ACCC announces 2019 enforcement priorities

influence legal canberraEarlier this week, the ACCC announced its enforcement priorities for 2019.

As well as the enduring priorities of:

  • cartel conduct;
  • anti-competitive conduct;
  • product safety;
  • conduct affected vulnerable and disadvantaged consumers; and
  • conduct affecting Indigenous consumers,

this year’s focus areas include:

  • consumer guarantees on high value electrical products and whitegoods;
  • anti-competitive conduct and competition issues in the
    financial services sector, including foreign exchange services where fees “seem to remain stubbornly high“;
  • opaque pricing of essential services, including telecoms and energy;
  • protection for small business, including under franchising and unfair contract requirements; and
  • customer loyalty schemes.

A new focus is on emerging issues in advertising and subscriptions on social medial platforms, especially for younger consumers.

In announcing the 2o19 priorities, Chair Rod Sims stated that the ACCC expects 3 significant cartel investigations to be referred to the Commonwealth DPP. The ACCC will also be occupied with the Consumer Data Right, where pilots and generic data sharing are expected to be in place in July, with consumer data to be shared by February next year.

If it quacks like a franchisor …

McDonald’s, Subway, KFC – all well-known global giants in both fast-food and franchise systems.

These companies, among many others around the world (not just within the fast food industries), are easily recognisable to us as franchisors.

However, franchise systems come in many shapes and sizes, and there are some franchises that are not quite as well-known and obvious as the ones above. Companies may even try to distance themselves from the F word, and associated franchise regulation, by telling everyone (or at least the parties contracting with them) that they are expressly not franchisors.

This situation can be seen in the recent ACCC action against the Australian subsidiary of Swedish power-tool powerhouse, Husqvarna Australia.

Husqvarna and the ACCC

Earlier this year, the ACCC took action against Husqvarna.

The ACCC was concerned that the company was in breach of the Franchising Code of Conduct (Code) and the Competition and Consumer Act (Act). Husqvarna had told its dealers that their “dealership agreements” were not franchising agreements and, consequently, they were not entitled to protections for franchisees under the Code.

The ACCC also argued that the company was likely to have contravened the Act as a result of making misleading representations and that the dealer agreements contained unfair contract terms.

influence legal contract
… and swims like a franchisor …

In the result, Husqvarna admitted that categorising its agreements in the way it had, ‘probably’ did in fact mislead the dealers. To resolve the issue, Husqvarna also agreed to rewrite its agreements to ensure they complied with the Code and the Act. Also, the company agreed to enter an undertaking with the ACCC that it will not enforce any unfair contractual terms in the existing agreements.

Define: “Franchise Agreement”

An agreement will be covered by the Code when:

  1. A party, having substantial control over a business, grants another party the right to carry on that business;
  2. The business is associated with a specific brand name or trade mark; and
  3. The other party is required or agrees to pay for the right to use the brand and operate the business.

If an agreement satisfies all of the above, it will be considered a franchise agreement and will therefore be covered by the Code.

Importantly, a franchisor cannot simply attempt to waive or exclude the mandatory obligation to comply with the Code and the relevant protections for franchisees.

The Husqvarna case provides an important lesson for all companies that appoint dealers, distributors, licensees or similar, highlighting the importance of carefully assessing your agreements to ensure whether they may be considered a franchise agreement.

As Mick Keogh, the ACCC Deputy Chair, put it: “if it looks and smells and appears to be a franchise agreement, it’s considered to be one, irrespective of what the franchisor says.”

Are you a franchisor or franchisee?

If you are a business concerned that your agreements may be considered a franchise agreement, or if you are considering becoming a franchisee and would like to know your protections under the Code, please contact us.

Author: Blake Motbey, Paralegal

Franchisors – are you ready for the new unfair contracts rules?

NotebookThe new unfair contracts rules will apply to protect small businesses in standard contracts that are made or varied from 12 November 2016.

Franchisors should already have amended their agreements and disclosure documents, and included the new information statement in their document packages, following the earlier amendments to the Franchising Code of Conduct that took effect last year.

Franchisors also need to remember to keep their disclosure documents up to date.

The unfair contract rules protect small business by prohibiting standard contract provisions which: Continue reading Franchisors – are you ready for the new unfair contracts rules?