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The Australian Small Business and Family Enterprise Ombudsman will have the power to name and shame franchisors who fail to participate in dispute resolution, the government has announced.
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ASBFEO to be given additional powers in franchising reforms
08 May 2024
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11 minute read
Minister for Small Business Julie Collins has announced that the Albanese Labor government has agreed or agreed in principle to the recommendations made in the Independent Review of the Franchising Code of Conduct by eminent small business expert Dr Michael Schaper.
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Minister Collins said the changes will improve protections and streamline processes for franchisees and franchisors doing the right thing, while increased penalties will make it tougher for those who don’t.
“This will provide certainty for, and confidence in, the franchising sector in the immediate term,” she said.
“The government is also looking to the future of the franchising sector’s regulatory framework and has agreed to look at the feasibility of introducing a licensing regime.”
Under the proposed reforms, small businesses, including franchisees, will also benefit from the expansion of the ASBFEO's dispute resolution service.
“This will provide more support to small businesses who are navigating disputes, including by improving access to low‑cost legal advice,” said Minister Collins.
The reforms made off the back of the review will also see the ASBFEO granted new powers to name franchisors who have not participated meaningfully in alternative dispute resolution.
“This will mean big businesses in a dispute with a small business will have to think about the reputational damage to their brand name by using their muscle to force a small business to have no alternative but to seek redress in court – an expensive and time-consuming pathway they almost always cannot afford to take,” said Billson.
“At present, we can only use this name and shame power under our Act as it relates to general business disputes, rather than as part of obligations under the Franchise Code.
These additional powers should apply to franchisees and franchisors as we have had experiences where both sides of a franchise relationship can behave appallingly and refuse to engage in or derail reasonable dispute resolution processes, he said.
In further recognition that the cost of legal advice can deter smaller businesses, the government is expanding ASBFEO’s Tax Concierge Service to support access to low-cost legal advice on alternative dispute resolution matters.
“This will help franchisees in particular to better understand their dispute, its legal merits, potentially viable remedies and how best to resolve it,” Billson said.
The government said it will consider further changes as part of the independent statutory review of the ASBFEO dispute resolution services next year and establish a Treasury taskforce to conduct a cost-benefit analysis of introducing a licensing regime for the franchise sector.
“We welcome this,” Billson said. “ASBFEO’s legislation requires a review at least every four years of the way that we operate our assistance function and whether the approaches, tools and resources available to us to resolve disputes are adequate or could be enhanced.
“The concept of a licensing regime is a bold suggestion for a franchise sector that is already more highly regulated here than in other comparable economies and ASBFEO looks forward to contributing to the feasibility work of the proposed taskforce.
“We believe there is scope in franchising for the government to consider a non-regulatory approach to activating the existing option for parties to agree to arbitration under the Franchising Code of Conduct by urging franchise systems to pre-commit to binding arbitration where disputes cannot be resolved through alternative dispute resolution.
Billson said there also needs to be more effective enforcement by regulators such as the ACCC of the code and other existing legal protections, particularly around unfair conduct and anti-competitive behaviour.
“The government’s response to the Schaper Review further supports good and fair commercial relationships in franchising. In helping with franchising disputes, we are often disappointed when mediation and conciliation does not produce a resolution for both parties,” he said.
“Currently, it is only the well-resourced and patient that can further pursue their interests via existing legal channels, unless the regulator steps up and in. This can distort the bargaining position of the parties and willingness to find an early mediate resolution, and is why we advocate for a responsive, affordable and restorative Court-based mechanism that can ensure all parties can benefit from Code protections and legal provisions intended to support fair and reasonable commercial dealings.”
“We believe that would be a game changer to deliver the Government’s objective to give people the confidence to enter business relationships and to invest, with the ‘bumper rails’ that aim to ensure reasonable dealing and fair commercial conduct being supported by an affordable and accessible legal process if it is required.”
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