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MELBOURNE, Australia (Blue MauMau) - The public hearing of the Federal Inquiry on November 5 into the Franchise Code of Conduct has seen the Franchise Council of Australia, the Australian Retailers Association and the Australian Competition and Consumer Commission unload the best they have to offer, publicly.
The Committee members, headed by Bernie Ripoll, have now been asked to rationalize complaints to the Committee as being based in a misunderstanding of the franchising relationship by an insignificant number of franchisees. To basically suggest that franchising needs should be evaluated on the basis that “Fred’s franchise is doing well, and there are a lot of ‘Freds’, and Bob just expected too much” is a desperate contention to an educated Committee.
Evans (ARA): “The code asks franchisees to seek out advice and understand the expectations prior to going in. A lot of folks do not.” [pg 16]
Giles (Deacons/FCA): “It is just that mismatched expectation which causes the tension.” [pg 48]
Samuel (ACCC): “There are many out there who claim that we ignore small business and we do not assist them. I have to say to you that results as much from an expectation gap as to what the ACCC is empowered to do under the Trade Practices Act versus what some in small business expect that we might be able to do.” [pg 91]
This topic of the “expectation gap” was monotonously referred to until the ACCC moved on to further defend a lack of enforcement.
Senator MASON: “Do you believe you have sufficient quivers in your legal armoury to sufficiently protect franchisees except, as the chair has pointed out, with respect to monetary penalties?”
Samuel; “Yes. I would say that is so.” [pg109]
Ridgway (ACCC): “I am talking about the bad ones, the ones who want to do the wrong thing quite deliberately for their own purposes.” [pg 94]
Samuel: “Show us circumstances where the ACCC has said, ‘We’re not going to pursue that matter because we just are not interested’, and I will come out and publicly apologise. There is the challenge. I just do not believe it is happening. I hope that is safe.”
CHAIR – Mr Ripoll; “Too late now if it is not.”
Samuel: “I am happy to apologise if that can be demonstrated.” [pg 102] (And it will be) Then there was a reality check.
Rodney Hackett (McDonalds): “I expect a little bit of silver coating to come out of this, but parliament is where the real lobbying starts. After this inquiry, even if it is a really good report to parliament that is able to see that reform is overdue, I cannot get to have lunch with [Prime Minister] Kevin Rudd.” [pg 72]
Rodney Hackett on FCA: “If you like, I might be able to compile a list of suicides for you so you can understand how serious it really is. It is not with the judges. It is not with the lobby groups. It is with the politicians. I understand you have to make inquiries and I think that is very worthy, but what goes on then is this whole lobbying process where all sorts of things can be derailed.” [pg 72]
Howard Bellin (IF Consulting): “I have got letters here from when I requested franchise legislation in this country in 1971.” [pg 78]
Tony Piccolo (South Australian MP): “The proposed changes by my (SA Inquiry) committee will importantly deter rogues and charlatans from entering the industry and equally will perhaps force out those rogues and charlatans so that we have an efficient, effective and competitive industry.” [pg 59]
Tony Piccolo: “When you put the disclosure document on the web page, for example, you are not putting up any intellectual property. The intellectual property is in the operating manual.” [pg 63]
Some classic FCA .......
Giles: “What works in franchising which is different from any other area is the economics; the market sorts the situation out. As a parliamentarian, you are perhaps sitting here thinking, ‘How do I find a legislative solution to this potential unfairness?’ What we are saying is that in 98 per cent or 99 per cent of the cases the problem does not arise at all. Secondly, the fact is that the last thing most franchisors want to do is actually end the relationship there, because they have to find a new franchisee, which is at the world’s lowest level at the moment. They then have to train them, recruit them and get funding. Why in your right mind would you do that ...”
CHAIR – Mr Ripoll: “There are some people who are not in their right mind. That is the answer. What do we do about the unscrupulous ...” [pg 46]
Clearly the Committee understands current franchising ...
CHAIR – Bernie Ripoll to ARA: “It is interesting that you say there is no management of that because in your opening remarks you said: ‘The Franchising Code of Conduct and the Trade Practices Act provide important protection for franchisees, and the Australian Competition and Consumer Commission has been a highly effective industry regulator.’ I was going to ask you by what measure, but you have explained to me that there is not a highly effective regulator.” [pg 15]
CHAIR - Bernie Ripoll to ARA: “The franchisor has an enormous amount of weight within the operations manual, and in the end can terminate. That is a very powerful act. There is power there. Where a franchisor decides to go off the rails and decides that they are going to terminate someone and use bullying tactics for whatever reason - they might want to bring that store back in house and not pay for it, and there have been circumstances of that happening - how does that play? This does happen. This does exist.” [pg 39]
CHAIR - Bernie Ripoll to ACCC: “Let us get down to the nuts and bolts and the reality of what happens on the ground. If somebody decides through phone calls and verbal communication - we have plenty of evidence this is often what happens - then you cannot really establish that. Once they sign, the contract does not really protect them in any way. That is why we have a code. But the code really just deals with disclosure, which is taken care of as pre-contractual. Post-contractual behaviour becomes the issue. Breaches can be really for anything. It just seems from the ACCC’s view and from your submission, apart from a number of suggestions about pecuniary penalties and so forth, that there really is not much of a problem and we should not tinker with it too much.” [pg 95]
CHAIR - Bernie Ripoll to ACCC: “I would say it is worse than that, because they can take it at any time. Every franchise agreement is not that at all. It is at the bare minimum just seven days. Your contract is actually for seven days or 30 days (termination) notice. Again, it is nuts and bolts and practical on the ground. For the rogue that is quickly manufactured and done. I am not saying that is the case all the time, but we are trying to deal with the ones that fall through the crack, the bad behaviours that are not accountable.” [pg 99]Refer: Melbourne Transcript (PDF 651kb)