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One Step Closer to a New Franchising Code

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By Louise Wolf, Senior Associate, MST Lawyers

The Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 (“the Bill”) was finally passed by both Houses of Parliament on 4 September 2014 and could officially become law as early as the end of this week. 

The Bill amends the Competition and Consumer Act 2010  in relation to contraventions of civil penalty provisions of industry codes (such as the Franchising Code of Conduct) by enabling regulations to be made prescribing pecuniary penalties and allowing the Australian Competition and Consumer Commission to issue infringement notices.

This means that once the Bill is enacted, there will be the ability for regulations to be made which prescribe pecuniary penalties. The proposed regulations are called Competition and Consumer (Industry Codes—Franchising) Regulation 2014 and form the amended version of the Franchising Code of Conduct (“new Code”).  The new Code is expected to come into effect on 1 January 2015. 

The final version of the new Code has not yet been released. However, the exposure draft of the new Code provides for civil penalties of up to 300 penalty units for numerous types of breaches of the new Code.  300 penalty units currently equates to $51,000. 

In addition, infringement notices can be issued by the ACCC of up to 50 penalty units (currently $8,500) for a body corporate and 10 penalty units (currently $1,700) for non-body corporate entities, including individuals.

The civil penalties are significant, however, if franchisors are diligent in educating themselves on the requirements of the new Code and putting in place measures to ensure they comply with the new Code, penalties can be avoided.

Once the new Code is released the Franchise Law Team at MST Lawyers will be hosting a series of workshops to go through what franchisors should do to comply with the new Code and what amendments should be made to their disclosure document.

If you have any queries in relation to the above or would simply like to receive some information about the new Code, please feel free to contact our Franchise Law Team by email franchise@mst.com.au or by telephone +61 3 8540 0200.