Most Read Contributor in Australia, September 2016
On 4 September 2014, the Federal Parliament passed the
Competition and Consumer Amendment (Industry Code Penalties)
Bill 2014 (Bill).
The Bill will have a significant impact on the franchising
sector, as it will allow regulations to be made to impose monetary
penalties on franchisors associated with a breach of the
Franchising Code of Conduct (Code). The Bill is
consistent with the exposure draft of amendments to the Code that
was released earlier this year.
The Bill will facilitate a change to the way that the Code is
enforced by amending the provisions of the Competition and
Consumer Act 2010 (Cth) (CCA) to enable the
Australian Competition and Consumer Commission
(ACCC) to either issue infringement notices or
seek orders for civil pecuniary penalties for breaches of the Code.
The explanatory memorandum to the Bill provides that changes to the
Code are proposed to apply prospectively.
The penalty and infringement provisions are intended to apply to
franchise agreements entered into after 1 January 2015.
Civil Pecuniary Penalties
At present, the CCA does not empower the ACCC to seek pecuniary
orders for breaches of the Code. Under the Bill, regulations can be
made to impose a civil penalty up to 300 penalty units (currently
$51,000) per contravention for failure to comply with a civil
pecuniary penalty provision of the Code.
The Commonwealth Minister for Small Business, the Honourable
Bruce Billson MP indicated that civil pecuniary penalties will
apply to provisions of the Code that are fundamental to its purpose
and where non-compliance is likely to cause significant detriment
to the other party.
The Bill does not specify which provisions of the Code will
attract the civil pecuniary penalties. The new Code will specify
the clauses that will attract civil pecuniary penalties for
Under the Bill, section 51ACD is to be inserted into the CCA
which would give the ACCC the power to issue infringement notices
(Notice) for an alleged contravention of the Code.
A Notice could be issued by the ACCC where the ACCC has reasonable
grounds to believe that a person has contravened a civil penalty
provision of the Code. The Notice is to be issued within 12 months
of the day that the contravention of the civil penalty provision is
alleged to have occurred and a Notice must not be issued for the
same alleged contravention of the Code.
The amount of the penalty would be 50 penalty units ($8,500) for
companies and 10 penalty units ($1,700) for individuals, per
contravention. If there is compliance with a Notice and payment of
this would not be regarded as an admission of contravention of
a civil penalty provision of the Code
no proceedings (whether criminal or civil) may be started or
continued against a person in relation to the alleged contravention
of the civil penalty provision of the Code by or on behalf of the
The compliance period for a Notice would be 28 days beginning on
the day after the day that the Notice is issued by the ACCC. The
ACCC does have the power to extend the 28 day period or to withdraw
A person to whom a Notice has been issued would be able to make
written representations to the ACCC seeking the withdrawal of the
Notice. Evidence provided to the ACCC in the course of making the
written representations would not be admissible in evidence against
the person in any proceeding.
We will continue to review and monitor the status of the
proposed reforms and will keep you informed of key significant
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
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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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