Government proposes changes to Franchising Code of Conduct

The Government has responded to reports of the Joint Committee on Corporations and Financial Services and the Senate Standing Committee on Economics by announcing that it will strengthen the Franchising Code of Conduct and the unconscionable conduct provisions of the Trade Practices Act to give small businesses greater protection from anti-competitive behaviour by more powerful businesses. 

Amendments to the Trade Practices Act will make it clear that protection from unconscionable conduct relates not only to the process of settling a contract but to the terms and conditions of the contract and the ongoing behaviour of the parties to the contract.

Penalties of up to $1.1 million for corporations and $220,000 for individuals will apply to anyone engaging in unconscionable conduct or making false or misleading representations.

These penalties will apply upon the commencement of the Australian Consumer Law that is now before the Parliament. The ACL will not commence before 1 July 2010.

The Government will empower the Australian Competition and Consumer Commission (ACCC) to conduct random audits under the Franchising Code and other mandatory codes and to seek redress on behalf of all franchisees who are party to an agreement.

The Government will also empower the ACCC to issue public warnings about rogue or unscrupulous franchisors.

The Franchising Code will be amended to state that nothing in the Code limits any common law requirement of good faith in relation to a franchise agreement to which the Code applies.

Amendments to the Franchising Code will also clarify obligations on the parties in respect of end-of-term arrangements and mediation.

The Government will establish an expert panel to inquire into and report on the need to introduce into the Franchising Code any further provisions to prevent specific behaviours that are inappropriate in a franchising arrangement.

The expert panel will also consider whether a list of examples of unconscionable conduct or a statement of principles of what constitutes unconscionable conduct should be incorporated into the Trade Practices Act.

The panel, to report by the end of January 2010, will consult with franchising and retail tenancy representatives, small business organisations, the ACCC and other interested parties.

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