A WESTERN Australian parliamentary committee has added its voice to the critics of proposed franchising laws intended to offer greater protection to franchisees.
A WESTERN Australian parliamentary committee has added its voice to the critics of proposed franchising laws intended to offer greater protection to franchisees.
The Economics and Industry Standing Committee tabled a report last week opposing the Franchising Bill 2010, a private member’s bill introduced to parliament by Liberal backbencher Peter Abetz in October last year.
The Bill was aimed at addressing the perceived imbalance in the relationship between franchisees and franchisors, which Mr Abetz said resulted in the exploitation of small business owners by ‘rogue’ franchisors.
“It has become apparent that a small, but significant number of franchisors are using their superior position to the detriment of their franchisee partner,” Mr Abetz said late last year.
The reforms proposed by the Bill included a statutory obligation for franchisees to act in good faith, penalties for breaches of the Franchise Code of Conduct, and additional power to the courts to grant remedies to franchisees.
The majority of the committee, chaired by Liberal MP Mike Nahan, said it was not convinced that the Bill was an appropriate measure at this time.
The committee found that amendments made to federal franchising legislation during the past three years were adequate, and cited this as one of the reasons it opposed the Bill.
The cost of enforcing the Bill – $4.2 million over the next four years – and a lack of evidence that misconduct in the franchising industry was widespread, were other reasons for the committee’s decision.
Franchise Council of Australia executive director Steve Wright said state-based franchising legislation had already been explored and rejected by five inquiries since 2007.
He agreed with the comments of Dr Nahan and said that the report was ‘a victory for common sense’.
“The FCA is pleased that the committee found that there were no widespread instances of misconduct in the franchise sector, and that the existing federal regulatory framework was working effectively,” Mr Wright said.
Mr Abetz was seconded to the committee, which allowed him to be involved in all the hearings and deliberations, but he was not able to vote or put his name to the report.
The Bill was based on similar legislation introduced into the South Australian parliament last year by Labor backbencher Tony Piccolo, which has been supported by Australia’s richest franchise owner, Jack Cowin of Competitive Foods Australia.
Mr Cowin, who owns 50 KFC stores in WA, admitted on Perth radio earlier this year that the campaign to have the law changed related to his dispute with the global owner of KFC, Yum! Brands.
About 90 per cent of the 100-plus submissions to the committee opposed the Bill, including from the Law Society of WA, the Franchise Council of Australia and the WA Small Business Development Corporation.
Mr Wright said many of the submissions noted the likely negative impact on franchisees in terms of increased uncertainty, reduced access to finance and increased costs of dispute resolution.
Competitive Foods spokesman Paul Plowman said the reason the Bill was so heavily opposed was because franchisors did not want to shift the balance of power away from them.
“Franchisors do not want to see a rebalance of the power relationship between themselves and franchisees and what ‘good faith’ does is offer a process for franchisees that are subject to some fairly unscrupulous behaviour on behalf of some franchisors, a level of procedural protection,” he said.
Labor MP Bill Johnston dissented from the majority report, believing the Bill should be supported with amendments.
He argued that the idea of including ‘good faith’ in statute law was not a new concept and that the proposed Bill would in fact enhance the operation of the Franchising Code of Conduct.
Despite the committee’s opposition to the Bill, Mr Plowman remains optimistic.
“We have in front of us a perfectly good piece of legislation subject to some minor amendments to clarify some issues around good faith,” Mr Plowman said.
“We are confident that Mr Abetz will proceed with the Bill through the parliament ...that the Bill will be debated in the future and that it will be passed.”
