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Queensland Considers Federal Franchising Action

BRISBANE - A Queensland Member of Parliament, DAVID GIBSON (Gympie-LNP), has called for the introduction of state franchisee protection. The following is an extract of his speech from the Queensland government record of proceedings, Hansard (p44 PDF 1MB), 17 Jun 2009. Highlights have been added.

Queensland"I note that there is a federal proposal to have national consumer protection laws to commence on 1 January 2010. Under those proposed changes franchisees will be regarded as consumers as they will be subject to a standard form contract. So I ask the Attorney-General: will franchisees, from 1 January, be able to assess QCAT under its commercial tribunal provisions?

If that is the case, can we have an interim measure that will enable franchisees to access QCAT up until 1 January? Obviously, until the national consumer protection laws are implemented, franchisees are unable to access any tribunal within the state for resolutions. So if there is an opportunity for the legislation to be amended to reflect what will be implemented federally on 1 January, I think it would do a great service to those franchisees in this state.

The franchise industry has been under almost continuous review for two years. There have been two state inquiries-one in South Australia and one in Western Australia-and one federal Senate inquiry, the latter making 11 recommendations for improvement to the sector generally. There have also, of course, been separate inquiries considering unconscionable conduct in retail leasing, which also relates to franchising issues.

Although the Senate recommendations, if adopted, will improve franchising practices in some areas, there is one question that has not been addressed constructively-and, indeed, the federal government is limited in how it can respond to this particular need-and that is the ability for franchisors and franchisees to have better access to justice. The franchising sector in Queensland, at a good estimate, represents in excess of 11,000 small businesses and over 65,000 jobs. Australia-wide, the sales turnover of the franchising sector is estimated to be $130 billion.

In the current economic climate in this state, franchising is one of the areas that the Queensland government can target for the creation of new jobs. However, if we are to encourage the expansion of franchisee systems, franchisees must have confidence that if there are any disputes there is a process they can access fairly, justly and easily to resolve those concerns.

Franchising is one of the few sectors with realistic expectations of growth, despite the economic downturn that we face. A logical and, I believe, ideal approach to a concern that we have would be to incorporate into QCAT a specialized franchisee tribunal or extend QCAT's obligations to take in franchisee concerns.

Suitable infrastructure and systems already existed under previous tribunals. Indeed, those tribunals have proved to be cost effective to the state. In their previous forms, the Shop Leases Tribunal and the Commercial and Consumer Tribunal proved to be effective forums for determining commercial disputes. I am sure that QCAT will continue the tradition of those previous tribunals.

Indeed, the philosophy of tribunals with respect to proactive alternative dispute resolution, and particularly collaborative dispute resolution, complements the mediation principles that exist within the franchisee code of conduct. However, the code of conduct does result in a power imbalance.

If we are to embrace the tribunal approach fully, one of its critical benefits is that it addresses the issue of power imbalance in such a way as to not disadvantage any party that is represented at the tribunal. I am sure with QCAT we will continue to see that occur as has been detailed. When it comes to the discretion of awarding costs, under an existing system franchisees are required to go to the courts.

A situation can develop where an unscrupulous franchisor will bully a franchisee out of their action because of the risks of receiving an adverse costs order in the court process. Tribunals are often quicker and cheaper than the civil courts. I am sure QCAT will continue this tradition.

I put to the Attorney-General that one of the most important initiatives or amendments to strike at the imbalance of power that currently exists would be to bring the franchising industry under the QCAT system. I acknowledge that this should occur as of 1 January, but we have an opportunity now to protect the interests of franchisees as consumers. No doubt many across the state would be very aware of recent media reports involving this issue.

We have all seen the collapse of Kleenmaid and the concerns that has raised for a range of people who have been adversely affected by it. This bill gives the government an opportunity to make some allowances and give consideration to this proposal.

We are about to see the adoption of federal legislation that regards franchisees as consumers from 1 January 2010. Why can we not make appropriate provision for the enforcement of these laws when QCAT comes into effect, after this legislation has been passed in this House? This is the ideal opportunity to do so. I look forward to hearing from the Attorney-General about whether that is a possibility that we can bring forward at this time.

It is not sufficient to say that the current court system will provide an adequate remedy. The cost of litigation to resolve disputes has been identified as being out of reach for most people, including franchisees.

The Senate inquiry very clearly showed that. It is not sufficient to say that the franchising code provides an adequate remedy through mediation when it has been found that the current code mediation process is not sufficiently comprehensive in the terms of experience, expertise, breadth, flexibility of approach or durability of outcome. As we look at recent inquiries into the franchising sector, we recognize the inadequacy of the current dispute resolution systems, including the use of litigation through the civil courts, to resolve franchisees' disputes.

The inclusion of franchising in the QCAT model would give recognition to a very important part of the Queensland economy, one that has great potential for growth in this state. It would also provide a sense of fairness and balance to those who currently find themselves in difficult positions when trying to resolve their concerns. Across Australia, bipartisan and well-informed inquiries have all concluded that more needs to be done to ensure access to justice in franchise disputes. This is open information and it has been the subject of much discussion in the media in recent months.

I put it to the Attorney-General that it would be irresponsible of this government to allow to slip by an opportunity to include franchisee disputes in the QCAT model, thereby denying many franchisees access to any meaningful system of justice. To date the federal government has refused to enact any changes to the franchising sector, despite clear recommendations from the Senate.

In the absence of any action by the federal government to implement these recommendations, it is incumbent upon the states to protect the interests of their small business people. It is incumbent upon the Queensland state government to protect the interests of Queensland franchisees by providing them with an affordable and effective tribunal to support the consumer protection laws that we all agree are important to protect the interests of Australian consumers.

We have an opportunity with this bill. I am genuinely keen to hear from the Attorney-General that we can include within this bill the provisions for franchisees so that they are protected against the sorts of debacles that we have seen with Kleenmaid and others where, for a variety of reasons, franchisors have created difficulties for those small businesses."

Below is a response for delayed action from the Attorney General, the Honorable Cameron Dick:

‘The member for Gympie raised some issues in respect of franchisees. Due to the current Commonwealth activity in the area of national consumer laws, it is not possible to say at this stage whether franchisee matters will be included in QCAT's jurisdiction. I note the member's interest in the issue and I undertake to consider what steps may be taken in the future to address these concerns.'

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Related Reading:

A group of Queensland franchisees have requested a meeting with the Prime Minister at the June Community Cabinet Meeting

These past and present franchisees come from a number of franchise systems and simply want the real reason that government considers thousands of franchisees incurring substantial and often total loss from ineffective law and regulation of scam franchising can be considered to be acceptable collateral damage. A decision on a meeting is to be decided 25 June 2009.

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