Two franchisors have recently paid penalties after the ACCC issued infringement notices for alleged breaches of the Franchising Code. This serves as an important reminder to franchisors to comply with their obligations under the Franchising Code to annually update their information on the Franchise Disclosure Register.
Introduction
The ACCC is the national regulator of competition and consumer laws, including the Competition and Consumer (Industry Codes-Franchising) Regulations 2024 (Code). In addition to providing guidance about the Code, the ACCC may take enforcement action, which can include issuing infringement notices for alleged breaches of the Code.
Two franchisors, Cash Converters Pty Ltd and Mobile Travel Agents Pty Ltd (MTA) have recently each paid a $16,500 penalty following infringement notices issued by the ACCC for the alleged breach of their obligations under the Code.
What were the alleged breaches?
The ACCC alleged that Cash Converters and MTA had failed to comply with their obligations to annually update or confirm franchisor information on the Franchise Disclosure Register (Register).
Cash Converters and MTA are well-known franchise chains, and this action by the ACCC serves as a timely reminder to franchisors about the importance of updating not just their disclosure documentation annually but also their disclosure on the Register as well.
Requirement to update the Register
The Register is an online service intended to give the public (including prospective franchisees, current franchisees and their advisers) access to information that will assist franchisees in making informed business decisions, including whether to enter into a franchise agreement.
Under section 93 of the Code, franchisors have an obligation to annually update or confirm information that is included in the Register and maintain accurate franchise profiles. If the information was required to be provided on the Register under section 92 of the Code, it must be provided at least once for each financial year that ends after the day the franchisor enters into the franchise agreement.
In particular, franchisors must:
- if information included on the Register remains current - confirm that the information is correct
- to the extent that information is incorrect, out-of-date or has not been previously provided for inclusion - provide or update the information.
Where a franchisor has a financial year ending on 30June, the information on the Register must be updated in the required form at least once on or before 14November each year. If the franchisor's financial year ends on a different date, the information must be updated on or before the 14th day of the fifth month following the end of the financial year.
ACCC action
This action by the ACCC reaffirms its position that transparency and the reliability of the Register are non-negotiable features of franchising.
The ACCC will continue to monitor compliance with the Code, including Register obligations. Failure to comply may result in the issue of infringement notices and other enforcement actions against franchisors by the ACCC.
Franchisors should also bear in mind that:
- the ACCC may issue an infringement notice where it has reasonable grounds to believe that a person has contravened a civil penalty obligation under the Code
- the infringement notice will specify the details of the alleged breach and the penalty that is payable in relation to the alleged breach
- if the franchisor pays the penalty within the 28-day infringement notice compliance period, they will not be regarded as having contravened the Code by virtue of paying the penalty
- a franchisor to whom an infringement notice is issued can make written representations to the ACCC seeking withdrawal of the infringement notice or request an extension of the infringement notice compliance period
- a franchisor is liable for prosecution in relation to the alleged breach if it fails to pay the penalty within the specified time and the infringement notice is not withdrawn.
Know your obligations
Franchisors should understand and comply with their obligations under the Code, including in relation to updating both their disclosure documentation and their franchise profile on the Register.
Cooper Grace Ward is well placed to advise on franchisor obligations under the Code, prepare any franchise agreements, amendments and disclosure documentation for compliance with the Code and to assist with uploading and updating information on the Register.
If you wish to discuss any of the matters contained in this article or would like any further information, please don't hesitate to contact Phil Vickery or another member of our corporate advisory team.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
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.
