Tougher penalties in trade practices act

Penalties of up to $1.1 million will apply to businesses engaged in unconscionable conduct as the federal government moves to strengthen the Franchising Code of Conduct and parts of the Trade Practices Act.

The announcement is below:

In further measures to promote competition, the Government will strengthen the Franchising Code of Conduct and the unconscionable conduct provisions of the Trade Practices Act to give small businesses greater protection from anti-competitive behaviour by more powerful businesses.

Amendments to the Trade Practices Act will make it clear that protection from unconscionable conduct relates not only to the process of settling a contract but to the terms and conditions of the contract and the ongoing behaviour of the parties to the contract.

Penalties of up to $1.1 million for corporations and $220,000 for individuals will apply to anyone engaging in unconscionable conduct or making false or misleading representations.

These penalties will apply upon the commencement of the Australian Consumer Law that is now before the Parliament.

In reforms to the various codes of conduct, the Government will empower the Australian Competition and Consumer Commission (ACCC) to conduct random audits under the Franchising Code and other mandatory codes and to seek redress on behalf of all franchisees who are party to an agreement.

The Government will also empower the ACCC to issue public warnings about rogue or unscrupulous franchisors.

The Government accepts the intent of the good-faith recommendation of the report of the Joint Committee on Corporations and Financial Services (the Ripoll report) and will introduce measures into the Franchising Code to prevent behaviours that are inappropriate in franchising agreements. Further, the Franchising Code will be amended to state that nothing in the Code limits any common law requirement of good faith in relation to a franchise agreement to which the Code applies.

While providing enhanced protection for small business, including franchisees, these pro-competitive reforms will avoid creating unnecessary uncertainty for small and larger businesses by providing specific policy remedies to specific problems, rather than general solutions to specific problems.

Amendments to the Franchising Code will clarify obligations on the parties in respect of end-of term arrangements and mediation.

The Government will establish an expert panel to inquire into and report on the need to introduce into the Franchising Code any further provisions to prevent specific behaviours that are inappropriate in a franchising arrangement.

The expert panel will also consider whether a list of examples of unconscionable conduct or a statement of principles of what constitutes unconscionable conduct should be incorporated into the Trade Practices Act.

The panel, to report by the end of January 2010, will consult with franchising and retail tenancy representatives, small business organisations, the ACCC and other interested parties.

The reforms are in response to reports of the Joint Committee on Corporations and Financial Services and the Senate Standing Committee on Economics. They also take into account comments on a Government discussion paper on franchising and state franchising reports.

The Government thanks both Committees for their work, especially Committee chairs Bernie Ripoll MP and Senator Annette Hurley.

Formal, more detailed responses to both Parliamentary reports were tabled today.