Based on recent meetings with the Federal government and the ACCC in relation to the current Federal inquiry into franchising it appears one of the more likely end outcomes will be increased powers to the ACCC. This is likely to include giving the ACCC power to audit Franchising Code compliance on an ongoing basis in much the same way that the Australian Taxation Office audits compliance with income tax laws.
It may surprise some to know that currently the ACCC is only able to investigate a franchisor if there is a belief that there may have been a breach of the Code. The ACCC sees this restriction as impeding its capacity to be pro-active in its role as industry regulator. The Franchise Council of Australia is understood to be generally supportive of this change.
The ACCC submission to the Federal inquiry also suggests that consideration be given to amending the Trade Practices Act to enable a court to order significant pecuniary penalties (fines) for breach of the Code. The FCA is less keen on this recommendation, particularly as the fines could be substantial based if the current penalty provisions in the Trade Practices Act are adopted.
Whatever the outcome, Code and Trade Practices Act compliance is likely to have more serious consequences. Franchise systems would be prudent to begin auditing their own compliance to ensure that if these recommendations become law they can be confident that they will pass scrutiny. It would be worth commencing this exercise now, as with the Federal inquiry reporting early December it is possible the changes could occur before the next chance to update the disclosure documentation in 2009.
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