On 5 November 2009, in its formal response to the 2008
Franchising Code Inquiry, the Federal Business Minister Craig
Emerson announced that the Government will strengthen the
Franchising Code of Conduct (the Code). The inquiry proposed 11
changes to the Code and the Trade Practices Act 1974 (Cth) (the
Act) in a bid to reform the laws designed to protect
The most contentious of the recommended changes was the proposed
inclusion of a broad and general good faith provision. The
Government did not adopt this recommendation, explaining that the
law on good faith is still evolving. Because there is no single
accepted definition or standard set of behaviours that constitutes
good faith, it would be difficult for parties to know whether they
had breached any such obligation. The inclusion of a statutory duty
of good faith in the Code would increase uncertainty in franchising
and could have adverse commercial consequences for franchisees.
While the reforms will not include a "good faith
negotiations" clause, a statement that nothing in the Code
limits any common law requirements of good faith in relation to a
franchise agreement will be inserted.
The key reforms to the Code and the Act include:
a requirement that franchisors disclose the processes that will
apply in determining end of term arrangements, including whether or
not there is a right of renewal beyond the term of the franchise
the introduction of fines of up to A$1.1 million for companies
and A$220,000 for individuals who engage in unconscionable conduct
or make false and misleading representations
the establishment of an expert panel to inquire and report on
the need to introduce into the Code any further provisions to
prevent specific behaviours that are inappropriate in a franchising
arrangement. The panel will report on whether a list of examples of
unconscionable conduct or a statement of principles of what
constitutes unconscionable conduct should be incorporated in the
Act by the end of January 2010
the Australian Competition and Consumer (ACCC) will be
empowered to conduct 'random audits' of franchise
the ACCC will be authorised to issue public warnings regarding
rogue and dishonest franchisors
identifying a list of behaviours expected under the Code to
enhance the dispute resolution process, including attending and
participating in meetings, making intentions clear at the outset of
the mediation, observing confidentiality obligations during and
after the mediation process and not damaging the franchise brand
during the dispute by providing inferior goods, services and
It is anticipated that these changes to the Code will be
introduced in early 2010.
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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