Australian MP Lashes 'Criminal Banks' and 'Useless Regulator'

CANBERRA, Australia (Blue MauMau) - Joanna Gash (LP), a member of parliament representing Gilmore, New South Wales, condemned in federal parliament on Monday criminal collusion between Australia's banks and franchisors that wipe out franchisees. Citing emails between the ANZ bank and Bakers Delight, she inquires, “Is that not evidence that suggests plans had been conspired to terminate Ms De Leeuw’s franchise well ahead of time?” and “Does this not constitute some degree of collusion towards the premature but planned demise of this franchisee?”

In the sitting a Notice of Motion was tabled by Don Randall MP, that the House:

(1) recognizes the severe financial distress and hardship faced by a number of current and former franchisees throughout Australia as a direct result of franchisor conduct;

(2) acknowledges that franchisors must be held accountable for their unconscionable conduct, including non-disclosure, through a more stringent and determined application of existing Trade Practices legislation;

(3) notes that there are many franchisees that have no adequate or available means to redress their grievances without recourse or expensive and often unaffordable litigation; and

(4) considers the introduction of provisions, similar to those available in industrial relations legislation, for mediation, conciliation and arbitration, at no cost to the franchisee.

In arguing for better regulation of franchising, Ms. Gash declared in the parliamentary debate, "The more I and some of my colleagues delve into franchising in Australia, the more we are astounded at the impunity with which many honest people have been driven to the wall without satisfactory remedy. I am also astounded that nothing seems to be being done to redress the injustices incurred, nor are any remedial measures being introduced to prevent or discourage a repetition of these events."

The franchising debate gained overwhelming support for a motion where Members of Parliament from each side of the House delivered speeches referring to the experiences of their franchisee constituent victims. (Full details at Hansard 1 Sept 2008, pdf, pgs. 111 - 118)

The franchise debate continued once again in parliament two days again:

“Mrs GASH (Gilmore) (09/03/2008)—Earlier this week I spoke to a motion in relation to the franchise industry and the seeming inability of the ACCC to deal with the large numbers of franchises that seem to be failing.  Because of the short time allocated to speak, I was unable to say all I need to say.  What I would like to expand upon is the notion of ‘unconscionable conduct’ inherent in the provisions of the Fair Trading Act.  Simply put, there seems to be an absence of a workable definition of the term that can be relied upon to protect franchisees. 

The reason we need to have certainty of description is that many, if not all, of these failed franchisees have been left bereft of any funding to afford a legal challenge in the courts, where they might have a chance of getting justice.  In fact, so traumatic has been the collapse of their businesses that they have lost the will to fight.  Many are broken in spirit and simply have abandoned any desire to challenge. Those who should have been held accountable have been let off the hook.  And given the huge number of franchisees that I believe have been churned, very good money has been made at someone else’s expense.

It is my view that the government has a responsibility and a duty to intercede on behalf of these many people whose businesses have been churned.  In many cases there has been a breach of fiduciary duty and a breach of confidentiality that effectively engineered the failure of many of these businesses so that they could be resold at a profit to the franchisor.  I would like to use the example of a former franchisee of Burger King, Rick Rampling, by way of demonstrating just one aspect of the way things are being done.  This information was submitted to the South Australian inquiry and is on the public record.

When a previous franchisee of Hungry Jack’s, Jack Cowin, won a court action against Burger King, all Burger King franchisees went under as a result of Westpac calling in their loans.  Approaches to the ACCC were as fruitless then as they are today. Rick was made bankrupt and he could not afford to mount a legal challenge.  Some might say ‘pure economics’, but does justice have to be affordable in Australia?  As an option, Rick went to the Privacy Commissioner and made some amazing progress.  Rick made his complaint six months ago that Westpac had passed his personal and business information to Jack Cowin and his reps, who were effectively his competitors.  The Privacy Commission investigated and is set to move on Westpac in the next few weeks.

Apparently, the Privacy Commission moved quickly, drilled it down to one specific meeting and got statutory declarations from the people in attendance.  The Privacy Commission contacted Rick a couple of weeks ago, informing him that they were moving.  They told Rick that, when the pressure was put on some people in Westpac, they quickly folded and rolled on others.  In fact, it was suggested that someone had perjured themselves in the process.  Westpac settled with Rick—and it took just six months.  The Privacy Commission is also working with the Australian Federal Police on the basis of ‘obtained financial advantage by deception’—a breach of the Criminal Code.  Rick has a meeting scheduled with the Queensland internal investigation section.

I am told that, in another interesting development, Susan Carr, the deputy commissioner of the ACCC, contacted Rick the day after he received his letter from the Privacy Commissioner confirming that they were moving.  Rick met with her last week, and I wonder what the outcome of that meeting was.  Why is it that the ACCC, in a raft of cases that have been presented to them, could not reach the same conclusion in just one case?  This is just too far a stretch of the imagination, and that is why I am repeating my call to the Australian Federal Police to step in and investigate episodes of franchise churning.  There is no shortage of informants willing to assist the investigation who somehow have been ignored by the ACCC.

The other thing that concerns me is the closed-shop approach of the ACCC in sharing with us how they actually conducted their investigations.  If the privacy commission succeeded where the ACCC failed, serious questions need to be asked.  The only sensible conclusion I can draw is that the ACCC is incapable of performing a forensic investigation and, as such, is incapable of protecting consumers even if they are franchisees.

I am calling on the minister to provide sufficient funding to afford a thorough investigation of churned franchises with a view of ensuring that justice is done and not denied on the basis of affordability.  I can stand up here at every opportunity and recite each case that has been referred to me, but that is not why the ACCC was set up and neither should this be the way our justice system was designed to work. 

A number of my colleagues have been calling for action, but now we are of the view that the ACCC is not the way to go—although it should be.  Convince me that the legislation is adequate and I will ask why the ACCC has not prosecuted one case.  Tell me that the ACCC worked fully within the bounds of its legislative obligations and I will tell you that the legislation must be inadequate.

In any case, changes need to be made—either to improve the way the ACCC does things or to tighten the legislation.  There is a strong case to suggest that something untoward has been allowed to occur in the face of natural justice.  The government must investigate all of these cases thoroughly, though perhaps not by the ACCC.  That is why I am repeating my call that the time has come for the AFP to be called in, perhaps assisted by the Privacy Commissioner.  

Finally, I want to thank Deanne De Leeuw, formerly a franchisee of Bakers Delight, for her guts and determination in continuing her case against all odds.” (Full record at Hansard 3 Sept 2008, pdf)