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Review of the Franchising Code of Conduct – Options stage Regulation Impact Statement –Department of Industry, Innovation, Climate Change, Science, Research & Tertiary Education

On 24 July 2013, the Minister for Small Business announced the Australian Government’s response to the Review of the Franchising Code of Conduct. Franchising is a way of doing business, where the franchisor licenses to another business (the franchisee) the right to sell goods or services using the franchisor’s intellectual property and business reputation. The Franchising Code of Conduct regulates the ongoing relationship between franchisors and franchisees, typically to address concerns over the imbalance of power between franchisors and franchisees. The announcement stated the intention to make several changes to the Franchising Code of Conduct, including:

  • that franchisors and franchisees will be required to act in good faith during negotiations;
  • the ACCC will be able to impose financial penalties for breaches of the Franchising Code of Conduct;
  • that franchisors provide a short summary of the key risks to potential franchisees;
  • that advertising and marketing funds are spent on legitimate expenses; and
  • limiting the enforceability of restraint of trade clauses that prevent former franchisees competing against a franchisor.

Under the new best practice regulation requirements Australian Government departments and agencies, rather than the Office of Best Practice Regulation (OBPR), assess the adequacy of their Options-stage RIS. In particular, agencies certify that the problem being addressed and the objectives of government action are well articulated; and that a range of feasible options, including regulation, no regulation or light handed regulation and do nothing, have been considered. Before relevant legislation and/or regulation is finalised the Department of Industry, Innovation, Climate Change, Science, Research & Tertiary Education (DIICCSTRE) will prepare a Details‑stage RIS that is informed by consultation on this Options-stage RIS. The Details-stage RIS is formally assessed by the OBPR. The Deputy Secretary, DIICCSRTE has certified that this Options-stage RIS prepared by DIICCSRTE meets the Government’s best practice regulation requirements.