As foreshadowed by the Coalition Government earlier this year (see our previous update), penalties for breach of the Franchising Code of Conduct (Franchising Code) are to be introduced.
On 17 July 2014, the Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 (Bill) was introduced into Parliament. If the Bill is passed, it will amend the Competition and Consumer Act 2010 (CCA) by introducing the following two alternative means of penalising contraventions of the Franchising Code:
Allowing the Franchising Code to prescribe pecuniary penalties of up to 300 penalty units for a contravention of a civil penalty provision of the code. These penalties can only be imposed by a court.
Empowering the Australian Competition and Consumer Commission (ACCC), the active enforcement body of the CCA, to issue an infringement notice, in the amount of 50 penalty units for a body corporate and 10 penalty units in any other case, if it has reasonable grounds for believing that a person has contravened a civil penalty provision of the Franchising Code. The ACCC can issue an infringement notice without seeking a court order.
The proposed amendments will be in addition to existing enforcement options and, at this stage, are expected to come into effect on 1 January 2015.
These amendments follow from recommendations in the 2013 Review of the Franchising Code of Conduct (Review) that pecuniary penalties and infringement notices should be introduced as remedies for breaches of the Franchising Code.
Once the Bill passes through the Parliament, it is expected that a new Franchising Code will be established by the Competition and Consumer (Industry Codes – Franchising) Regulation 2014. The new Franchising Code will specify the pecuniary penalties payable by a franchisor or franchisee for breaches of the code, which could be up to AU$51,000. These will sit alongside the ACCC's power, under the Bill, to issue an infringement notice in the amount of AU$8,500 for a breach of the Franchising Code.
If introduced, these changes would be a drastic enhancement of the enforcement tools available to the ACCC to deal with serious breaches of the Franchising Code.