Australia: Government Response To Code Recommendations

Originally Published 1^st July 2009

The Sydney Morning Herald reported on 22 May 2009 that a frustrated leading state campaigner for reform said he will have no choice but to introduce his own laws to amend the laws governing the franchising sector if the Federal Government continues to fail to respond to the report recommending changes to the sector.

The federal inquiry tabled its report in December 2008. It made 11 recommendations, including monetary penalties for breaches of the Franchising Code of Conduct (the Code), the provision of good faith bargaining between franchisors and franchisees, a better balance of franchisee and franchisor rights and, liability in the event of franchisor failure.

The South Australian inquiry tabled its report in June 2008 and South Australian Labor Government MP, Tony Piccolo, who believes quite strongly that the current franchising laws are inadequate, was quoted by The Sydney Morning Herald stating that reform of the Code is "now urgent".

Mr Piccolo noted that three separate inquiries (South Australian, Western Australian and federal) had recommended changes but no action had been taken. Mr Piccolo left open the possibility of state based laws being introduced if the Government failed to deliver, but admitted that this was not desirable.

Subsequently, on 31 May 2009, Federal Small Business Minister Craig Emerson announced that the Government was set to respond to the Parliamentary Joint Committee on Corporation and Financial Services inquiry into franchising and that the response would take into account the inquiries that took place in Western Australia and South Australia. Mr Emerson said that franchising is on the whole a successful working arrangement that should not be put at risk by changes to legislation.

He advised that final input would be sought from franchising stakeholders and an options paper released in the next few weeks before a formal response, which may be given in late July 2009. He said that "most franchise arrangements work well and these good working relationships must not be jeopardised by the reforms".

Mr Emerson stated that if the Government's reforms are to be worthwhile and enduring, it is worth taking the time to get them right.

On 21 June 2009 the Government released an options paper that invites final comment from relevant parties and the broader community regarding the report of the Parliamentary Joint Committee on Corporations and Financial Services. Comments are due by 10 July 2009.

Middletons will keep you advised of the Government reforms when they are announced.

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.