In The News

Wed 5 Jul 2017

News Update – Get Prepared the ACCC are Taking Action

Business Planning & Strategies

Earlier this year in May, the Australian Competition and Consumer Commission (“ACCC”) issued its first infringement notices for alleged breaches under Australia’s updated Franchising Code of Conduct (“Code”) that resulted in civil penalties being paid by a Franchisor.  What this means for Franchisors is that the ACCC are ready to take action, and under the updated Code have more rights and abilities to take action and/or seek penalty payments.

In this particular situation, Domino’s Pizza Enterprises Limited (Domino’s) have now paid $18,000 in fines, on the basis of two ACCC infringement notices alleging that Domino’s failed to provide its Australian franchisees with a financial statement for the company’s marketing fund and an auditor’s report within the required time frames prescribed under the Code.

The Code requires franchisors that have marketing or other co-operative funds to supply annual financial statements to franchisees of any funds they are required to contribute to, and to do this within 4 months of the end of the financial year, with audit reports of these funds to also be completed and provided to franchisees within 30 days of the relevant review, subject to certain exceptions set out in the Code.

In a public release issued by the ACCC on the 8th May 2017, the ACCC Deputy Chair Dr Michael Schaper  stated that “Ensuring small businesses receive the protection of industry codes is an enforcement priority for the ACCC.”

The ACCC have the right to issue an infringement notice where it has reasonable grounds to believe that a person has contravened certain requirements of the Code and set out an amount payable as the relevant penalty within such notice.

While Domino’s has paid these penalties, it should however be noted  that payment of a penalty specified in an infringement notice is not itself an admission of a contravention of the Code.

So what does this mean for Franchisors. In short it is a strong reminder to ensure Franchisors are aware of and meeting their Code obligations, and if the ACCC comes knocking they have kept easily accessible the records and material to promptly support their compliance.

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