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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-02-05 Daily Xml
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FRANCHISE CODE OF CONDUCT

Mr PICCOLO (Light) (15:29): I wish to update the house on the progress of reform of franchise laws in this country. Members of the house are aware that it is something I have taken an interest in, as has the Economic and Finance Committee. The federal Parliamentary Joint Committee on Corporations and Financial Services held an inquiry into whether the franchise code required reform. I am pleased to advise the house that franchisees will get better protection from opportunistic franchisors who bully and intimidate them into unfair and harsh contract arrangements.

Under the changes proposed by the committee, the franchising code will have a statutory obligation for franchisors and franchisees to deal with each other in good faith. That would be a major reform given the situation we have today. The recommended reforms are most welcome and the changes, hopefully, will be introduced by the federal government some time this year.

Like the South Australian parliamentary committee, the federal parliamentary committee was a bipartisan committee and had bipartisan support. The federal inquiry clearly demonstrates and supports the general findings of the South Australian inquiry. The federal inquiry repudiates the outrageous claims made by the Franchise Council of Australia suggesting that the current industry code was robust enough to deal with rogue franchisors.

The Franchise Council of Australia again stands isolated and condemned for trying to prevent the reform of the Franchise Code to provide a fairer, more accountable, efficient and competitive industry. The Franchise Council of Australia has, once again, been dragged screaming and kicking to the reform table. The need to reform the code has been obvious to everybody except the FCA. The FCA strongly criticised the South Australian inquiry, the WA inquiry and, in particular, me, but, interestingly enough, the federal inquiry has reached similar conclusions to both South Australia and Western Australia.

In addition to calling for a statutory requirement to act in good faith, the federal inquiry also recommends better disclosure by franchisors, which is a recommendation made by the South Australian inquiry; an investigation into the online registration of disclosure documents, again another recommendation made by the South Australian inquiry; pre-contract agreement on franchise termination, another recommendation made by the South Australian inquiry; and a better balance of rights and liabilities in the event of franchisor failure, again something supported by the South Australian committee.

The federal committee also recommends better collection of franchise statistics to inform future policy reform and direction, something which the South Australian committee also indicated. Importantly, it also recommends, like the South Australian inquiry, that there will be penalties for breaches of the franchise code. At the moment, if a franchisee breaches the code they can lose their franchise. If the franchisor breaches the code there is virtually nothing that the franchisee can do. Any action in the courts is often beyond the financial means of a franchisee.

The recommendations made by this federal committee will help clean out the rogues and charlatans in the industry. This is particularly important and reform is urgent, because with the financial crisis that the world is experiencing there will probably be people taking payouts from their employment who might be thinking about going into franchising.

As the law stands at the moment, a franchisee may invest up to $400,000 into a franchise and have less protection (at law) than a person who invests $100 in the stock market. There is more law and regulation for a person who invests $100 in the stock market, compared to a person who may put up to $400,000 into a franchise.

The proposed changes will attract and help protect legitimate investors to the franchise industry and make it tougher for opportunists to rip off hardworking mum and dad franchisees. Those mum and dad franchisees who decide to enter into a franchise arrangement will now get, if these laws are passed, some reasonable protection from unscrupulous franchisors.

I would acknowledge that the federal inquiry did not go quite as far as the South Australian inquiry did. However, the proposed changes will make a big and positive difference to the franchise relationship and represents a reasonably balanced position between the competing interests in the franchise industry. It is my intention to write to the federal minister urging the federal government to implement the recommendations as soon as possible.

Time expired.

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