New powers for ACCC to strengthen franchising industry

The Australian Competition and Consumer Commission says the new powers given to the consumer watchdog under the Franchising Code of Conduct will strengthen Australia’s franchising industry.

The Australian Competition and Consumer Commission says the new powers given to the consumer watchdog under the Franchising Code of Conduct will strengthen Australia’s franchising industry.

Changes to the mandatory Franchising Code of Conduct came into effect on January 1, 2015. The consumer watchdog now has new powers to issue infringement notices of $8,500 for body corporates ($1,700 for individuals and other entities), and to seek penalties of up to $51,000 in court for serious breaches of certain Code provisions.

ACCC Acting Chair Dr Michael Schaper said the ACCC welcomes these changes to the Franchising Code as valuable additions to its arsenal.

“Rogue operators should be on notice that the ACCC can now seek significant penalties for serious breaches of the Code,” he said. “However, these new powers will go unnoticed by the vast majority of franchisors and franchisees who do the right thing.”

The changes introduce a good faith obligation into the Code, which requires both parties to a franchise agreement to remain loyal to the contract that they have signed. Acting dishonestly, for an ulterior motive or in a way that undermines or denies the other party the benefits of the contract, would breach the good faith obligation.

“Franchisees and franchisors will still be able to negotiate and make agreements in their own interest, but this new obligation requires all parties to be honest and upfront in their dealings,” Schaper said.

The code will also now require increased disclosure prior to entering a franchise agreement, greater transparency around the use of marketing funds and clarity around whether the franchisor or franchisee can operate online. Schaper said the ACCC received more than 500 franchising related complaints last year, with one third related to disclosure matters.

The new Code applies to all franchise systems and franchisees across Australia. Further information on the Code is available at www.accc.gov.au/franchisingcode or by calling the ACCC Small Business Helpline on 1300 302 021. You can also find out about the changes by viewing the ACCC’s industry webinar at www.youtube.com/user/ACCCvideos.

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