Australian Government Rejects "Unconscionable Conduct" and Responsibility
CANBERRA, Australia (Blue MauMau) - On Monday the Australian Senate Standing Committee on Economics agreed that there is a need to look into unconscionable conduct in franchising practices but the “Majority” deferred the responsibility to Courts and the ACCC.
Senate Standing Committee on Economics
"The need, scope and content of a definition of unconscionable conduct for the purposes of Part IVA of the Trade Practices Act 1974"
Voting NOT to include a Statutory definition and stick head in ground:
Senator Annette Hurley, Chair – Kent Town, South Australia, ALP
Senator Doug Cameron – Surry Hills, New South Wales, ALP
Senator Mark Furner – Strathpine Queensland, ALP
Senator Louise Pratt – Woodvale, Western Australia, ALP
Voting TO include a Statutory definition and protect citizens
Senator Alan Eggleston, Deputy Chair - Western Australia, LP
Senator Barnaby Joyce - Queensland, LNP
Senator David Bushby - Tasmania, LP
Senator Nick Xenophon - South Australia, IND
AND the winner is:
Senator Annette Hurley, Chair – Kent Town, South Australia, ALP
AND the losers are: Australian Consumers, Small Business and Franchising
The Australian Labor Party contingent on this Committee has side-stepped the issue and condemned more unsuspecting victims to acknowledged abuse and suffering for whatever period it takes to raise another Committee to again review the abject failure of lawmakers to protect citizens. They found the task “too hard” and their constituents made an error in judgement at the last election.
This is disgusting ... (pdf, 160 pgs)
See page 51 particularly; those who wanted to be responsible.
unconscionable conduct
Richard Solomon concludes that franchisees are whining and that this is the expected outcome. Franchisee lobbyists in Australia are being majorly successful. "Good Faith" is a given. We are unified and have many years up our sleeves and nothing to loose to get the law reform needed to protect thse still in the system. You underestimate our success..... No body is buying Bakers Delight stores and there has been a steady decline in inquiries to other networks. We are saving consumers from this insidious franchise disease, the senate committee can place a band-aid over the wound only for a time. If the Govt fails to properly deal with this problem the confidence in the sector will decline and the system will implode. Bad publicity is one thing, but wait until the franchisees in the system stop paying royalties and start suing franchisors for failure to adeqately manage the sytem they purchased.
unconscionable conduct
So the labor party shows its true colors. Labor has never given a damn about small business, this is so evident by the committee spread and the result on unconscionable conduct. Did anyone else notice the absence of published submissions to the unconscionable conduct inquiry. I provided, a solution and a definition in my submission. Obviously the horror stories of franchisor conduct and fraud, and the fact that the Govt has been remiss in protecting us through inadeqate law has fallen on deaf ears.
I wonder how much pre election cash went from Big businesses like Bakers delight into Mr Sheens (kevin Rudds)election campaign to buy a verdict.
mmm Mr Emerson has been most quiet on the issue, maybe he doesnt have the aptitude or level of understanding required or simply has his head stuck firmly in he sand.
Why are you shocked? I told you it would end like this
many months ago; and I also told you why.
Assumptions that things work out like they taught you in 9th form civics class are usually wrong. There is what teenagers are taught, and then there is reality. They are quite different.
When you consider that all the franchisees invested in this exercise was a chorus of gratuitous whining and appealing to the consciences of the conscienceless, you got the exact result that American franchisees got when they did the same things at the LaFalce hearings in Congress here. NADA!
But think of the money you saved by not investing in an effective campaign. Isn't that consolation enough?
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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
We didn't have any money
and it ain't over - unconscionable conduct is dead but not so the changes that will come to franchising.
Good faith will be included and has extensive case law behind it [as opposed to unconscionable conduct that appears never will] but we still have the issue of who will be able to afford justice. The committees goal was to work toward an acceptable balance that they could get through parliament to create a franchising environment where rogue behavior was, hopefully, lessened to a great extent. Do you ever completely eliminate abuse?
I am disappointed that the recommendations dealing with 2 areas in particular that appeared to seriously concern the Committee now do not address those problems.
Good faith will seemingly be available only to those franchisees with big pockets. Good faith has only partially closed the Mediation gate where rogues who choose to abuse the process will when the franchisee is not financial.
I completely discounted any real or long-term use of 'good faith' by the ACCC. I feared that if no one was looking they would return to total disinterest for another 10 years. But I am assured "someone" will be looking and the ACCC have been given "direction" and we will be watching and stirring the pot when necessary.
In my opinion, education in the hands of the ACCC could not be relied upon. The ACCC won't promote it and make it easily accessible and what they have on offer is poor, or some good information that comes up short. Once again I am advised they have been given "direction".
What education on offer from FCA is designed to make the FCA look good but it is designed to mesmerize the prospect and naive government prone to select the convenience of FCA over the effectiveness and accessibility of education. And that won't change.
Many that go looking for a franchising education are probably smart enough not to need to be told. The ACCC's record is abysmal across almost everything they are responsible for and with the overall effect of these recommendations on the ACCC to only reinforce their view that franchising is an unimportant work in progress; from them we can expect a flash of light and then darkness again - few that really do need to be told to investigate a franchise offering will never hear the message.
Government should take some responsibility to offer protection to the stupid and not just say; 'the idiot should have known - too bad'. We will do our best to fill any gap.
But we do see great change to behaviours coming from these recommendations;
Good faith, penalties and much better disclosure, particularly on how end of term works, is now on offer. On line registration, while weak, is at least something that can be pursued where a franchisor guarantees he complies with the Code. But this recommendation does not educate or promote competition.
It would now appear that we might get some worthwhile franchising data from the Australian Bureau of Statistics and while it remains to be seen whether the ABS will understand the trickery in hiding accurate statistics, it is something to work with and much better than having the only data available being the rubbish coming from the FCA.
These recommendations won't clean up franchising but we will work on them and it will change behaviors and save many. The message is out there and behind the message is a large contingent of federal politicians, media and us.
Say what you like Richard but it ain't over and while we have achieved less then what is needed, we have achieved much more than anyone considered we could if we can get these through parliament. And we are working on it and we have a hell of a lot of support that we didn't have 18 months ago.
The process of this Inquiry has already added to transparency in this industry and identified that rogue behaviour exists and is a very real risk where the consequences are often enormous. And what about Appendix 3 - the FCA didn't bend over the block - they handed us their heads. That little inclusion removed any chance Giles had of reigning over FCA and what credibility they had left went down the toilet. And it's publication tells us of the view the Committee has of FCA.
What our strategies will be after we see new law will be decided once we see what we get. We have learned much from BMM so it should be interesting and agressive work.
Aussie & US zees think alike
CeeB, I would suggest that it is not an issue of not having money, it is an issue of not wanting to contribute money--a classic free-rider problem which plagued Susan Kezios back when the American Franchisee Assn was trying to fight for (among other things) inclusion of a "good faith" standard.
Solomon is cynical, but quite correct on this point.
If 10,000 franchisees gave $100 each, you would have a million dollar war chest every year to use for campaign contributions/lobbying/education etc. Now that $100 works out to 27 cents per day over the course of a year.
As to Government protecting the stupid, if you frame this in terms of negative externalities borne by taxpayers the Government just might listen to you. But here in the US, franchisees are for the most part too intellectually lazy to even think out such an argument, and almost universally franchisees here are too self-centered to fund presentation of such an argument in the halls of the federal and state legislatures.
Franchisors succeed because they present a united front and they realize that in a representative democracy, lobbying is a cost of doing business.
Franchisees fail because they rarely unify and they whine about how the Government should be their Momma.
Sorry to end the week on a down note, but that's the unfortunate reality.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
That is the reality Paul
and we know it too well. We have always suggested that 27c per day is simply insurance. What we need is the ability to promote that need and we will be working on that before parliament returns in February. But that will be my last shot at getting franchisees to get a little bit smarter.
I don't consider your points a "down note" - it is what we have had to accept to date [and probably forever].
What is it that Fuwa says about "large numbers" of people. "Stupid" isn't an excuse - and this goes well below stupidy - they either don't care until they get bit or they hide and think the storm will pass. So that amounts to the lack of principle displayed by rogue zors or quite simply cowardice - and both combined with a large smack of great stupidy.
Free Riding: Franchisors and Franchisees
Cee B and Paul;
The issue doesn't resolve into stupid franchisees, or failure to pay for services.
Franchisors in the US faced up to their legal problem in the early 60's. Tying products to services was an anti trust barrier that the franchisors had to overcome - they did because every franchisor saw it was in their interest to have a lobby group.
Franchisee associations face a similar problem: there is no legislation which enables them as the collective bargaining agent. But, the franchisee associations don't support the AAFD which is the only trade association in the game which could push through federal legislation which would set out the procedures a franchisee association would have to jump through in order to be recognized by the franchisor.
Michael Webster, a franchisee attorney in Toronto, Ontario, who publishes a website on business opportunities and franchises, called "The BizOp News"
The AAFD can't push out a bowel movement, much less
any constructive agenda for franchisees. The AAFD is just a brown lump floating in the toilet bowl of franchising.
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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
Disagree
Richard, a little more constructive criticism about the AAFD would be useful. Even if you are competing with them for managing independent associations, you can be more respectful towards all of us who are trying to assist franchisees to understand the value of supporting their IndFa.
Course if you don't want to, I am still on for wine/beer in Toronto for the next ABA Forum.
Michael Webster, a franchisee attorney in Toronto, Ontario, who publishes a website on business opportunities and franchises, called "The BizOp News"
You wanted a constructive critique..
Michael:
Here is a suggestion. Ask a few people go to the AAFD website and review it, wait 24 hours and ask them to get back to you. And without asking them leading question just ask them to explain in a few sentences what the AAFD does. The go back the same group 45 days later and ask them again.
Here is what you are going to find. Out of the box, reading between the lines of what they tell you, they are going to roughly state the AAFD is a quality of the concept seal of approval, 45 days later they will tell you that in no uncertain terms.
My best guess is that was the original intention or marketing concept and liability, expense, got in the way of execution. And all the rewriting of the website of the AAFD is not going to change people's reception of what the AAFD does until it changes it does away with the terms seal of approval and accreditation.
The thing I find almost the most bizarre in this, is your perceptions. You who know most people do not read what is before them, but rather interpret the words based on their own bias, experiences, education, and what they want to see.
So in the end the AAFD is a negative, because people mistakenly believe it means the concept has been thoroughly vetted. Take a look at how the seal of approval is used and tell me if in your heart of hearts you believe it conveys anythign else to the masses it is pitched at.
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
The Fair Franchising Seal
Fuwa writes: "So in the end the AAFD is a negative, because people mistakenly believe it means the concept has been thoroughly vetted. Take a look at how the seal of approval is used and tell me if in your heart of hearts you believe it conveys anythign else to the masses it is pitched at."
I have already come to this conclusion about the accredited contracts, but it is an interesting point about the seal recepients. I have never liked the Total Quality aspect in the AAFD's marketing because of its puffery.
Actually, I am going to accept your criticism of the website and work to change it.
Whether a particular system meets the seal requirments should be more clearly advertising than a recommendation. No system can come pre-vetted.
What should be learned on the AAFD's website is how to use the standards to evalute a particular franchise contract. Let's see if I and others can make that difference for the site.
I don't think that the disclaimers on the site are anything more than cover our ass representations, either.
What you really want to know is how the standards made a difference in thinking of the seal winners, as to how they approach problem solving, and how they avoid litigation or arbitration. (Perhaps we will find out that the standards made no difference at all, that the seal winners were just naturally a collaborative group?)
Michael Webster, a franchisee attorney in Toronto, Ontario, who publishes a website on business opportunities and franchises, called "The BizOp News"
Michael's response
Michael:
That was a very mature response. It is nice when someone can make observations about something someone else is passionate about without someone taking offense or getting defensive. There shoud lbe more of this on the Internet.
All the best,
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
The AAFD has never competed with me at any level.
Taking chump change membership dues from people for whom you produce nothing of material practical benefit is just low hucksterism.
Please don't suggeest that nothng is something.
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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
Is this going anywhere
constructive. I dropped in to learn but some times it turns into a scratch match amongst some very learned people ... who don't mind a dwink. ...xxx
Were we talking about unconscionable conduct or franchisee associations or was I being educated about franchisee associations. If we were we don't have one in Aus so the conversation was promising and probably worthwhile everywhere. Or were we talking about competition ....... mine is bigger sorta stuff. Damn it .. I lose agin
Wake up. That's what we are talking about too.
I get very angry when some bozo AAFD kind of group rips off franchisees by appealing to their cheapness and representing that for pennies you can get what costs many dollars.
The bozo has been around a long time. During that period there have been ridiculous "standards" to which almost no one subscribes; a pretense that there is a "movement" while no results of any materiality are ever produced; and ultimately the bozo's endorsement for having a "fair contract" of one of the most fraudulent franchisors ever to appear - Cuppys.
This bozo has for years mislead franchisee groups and individual franchisees into believing that material progress can be achieved in playing field leveling for miniscule expense. That is simply not so - as everyone in here already knows or ought to know. The field is less level today than it was before these AAFD morons came along.
That is what I am upset about, and it is exactly what you are upset about. So wake up and get real. I am addressing exactly your problem!
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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's Nonsense
The AAFD has not received the necessary support from the successful independent franchisee associations, many of which were established after the AAFD referred them to Dady and Garner because they were primarily in litigation mode.
Dady and Garner are probably the biggest financial supporters, among attorneys, of the AAFD.
There is also no question that the AAFD's Franchising Seal has not become the selling point which we had hoped for. We had hoped to move the market through appealing to the prospective franchisees community desire for a fair and collaborative relationship with their franchisor. That has not happened.
(I have parted with the official AAFD line on accredited contract status.)
But, let us observe what has happened.
AAOHA has been able to push their 12 Point Fairness program, something that would not have happened unless CK Patel, the Treasurer of AAOHA and a Board Member of the AAFD, had the fortitude to push for fair contracts in the hotel industry.
As Stan Turkel as documented, a number of hotel franchisors have changed their franchise agreements it meet AAOHA's demands. Again, these demands originate in part because of CK Patel's joint association with AAOHA and AAFD.
The AAFD Standards have been published in the premiere US caselaw on franchising, CCH.
Unlike any other trade association, law firm, or attorney, the AAFD is transparent about it successes and failures. For example, Richard, we know nothing about the franchisee associations which you manage - the good, the bad, and the ugly.
The AAFD has not made the progress amongst franchisee associations it should have. But it is not because of a lack of trying, dedication, or an extraordinary effort.
However, tomorrow is another day.
Michael Webster, a franchisee attorney in Toronto, Ontario, who publishes a website on business opportunities and franchises, called "The BizOp News"
re: Richard's Nonsense
Webster wrote: "Richard, we know nothing about the franchisee associations which you manage - the good, the bad, and the ugly."
So what makes you think he manages any?
You will never see the day I disclose cliet identities unless
it is already on some public record or the cliets themselves make it publicly known.
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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
AAFD
Do they have any good programs? Were they on track originally? The need for an association is fairly obvious but are you saying that no matter how many times I click my heels it won't happen, or we end up with something that sits there and doesn't achieve the intended goals? I must admit to ony briefly looking over their web site on occassions and it appears to cover a hell of a lot [some of which my initial thought was "how?why?what?"] and with a market as big as the US at $290 you would think that they would be funded?
Should an association attempt much more than lobbying and education?
I have concerns about referrals and accreditation. I've seen good turn to bad and on a rare occasion bad to good and in this country there has only been a very few examples of a win for franchisees.
They talk of the "double whammy" where the zee is screwed by the zor and the landlord but the triple is where the zee parts with his last few dollars to a lawyer who is a pretender. What is so difficult about saying "this is your case; this is their case; you lose; get a new life"? I hate sending people to a lawyer but on occasions you have no other choice - but I don't have one I would endorse and I warn people to investigate their selection and tell them they will most likely get screwed.
There is a lot of advice here at BMM, free advice, good advice - but ain't it frustratin when it is ignored because people ask for advice when what they are really after is confirmation of some insane plan. It is 3.30am on Sunday here and I'm off to deal with Australia's dumbest zee and his moron lawyer and I ain't happy.
Here's how it really works
The notion that 29 cents a day produces a million dollars, and that sounds like a lot of money, is absurd. A million dollars, when it comes to trying to influence the direction of regulatory policy or regulation is chump change. When you consider that you really can't have any shot at anything without professional lobbyists, and that they aint free, what they have to spread around for your position to be considered, as opposed to the well heeled opposition's position, you may begin to appreciate reality here.
Ten years ago $ 3.50 a day, producing maybe $ 15 - 20 million, would have been a good beginning, with the road to creedibility still being two years down the road. Today figure at least $ 2,000 per store if you have an extremely large membership. And you have to figure three years before respect begins to be seen.
We know now that franchisees won't even pony up much chump change, much less ongoing credible warchest level funding.
Where does that leave you? It leaves franchisees with no position that is in any way defensible in the context of this discussion. Despite the politically correct blather about franchise incvestment and franchise releationship regulation, the reality is that it is open season on franchisees everywhere in the world. That right has been bougtht and paid for, and it belongs to the franchisor community.
Nothing will change without MONEY & MILITANCY - neither of which is likely to be forthcoming from the franchisees of the world. You can't act like sheep when you live in wolf country. Only preinvestment analysis can save a potential franchise investor from being just so much meat. If they don't choose to buy the best preinvestment due diligence available, that's just their tough luck. This aint Alice In Wonderland here.
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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
Guts or Balls
This was sent to me by one of my zees. She is a funny little country gal with a wicked sense of humor [the rest I cannot pass on];
There is a medical distinction. We've all heard about people having guts or balls, but do you really know the difference between them? In an effort to keep you informed, the definitions are listed below:
GUTS - Is arriving home late after a night out with the boys, being met by your wife with a broom, and having the guts to ask: ''Are you still cleaning, or are you flying off somewhere?''
BALLS - Is coming home late after a night out with the boys, smelling of perfume and beer, lipstick on your collar, slapping your wife on the butt and having the balls to say: ''You're next, fatty.''
I hope this clears up any confusion on the definitions. Medically speaking, there is no difference in the outcome, since both ultimately result in death.
Party Politics?
Looks like Dr Emerson, the minister in charge (and I use this term loosely) of the small business portfolio, used his party weight on this one. He has obviously forgotten his words and promises to several franchisees he met last year.
Many would challenge Emerson to put his money where his mouth is - go and use your own money to buy a franchise in one of the 3 majors who have been 'outed' in the last 12 months.
But then again one of these systems has a long standing Labor politician who is a former Qld deputy premier on its Board.
Could it possibly be a case of "its not what you know, but who you know"!!!!! or merely a coincidence!
UC might cost the Australian Labor Government $
A second read of this report indicates that the "majority" - being 4 government ministers of 8 on the Committee - made a decision not to support the insertion of a definition for unconscionable conduct on the basis that they could not determine what impact such a definition would have on other industries regulated by the Trade Practice Act 1974.
Further; they would basiclly encourage the Courts and the ACCC to determine through test cases how unconscionable conduct should be dealt with.
Not withstanding that the Courts and .the ACCC have had that opportunity now for more than 10 years and pursued 2 cases in that time; what the Committee is suggesting is that they would like to shut down unconscionable conduct for some and not for others.
That is: The Australian Labor Government is prepared to tolerate unconscionable conduct and the disasters left by such conduct in all cases for years to come because this government does not want to upset too many at the big end of town. There is no other way to interpret it.
Kevin Rudd, Prime Minister of Australia - you are a .......... hipocrit.
Smooze the rice
In Brooklyn, we say schmooze. I'm not sure if "smooze" is the Aussie version, but it sounds a bit gross.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Smurfs are known to smooze
It is a well known fact that Papa Smurf was a prolific smoozer. But I don't know if Condi Rice was his putative smoozee?