Two Federal Government inquiries tabled their reports shortly prior to Christmas. Included in the recommendations were matters likely to attract the interest of many businesses.
The Federal Parliamentary Joint Committee on Corporations and Financial Services entitled "opportunity not opportunism: improving conduct in Australian franchising" (the Franchising Report) made a series of recommendations relevant to the franchise sector. However the recommendation "to explicitly incorporate, in its simplest form, the existing and widely accepted implied duty of parties to a franchise agreement to act in good faith"1 as a deterrent to alleged opportunistic conduct in franchising has the capacity to have wider implications for business.
Around the same time the Senate Standing Committee on Economics delivered its report on the need, scope and content of a definition of unconscionable conduct for the purposes of Part IVA of the Trade Practices Act 1974 (the Unconscionable Conduct Report). Although the report fell short of recommending dramatic changes to the Trade practices Act, the report did observe that the unconscionable conduct provisions were not operating effectively and improvements were required.
The Franchise Council of Australia, the Shopping Centre Council and the Australian Competition and Consumer Commission all counselled against the inclusion of an explicit good faith obligation into the Trade Practices Act, so it will be interesting to see how the Government reacts to the Franchising Report, particularly as in the Unconscionable Conduct Report the committee specifically declined to recommend the insertion of a definition of good faith into the Act, commenting that the introduction of a definition of good faith "would only add uncertainty."2 The official Government responses are expected in the first quarter of 2009, although the matters do not appear to have any particular priority.
The broader business community would be justifiably concerned if any form of statutory good faith obligation was to be considered. Apart from the direct negative impact on the franchise sector, it would be a very short step from the franchise sector to retail leasing, the oil industry, the grocery sector and indeed any industry where any allegations of "opportunistic conduct" could be made.
Footnotes
1 Recommendation 8.
2 Paragraph 5.43