

The Bill, which will commence on 1 January 2015, gives the ACCC the power to either:

1. issue infringement notices with fines of $8,500 (for companies) or $1,700 (for individuals) for an alleged infringement of the Code.  Once issued with an infringement notice, a person has a period of 28 days within which to comply with the relevant provision of the Code, or pay the fine (without an admission of breach); or

2. seek orders for civil pecuniary penalties of up to 300 penalty units (currently equivalent to $51,000) per contravention.

There will also be a general duty on franchisors and franchisees to act in good faith in their dealings with each other.

In his Second Reading Speech, the Small Business Minister confirmed that the Government intends to introduce an amended Franchising Code of Conduct to apply to franchise agreements entered into in or after 1 January 2015.

… we will be introducing a new franchising code, one which simplifies and modernises the way franchising is regulated, one that fulfils our election commitment to refine the franchising code to strengthen its effectiveness, improve its responsiveness to the sector’s unique commercial characteristics and tensions and guard against additional state-based regulation.

Other amendments to the legislation include:
  • prospective franchisees will need to be provided with a short information sheet containing an overview of the risks and rewards of franchising
  • removing the need for master franchisors to provide a separate disclosure document to the master franchisees in addition to the disclosure document provided by the master franchisee.
  • the short form disclosure document provided in Annexure 2 will be removed.
  • information about online trading activities of franchisors must be disclosed
  • greater obligations regarding disclosure of use and management of marketing funds
  • limiting the right of franchisors to impose significant capital expenditure on franchisees

Contact Melissa Lammers, Solicitor Director, on 9526 3444 or mlammers@shirelegal.com.au if you have any questions.

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