The Bill will have a significant impact on the franchising sector, as it will allow regulations to be made to impose monetary penalties on franchisors associated with a breach of the Franchising Code of Conduct (Code). The Bill is consistent with the exposure draft of amendments to the Code that was released earlier this year.
The Bill will facilitate a change to the way that the Code is enforced by amending the provisions of the Competition and Consumer Act 2010 (Cth) (CCA) to enable the Australian Competition and Consumer Commission (ACCC) to either issue infringement notices or seek orders for civil pecuniary penalties for breaches of the Code. The explanatory memorandum to the Bill provides that changes to the Code are proposed to apply prospectively.
The penalty and infringement provisions are intended to apply to franchise agreements entered into after 1 January 2015.
Civil Pecuniary Penalties
At present, the CCA does not empower the ACCC to seek pecuniary orders for breaches of the Code. Under the Bill, regulations can be made to impose a civil penalty up to 300 penalty units (currently $51,000) per contravention for failure to comply with a civil pecuniary penalty provision of the Code.
The Commonwealth Minister for Small Business, the Honourable Bruce Billson MP indicated that civil pecuniary penalties will apply to provisions of the Code that are fundamental to its purpose and where non-compliance is likely to cause significant detriment to the other party.
The Bill does not specify which provisions of the Code will attract the civil pecuniary penalties. The new Code will specify the clauses that will attract civil pecuniary penalties for contravention.
Under the Bill, section 51ACD is to be inserted into the CCA which would give the ACCC the power to issue infringement notices (Notice) for an alleged contravention of the Code. A Notice could be issued by the ACCC where the ACCC has reasonable grounds to believe that a person has contravened a civil penalty provision of the Code. The Notice is to be issued within 12 months of the day that the contravention of the civil penalty provision is alleged to have occurred and a Notice must not be issued for the same alleged contravention of the Code.
The amount of the penalty would be 50 penalty units ($8,500) for companies and 10 penalty units ($1,700) for individuals, per contravention. If there is compliance with a Notice and payment of the penalty:
- this would not be regarded as an admission of contravention of a civil penalty provision of the Code
- no proceedings (whether criminal or civil) may be started or continued against a person in relation to the alleged contravention of the civil penalty provision of the Code by or on behalf of the Commonwealth.
The compliance period for a Notice would be 28 days beginning on the day after the day that the Notice is issued by the ACCC. The ACCC does have the power to extend the 28 day period or to withdraw a Notice.
A person to whom a Notice has been issued would be able to make written representations to the ACCC seeking the withdrawal of the Notice. Evidence provided to the ACCC in the course of making the written representations would not be admissible in evidence against the person in any proceeding.
We will continue to review and monitor the status of the proposed reforms and will keep you informed of key significant developments.
Author: Lara Rush
Trent Taylor, Partner
T: +61 7 3135 0668
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