The Code is designed to ensure that franchisees are given information that is material to the running of the franchised business, and provide access to a fast and relatively inexpensive way to resolve any disputes. Broadly, it achieves this by requiring franchisors to disclose specific facts to franchisees and to follow set procedures in their dealings with franchisees. For instance, if a dispute arises, either party can require the other to attend mediation. To support the dispute resolution aspects of the Code the Government established the Office of the Mediation Adviser (OMA) in 1998 to assist with the mediation of disputes between franchisees and franchisors. The OMA appoints qualified and experienced mediators to help franchisors and franchisees resolve their problems and disputes without going to court. While the OMA provides an initial free and confidential discussion, the parties to the mediation are responsible for their own costs. The First Review – December 1999 to May 2000 In the Budget Statements for 1999-2000, the Government announced that it would conduct a review of the Code. On 26 August 1999, the then Minister for Employment, Workplace Relations and Small Business, the Hon Peter Reith MP, announced that the FPC had accepted the task to review the Code. This review was conducted during the period 1 December 1999 to 31 May 2000. The FPC was required to report on: • the effectiveness of the Code in meeting its objectives; • the success of the Code in raising standards of conduct within the franchising sector; and • the costs of compliance with the Code and how these costs might be minimised. The FPC made a number of recommendations for amendments to the Code.10 In relation to the disclosure provisions of the Code, the recommendations included: • that the original Annexure 2 (mainly used for disclosure of information by a vendor franchisee to a prospective purchaser franchisee) be repealed; • that a short form disclosure document for franchisees with an annual turnover of less than $50,000 per annum be prescribed; and • that international franchisors should be exempt from the disclosure requirements of the Code (only in situations where the franchisor has appointed an Australian master franchisee to make the necessary disclosures on its behalf).
THE CODE – CONSEQUENCES OF BREACHING PART 2 The Franchising Code of Conduct is a mandatory industry code prescribed under the Trade Practices Act 1974 (TPA) and thus has the force of law. The ACCC is responsible for: • investigating possible breaches of the competition and consumer protection provisions of the and, where appropriate, bringing proceedings against those suspected of breaching the Act; • considering applications for immunity from the Act on a range of public interest grounds; • arbitrating on disputes over access to essential facilities and in the telecommunications industry; • assisting consumers who have suffered as a result of breaches of the Act to obtain compensation or redress; • generally ensuring a culture of compliance with the Act through education and research.11 This part of the report explains the consequences of breaching Part 2. General A breach of Part 2 of the Franchising Code of Conduct constitutes a breach of section 51AD of the Trade Practices Act 1974 (Cth) (TPA) which reads: “A corporation must not, in trade or commerce, contravene an applicable industry code.” This section prohibits corporations from contravening mandatory industry codes, and voluntary codes where a corporation has bound itself to accepting that code, provided that such codes are prescribed under regulations made under section 51AE of the TPA. Consequences of Breaches Any person who suffers loss or damage as a consequence of a breach of section 51AD may: • seek injunctions under section 80 of the TPA;