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.
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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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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