ACCC INVESTIGATIONS INTO FRANCHISING

The Australian Competition and Consumer Commission (ACCC) recently issued a news release on its website to explain the processes involved in handling franchising complaints, investigations and outcomes.
Approximately 1000 complaints concerning franchising are received by the ACCC each year from consumers and businesses. The ACCC will examine complaints wherever the matter falls within the scope of the Trade Practices Act and/or the Franchising Code of Conduct.

A three stage investigation process is used by the ACCC. Firstly, an “Initial Assessment” is made to verify the general information of the complaint and assess whether the complaint is substantive. At this stage of the complaint, the ACCC will usually recommend mediation to resolve the franchising dispute.
If a complaint is found to be substantive, it progresses to an “Initial Investigation”, which involves an ACCC enforcement officer investigating the allegations, for example by interviewing the parties and reviewing relevant documents.

Finally, an “In-depth Investigation” may be conducted by senior enforcement staff if the allegations can be substantiated by reliable evidence. The ACCC’s Enforcement Committee will consider such matters and take appropriate action, such as litigating the matter or resolve it by an administrative settlement.

The ACCC has investigated and taken action in several recent cases, including:
Several franchisors who were found to have made misleading and deceptive representations to franchisees and prospective franchisees about the profitability of the system;
A franchisor whose disclosure document was found to be ambiguous and potentially misleading, and a franchisor whose disclosure document was found to be incomplete and insufficient;
A franchisor who did not provide franchisees with the safeguards provided under the Code, including failing to provide a disclosure document;
A franchisor who was found to have issued notices to franchisees claiming that they had breached their franchise agreements that did not sufficiently describe the breach or the remedy required and did not give the franchisee a reasonable timeframe to remedy the breach;
Several businesses that purported to offer a “licence” but which the ACCC found was actually a franchise, and as such that the franchisors were in breach of the Code;
The outcome of such investigations varies, but may include the franchisor having to give court enforceable undertakings, the franchisor having to refund franchise fees or provide compensation to the affected franchisees, and/or the franchisor having to undergo trade practices compliance training (at their cost).

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