13 April 2022
Penalties under the Franchising Code of Conduct (Franchising Code) are increasing significantly. From 15 April 2022, new penalties will be introduced and many existing penalties will double or increase to as much as $10 million.
The Franchising Code failed to adequately deter non-compliance as some large and profitable businesses have been able to absorb penalties as a cost of doing business, according to a 2019 parliamentary report.
In response to that report, the government introduced an amendment to the Competition and Consumer Act 2010 in 2021, which increased some of the maximum penalties under the Franchising Code. Read our previous discussion here.
The new Competition and Consumer (Industry Codes—Franchising) Amendment (Penalties and Other Matters) Regulations 2022 (Code) is the latest development in a suite of reforms aimed at encouraging better compliance with existing franchising legislation.
In this article, we set out the five most important changes that franchising parties need to know.
This applies to the following existing obligations under the Code:
Specifically, the maximum penalty for the above obligations is increased for individuals to $500,000, and for body corporates to the greater of:
This includes breaches of the requirement to act in good faith under section 6(1) and the various obligations relating to the disclosure of documents (see sections 13, 14 and 15 of the Code).
The updated Code also introduces a raft of new obligations, including:
The updated Code also introduces new penalties for the following existing obligations:
These new penalties also have a maximum value of 600 penalty units each ($133,200).
In a separate tranche of amendments to the Code passed on 1 April 2022, a further obligation was introduced into the Code which requires franchisors to create a profile on the Franchise Disclosure Register by 14 November 2022. The Register will become publicly accessible on the government’s MyGovID website from 15 November 2022.
The Code sets out the information that must be disclosed, including the franchisor’s name, registered address, principal place of business and email address. Failure to disclose the necessary information may result in substantial civil penalties.
Now is a good time to review standard franchising templates to ensure compliance with the Code.
If you need assistance with reviewing these templates or getting your profile set up on the Franchise Disclosure Register, please contact us or send us your enquiry here.
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.