Australia: Trade Practices Compliance Program

Last Updated: 17 November 2009
Article by The Franchising Team

If you are a franchisor or operate a small business, advertise goods or services, negotiate with suppliers, are a distributor or compete with other businesses, then you should have a Trade Practices Act 1974 (Cth) (TPA) compliance program (Program) in place.

The ACCC Takes Action

A recent Australian Competition & Consumer Commission (ACCC) news release again highlighted the importance for franchisors to have such a Program in place. In this instance, G.J. Gardner Homes, Netdeen Pty Ltd and its directors have given Court enforceable undertakings after an ACCC investigation into allegations that the franchisor had mislead former franchisees.

G.J. Gardner Homes is a residential building franchise with approximately 100 franchises operating in Australia and elsewhere. The investigation revolved around misleading representations about the significance of the franchisor's buying power and some specific capabilities of its building management software system. The absence of a Program and resultant failure to follow any methodology to ensure compliance with the TPA contributed considerably to a breach of section 52 of the TPA and the consequences suffered by the franchisor and its directors.

Experience shows that compliance with the TPA does not happen automatically. To the contrary, what is often considered commercial, or good business practices may fall foul of the TPA. Businesses are often surprised to learn that their supply chain, pricing practices, advertising campaigns or failure to comply with mandatory industry codes breach the TPA.

In an attempt to partially address this, the ACCC published a guide to the Program for small businesses. The guide is designed to promote awareness of the TPA in the small business sector and assist small business operators to incorporate TPA compliance as an integral part of their businesses. Similar guidelines also exist for medium to large corporations.

What Is A Small Business?

The ACCC guide does not define what constitutes a 'small business', but the Australian Standard for compliance programs describe it as:

'a philosophy of the way the business is run, rather than a matter of the number of employees'.

Section 761G of the Corporations Act 2001 (Cth) defines a small business as any manufacturing business which employs less than 100 people or any other business which employs less than 20 people.

Although, defined in legal terms under the Franchising Code of Conduct, in commercial terms, franchising is generally seen as a method of doing business. Given this generally accepted view of franchising, a franchise system is amongst others characterised by its ability to adapt quickly and effectively to market needs and changes. Philosophically, regardless of the size of any franchise system, franchising is much about the way the business is run. Assuming this to be correct, a franchisor will invariably fall within the Australian Standard definition of a small business.

The ACCC's Program Checklist

The ACCC has produced a checklist for small businesses as to how they should establish, and what should comprise a Program. In summary, these steps are:

Demonstrated Commitment

Businesses should make a board resolution evidencing their intention to implement a Program, to establish a TPA compliance culture and to appoint a TPA compliance officer. The list is not exhaustive and can include what follows or anything relevant to a business' particular characteristics.

Prioritise TPA Risk Areas

The next step is to investigate and understand the business' risk areas. These may include:

  • Price fixing and retail price maintenance.
  • Imposing conditions on the supply of goods or services to, or by a third party.
  • Unconscionable conduct.
  • Misleading and/or deceptive conduct.
  • Compliance with TPA industry codes such as the Franchising Code of Conduct.

Implementation

Once a business understands its TPA risks and have prioritised those, a Program should be developed to address all relevant issues. An effective Program must as a minimum comprise at least the following:

  • TPA training of staff and business officers.
  • A complaints handling system in relation to TPA issues.
  • Delivery recording.
  • Regular review and updating.
  • Adequate documentation to ensure compliance efforts can be substantiated.
  • Appointment of a TPA compliance officer.

Generally, the TPA compliance officer should be responsible for delivering and updating the Program, monitoring and acting on TPA related complaints and maintain records in relation to the operation of the Program. Critical to the successful implementation of a Program is the involvement of, and continuous training of staff. All new staff should also be given TPA training as part of their induction. The Program should be regularly updated to account for changes in business practices and/or the law and records should be kept relating to the delivery of the Program, the collection and resolution of TPA related complaints and how a business has reviewed and updated its Program.

Consequences Of Non-Compliance

Failure to comply with the TPA can have serious consequences. Apart from potential damage to business reputation, it can result in the imposition of a range of sanctions including requirements that the business:

  • Publish corrective advertising.
  • Pay significant fines.
  • Implement an Australian Standard compliance program which is an extremely high standard to meet.
  • Individuals 'knowingly concerned' in breaches of the TPA may also become personally liable for civil and criminal sanctions.

The consequences suffered by G.J. Gardner Homes, Netdeen Pty Ltd and its directors is just one such example. It is fair to say that they were probably treated lightly because in the words of the ACCC Acting Chairman, Peter Kell it was:

'Pleasing that Neddeen Pty Ltd and its directors cooperated with the ACCC to achieve this outcome which has included redress to two affected franchisees', .... 'this matter serves as a timely reminder to franchisors to ensure that promotional materials are accurate and truthful, and prospective franchisees are not mislead. The consequences of misinformation and ill-informed people purchasing and entering any franchise are simply bad for business - for both franchisor and the franchisee.'

Benefits

Although difficult to navigate the TPA, ignorance is no defence. A business can effectively reduce its risk by implementing an effective and business specific Program. A demonstrated commitment and documented attempts to comply with the TPA may also reduce any penalty imposed if the TPA is inadvertently breached.

An effective Program is a preventative mechanism for minimising the risk of breaching the law. It makes staff, from entry level to senior management, aware of their obligations and their business' obligations and responsibilities.

Compliance is a dynamic process and maintaining the Program is necessary to keep it relevant and effective. To ensure relevance and appropriateness, all such Programs should be subject to periodic audit, either by external experts in the field or internally.

DLA Phillips Fox is well positioned to assist clients in preparation of TPA compliance programs and periodic auditing of compliance.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
The Franchising Team
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.