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.
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.
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
Define: “Franchise Agreement”
An agreement will be covered by the Code when:
A party, having substantial control over a
business, grants another party the right to carry on that business;
The business is associated with a specific brand
name or trade mark; and
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
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.
The 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.