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ACCC to crackdown on franchise compliance

Monday, 10 October 2011 | By Michelle Hammond
Competition watchdog ACCC says it will focus on compliance in the franchising sector in order to “improve its standing”, while industry experts say the sector is performing well financially.

 

Speaking at the National Franchise Convention, hosted by the Franchise Council of Australia, the Australian Competition and Consumer Commission outlined its plans for the sector.

 

ACCC chairman Rod Sims said while the sector is an important part of the economy, it also needs to work on its image in order to grow.

 

“Franchising offers many opportunities to entrepreneurs… but also many obstacles. The power imbalance in the franchise relationship too often leads to conflict,” Sims said in a statement.

 

“The ACCC will be doing more in the future to ensure compliance, helping the sector to improve its standing.”

 

Sims said the ACCC will use new investigation powers to ensure the regulatory regime promotes confidence in the sector.

 

“The ACCC will continue to enforce the code of conduct and these new powers will allow the ACCC to do more, earlier, to support best practice in the industry.”

 

Also addressing the conference, ACCC deputy chairman Michael Schaper outlined how the watchdog has begun applying new powers to increase transparency and disclosure.

 

Amendments to the Competition and Consumer Act enable the ACCC to monitor compliance, and seek the disclosure of documents that franchisors must provide under the Franchise Code of Conduct.

 

The ACCC can also investigate alleged breaches, giving franchisees the ability to complain without fear of reprisal.

 

“These new powers are designed to reassure potential entrants and existing franchisees that they will be provided with appropriate information from their franchisor throughout their contract,” Dr Schaper said in a statement.

 

“The ACCC will monitor compliance where there is a significant imbalance in bargaining power between industry participants. These new powers will put franchisors on notice to abide by the code of conduct and keep their records in order.”

 

According to FCA executive director Steve Wright, profitability is the number one “image issue” for franchisees.

 

“We’re confident most of the things occurring in the sector are unequivocally positive. The franchise sector continues to outperform the small business sector,’ Wright says.

 

“The message that we have heard repeatedly is that franchising is going pretty well compared to a lot of industries.”

 

Terry Sexton, FCA strategic community manager, says the convention got off to a successful start, with plenty of discussion about legislative changes.

 

“We also focused on our Franchisee Success Club, which is a new initiative to celebrate successful franchisees,” he says.

 

Sexton says as the convention gets underway, the FCA will turn its attention to “talking about the sector as a whole and working nationally”.