Franchisors need to beware of a new push by the Australian
Competition and Consumer Commission (ACCC) to change the image of
the franchise industry through the enforcement of their increased
powers acquired under the new Competition and Consumer
Much has been written about the ACCC's power to serve
substantiation, infringement and public warning notices. Recently
however, there has been a lot of focus on the power given to the
ACCC to provide audit notices to franchisors for the production of
a range of documents.
The Act provides grounds for the ACCC to compel a franchisor to
provide it with any documentation, or information, it is required
to produce to its franchisees and keep under the Franchising
The burden that the new provision places on franchisors is quite
significant. For instance:
If given a written notice, a franchisor has 21 days to produce
the relevant documents;
Franchisors can seek an extension to this 21 day period,
however this must be sought in writing and made within the 21 day
It is important to note that in no way is the ACCC obliged to
accept the request for a time extension, purely because it was
applied for, and any request for an extension of time will be
determined on a case by case basis;
Whilst there are currently no penalty provisions dealing with a
franchisor's failure to comply with the ACCC's audit
notice, a failure to comply with the notice would constitute a
breach of the Act.
The ACCC has exercised this power previously. More recently,
they have given warnings to the industry preparing them for an
increase in random audits that they will carry out to ensure that
franchisors are complying with the Code.
What Can You Do?
It is important to note that the provisions aren't there
merely for process. The ACCC has made it very clear that it will
apply them, and in fact, it has already.
It is critical that you keep and archive all documents and
information that you are required to provide to your franchisees,
or prospective franchisees, under the Code. You should also check
your operating systems and see whether you would be able to comply
within 21 days of receipt of an audit notice. If not, then new
systems will need to be implemented to ensure compliance in the
event that you are audited.
There is no guarantee that if you are served with an audit
notice and seek a time extension, that the ACCC will grant one.
There are no short cuts or ways around this provision- you must
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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