Franchising Under Review

The Parliamentary Joint Committee on Corporations and Financial Services is conducting an inquiry into the operation and effectiveness of both the Franchising Code of Conduct as well as the Oil Code of Conduct (OIlcode) which regulates the conduct of suppliers, distributors and retailers in the petroleum marketing industry.

The committee is a result of a multitude of complaints by industry participants about things like the prevalence of ‘take it or leave it’ head agreements and problems with how marketing funds are spent. Concerns about the bargaining power between franchisors and franchisees are also an issue.

The enforcement activities of the ACCC generally and its decision to prioritise the effective operation of both industry codes and unfair contracts law as a 2018 enforcement priority suggests the time is ripe for a parliamentary review of the codes.

The Committee will need to balance the need to protect the dynamism of the franchising model against the reality that many franchisees have neither the information nor the capital to truly enter into robust contractual negotiations with many franchisors.

The current rules are set out in the Competition and Consumer (Industry Codes – Franchising) Regulation 2014.

It will be interesting to see if the Committee recommends a rule change to adopt a ‘command and control’ cum ‘tick a box’ approach, setting out specifically what consignors can and can’t do – thus providing a semblance certainty for franchisees at the price of reducing the ability for franchise contract models to adapt to changes in market conditions, or whether inserting generic concepts of ‘fairness’ is considered appropriate –  which sounds good on paper but confers a lot of discretion in regulators until a body of judicial decisions sets out what ‘fairness’ means in this context.

Submissions close 4 May.

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