Release of Franchising Code of Conduct Consultation Paper
By Joanna Bairamidis, Lawyer, MST Lawyers
Following the release of the report on the Review of the Franchising Code of Conduct (“the Review”) on 17 May 2013, the federal government has announced a consultation paper to be circulated to industry on 17 June 2013 (“the Consultation Paper”). The Consultation Paper will seek to obtain feedback from all industry stakeholders regarding the 18 recommendations arising from the Review, which seek to implement reforms for the improvement of the operation and regulation of the franchising industry.
Some of the 18 recommendations proposed by the Review include:
- amending the Franchising Code of Conduct (“the Code”) to include an express obligation to act in good faith, which would extend to the negotiation and performance of the Franchise Agreement, performance of obligations under the Code and the resolution of disputes between the parties to a Franchise Agreement;
- amending the Code to provide for comprehensive methods of alternative dispute resolution between parties to a dispute and clarification of the payment of costs in such circumstances; and
- amending relevant legislation to:
(a) strengthen the enforcement measures available to allow the ACCC to issue penalties to a maximum of $50,000 for a breach of the Code;
(b) give the ACCC wider audit powers to enable them to audit a Franchisor’s compliance with the Code; and
(c) specify court orders that can be made, including compelling Franchisors to provide royalty free periods to Franchisees and to pay amounts into marketing funds.
While support for most of the recommendations put forth by the Review has been given by the Franchise Council of Australia and the Franchise Advisory Centre, the Consultation Paper will allow industry participants to engage in the reform process and address any concerns with the effectiveness of the proposed changes.