In a recent speech, ACCC Chairman Rod Sims announced the ACCC's enforcement and compliance priorities for 2015. Of particular importance for participants in the franchising sector, one of the ACCC's priorities will be compliance with industry codes, particularly the Franchising Code of Conduct.
This announcement of the ACCC's priorities coincides with the ACCC's expanded enforcement powers from 1 January 2015. The ACCC can now issue infringement notices with fines of up to $8,500 for breaches of certain provisions of the Franchising Code and can also seek civil penalties of up to $51,000 per breach.
The ACCC also recently released its biannual Small business in focus report, offering insight into regulatory activity in the franchising space for the second half of 2014. In respect of compliance with the Franchising Code, the report reveals that, in the last year, disclosure related complaints outstripped termination issues three to one. This is a trend that continued from 2013, although the total number of complaints had reduced.
These recent announcements from the ACCC and the new penalty regime under the Franchising Code put franchisors on notice that they must ensure they take active steps to comply with the new Franchising Code.
The steps franchisors should take include:
- reviewing their franchise agreements for compliance;
- completely replacing their current disclosure document with a document in the new mandatory format; and
- issuing general franchise information statements to all potential new franchisees.
Our earlier article on the changes to the Franchising Code of Conduct details the impact on the changes for franchisors and franchisees.
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