The release of the Exposure Draft follows the review of the Code
conducted by Alan Wein in 2013, the 24 June 2013 release of the
then Government's official response to the 18 recommendations
made by the Wein Report and a period of further consultation.
"The Future of Franchising" statement identifies 4 key
areas that the government has focused on in producing the
reducing red tape
improving information available to franchisees
strengthening the balance in franchise agreements
improving conduct in the sector and the overall effectiveness
of the Code.
Key changes include the following:
penalties of up to $51,000 for major breaches of the Code
power of ACCC to issue infringement notices of up to $8,500
without Court order
increased audit powers for ACCC
introduction of obligation to act in "good faith
short form "information sheet" risk statement to be
provided to prospective franchisees
removal of Annexure 2 short form disclosure document
removal of double disclosure obligations on master and foreign
higher level of disclosure requirements for marketing fund
requirement for company owned franchises to contribute to
restrictions on ability of franchisor to require significant
restrictions on ability of franchisor to impose restraints of
trade on former franchisees.
The new format Code embodies most of the existing Code together
with the new changes but is completely reformatted and
While one of the intents of the government has been to reduce
red tape, the revised Code itself (excluding annexures) is
certainly not shorter than it was.
The new statutory Code definition of "Good Faith" does
not make any reference to the common law duty as recommended in the
If the legislation is passed in in its current form, there will
inevitably be much deliberation on what "Good Faith"
It is intended that the announced proposed changes to the Code
will come into effect from 1 January 2015.
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.Madgwicks is a member
of Meritas, one of the world's largest law firm
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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