28 June 2011
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The Franchising Bill 2010 (WA) (the Bill)1 originated as a private member’s bill in October 2010 in response to concerns that the current federal legislative framework for franchising does not sufficiently protect franchisees against “rogue” franchisors2. The Bill seeks to:
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| reinforce the provisions of the national Franchising Code of Conduct (the Code), a mandatory industry code, by enacting the Code as a law of Western Australia;
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| | codify the existing implied duty on parties to act in good faith when entering into contracts by introducing a defined statutory obligation for parties to act in good faith; and
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| | enable the WA Commissioner for Consumer Protection or an appropriate WA court to impose penalties and/or make remedial orders against those who breach the Code or the proposed statutory good faith provision.
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The Bill was subsequently referred to the Economics and Industry Standing Committee of the Parliament of Western Australia (the Committee) for consideration. On 23 June 2011, the Committee published its report Inquiry into the Franchising Bill 2010. The Committee ultimately formed the view that in light of the recent amendments to each of the Code and the Competition and Consumer Act 2010 (Cth) (CCA), and the importance of uniform legislation to easing the cost and compliance burden of franchising, the Bill is not an appropriate measure at this time. It therefore recommended that the Bill be opposed.
The Committee also made a number of other findings, including that:
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- franchising is most appropriately and usefully regulated at the Commonwealth level because most franchises in Australia operate across multiple state jurisdictions;
- incidents of misconduct in the franchising industry are serious but not widespread;
- the existing national regulatory framework for franchising under the Code and the CCA appears adequate, particularly in light of the recent amendments to each of these pieces of legislation;
- given that the amendments to the Code and CCA are due for review in 2013, the introduction of the Bill is not appropriate at this time;
- the major impediment to justice is the cost of accessing the courts, particularly for small franchisees, therefore the statutory good faith provision proposed by the Bill (which relies on accessing the courts) does not significantly improve access to justice;
- if a general statutory obligation to act in good faith is to be introduced into franchising legislation, it should be pursued at the Commonwealth level during the foreshadowed review of the Code and CCA in 2013;
- in the Committee’s view, given that the Bill will have little deterrent effect and that the estimated cost to the state of enforcing the Bill will be substantial, the Committee has deep concerns that the Bill will not provide a net benefit to the WA franchising industry;
- if the Bill is enacted, a party may be exposed to a multiplicity of actions, therefore administrative arrangements would be needed between federal and WA enforcement agencies to avoid this outcome; and
- the Bill may increase costs for compliant franchising participants (particularly franchisors) who may seek legal advice regarding the potential impact of the Bill on their business and may pass these costs on to franchisees.
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The Committee’s report, containing its full set of findings and recommendations, can be found here.
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| For further information, please contact: |
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[1] The Bill is available here.
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[2] See second reading speech of Mr Peter Abetz, Member of the Legislative Assembly, Western Australia, 13 October 2010.
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