Australian Government Announces Inquiry into Franchising
This follows the recent State inquiries held in Western Australia and South Australia.
The terms of reference are:
The Committee is to inquire and report on the operation of the Franchising Code of Conduct, and to identify, where justified, improvements to the Code, with particular reference to:
1. the nature of the franchising industry, including the rights of both franchisors and franchisees;
2. whether an obligation for franchisors, franchisees and prospective franchisees to act in good faith should be explicitly incorporated into the Code (having regard to its presence as an element in paragraph 51AC(4)(k) of the Trade Practices Act 1974);
3. interaction between the Code and Part IVA and Part V Division 1 of the Trade Practices Act 1974, particularly with regard to the obligations in section 51AC of the Act;
4. the operation of the dispute resolution provisions under Part 4 of the Code; and
5. any other related matters.
The Committee invites submissions by 12 September 2008. The Committee will report by 1 December 2008.
Please send submissions to corporations.joint@aph.gov.au or by post to -
Committee Secretary
Parliamentary Joint Committee on Corporations and Financial Services Department of the Senate
PO Box 6100 Parliament House
Canberra ACT 2600
Emailed submissions should include full name, address and phone contact details so that they can be verified.
For further information please contact the committee secretary on (Australia) 02 6277 3583.
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Phil Zeidman, a renowned international franchise attorney and general counsel to the International Franchise Association, observes what little regulation the world has is almost always legislated by a central government, as opposed to the American federal model. Zeidman thinks that is changing, most recently with Canada and now possibly Australia.
If there is to be any legislation at all, Zeidman argues that the federal (central) government is best positioned for franchise chains that almost certainly want to develop regionally and then nationally.
According to Zeidman, a rich Australian franchisee with strong political ties is upset that his own franchise agreement has reached maturity without being renewed by a multi-national franchisor. The franchisee now wants Australia's government to change the law to create a right so that his considerable franchise empire can remain under his ownership.
Philip Zeidman of DLA Piper Rudnick Gray Cary has been a global Franchise Lawyer of the Year 2005 and 2006 in the Who’s Who Legal Awards.
Read attorney Phil Zeidman's full comments in Franchise Times
Tonight the Australian Parliamentary Joint Committee on Corporations and Financial Services delivered their recommendations to Federal Parliament for the Inquiry into the Franchise Code of Conduct. These will now go to debate in 2009 as we anticipate the recommendations from the Senate Economics Committee into the Inquiry into the statutory definition of Unconscionable Conduct will also follow after their delivery within 48 hours.
The Hon Bernie Ripoll MP [Oxley] briefly referred to 11 recommendations to Parliament under the heading of Opportunity not opportunism: Improving conduct in Australian franchising.
To wet the appetite; Mr Ripoll referred to the imbalance of the franchising power dynamic, the need for transparent and better disclosure and meaningful advice for prospective franchisees including understanding the potentially dire implications of end of term implications and conditions. He referred to the need for pecuniary penalties for breaches and the effective arming of the regulator [to achieve long awaited results].
Hot on the Committee’s list and as yet to be mentioned were two topics close to all franchisees – and it would seem even closer to the FCA, ACCC and those franchisors that have something to fear – “good faith” and accessible justice. “House” time limits cut Mr Ripoll off mid-sentence but a full list of all recommendations will be available shortly ...
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Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard, as I understand this from Webster/Buchan/Spencer: when they speak of "good faith" they are dealing with a different concept than we are used to in the US.
Here in the US "good faith" is a gap-filler and generally not an independent cause of action. It also cannot be used to override explicit contractual language; for this reason jurists such as Scalia and Posner regard "good faith" as a near-useless concept to be applied only where there has been poor contract drafting.
(N.B.:In the case of auto dealers, "good faith" is defined by statute )
However, in Australia and Canada my understanding is that "good faith" has some bite and may be used to modify contractual terms.
Perhaps this could be clarified by those who still celebrate the Queen's birthday?
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
Paul, the quick answer is that the statutory duty of good faith in the Arthur Wishart Act allows a pure economic loss claim for the negligent performance of a franchise contract, which cannot be contracted out of.
Some Canadian commentators don't accept this, preferring to believe that the legislative intent is idle, and section 3 merely codifies common law.
Section 3 does not merely codify common law, and I was able recently to use the presumption of good faith to defeat a motion for summary judgment on a promissory note - in effect creating a new category of set-off.
Michael Webster, a franchisee attorney in Toronto, Ontario, who publishes a website on business opportunities and franchises, called "The BizOp News"
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"