ECONOMICS AND INDUSTRY STANDING COMMITTEE INQUIRY INTO THE FRANCHISING BILL 2010 Report No. 7 in the 38th Parliament 2011 Published by the Legislative Assembly, Parliament of Western Australia, Perth, June 2011. Printed by the Government Printer, State Law Publisher, Western Australia. Economics and Industry Standing Committee Inquiry into the Franchising Bill 2010 ISBN: 978-1-921865-17-6 (Series: Western Australia. Parliament. Legislative Assembly. Committees. Economics and Industry Standing Committee. Report 7) 328.365 99-0 Copies available from: State Law Publisher 10 William Street PERTH WA 6000 Telephone: (08) 9426 0000 Facsimile: (08) 9321 7536 Email: [email protected] Copies available on-line: www.parliament.wa.gov.au ECONOMICS AND INDUSTRY STANDING COMMITTEE INQUIRY INTO THE FRANCHISING BILL 2010 Report No. 7 Presented by: Dr M.D. Nahan, MLA Laid on the Table of the Legislative Assembly on 23 June 2011 ECONOMICS AND INDUSTRY STANDING COMMITTEE COMMITTEE MEMBERS Chair Dr M.D. Nahan, MLA Member for Riverton Deputy Chair Mr W.J. Johnston, MLA Member for Cannington Members Ms A.R. Mitchell, MLA Member for Kingsley Mr M.P. Murray, MLA Member for Collie-Preston Mr I.C. Blayney, MLA Member for Geraldton Mr P. Abetz, MLA Member for Southern River (co-opted on 24 November 2010) COMMITTEE STAFF Principal Research Officer Mr Tim Hughes, BA (Hons) Research Officers Mrs Kristy Bryden, BA, BCom Mr Foreman Foto, BA (Hons), MA (from 28 February 2011) COMMITTEE ADDRESS Economics and Industry Standing Committee Legislative Assembly Tel: (08) 9222 7494 Parliament House Fax: (08) 9222 7804 Harvest Terrace Email: [email protected] PERTH WA 6000 Website: www.parliament.wa.gov.au - i - ECONOMICS AND INDUSTRY STANDING COMMITTEE TABLE OF CONTENTS COMMITTEE MEMBERS ................................................................................................................................ i COMMITTEE STAFF........................................................................................................................................ i COMMITTEE ADDRESS ................................................................................................................................. i COMMITTEE’S FUNCTIONS AND POWERS.............................................................................................. v INQUIRY TERMS OF REFERENCE ............................................................................................................ vii ABBREVIATIONS AND ACRONYMS ......................................................................................................... ix EXECUTIVE SUMMARY .............................................................................................................................. xi FINDINGS....................................................................................................................................................... xv RECOMMENDATIONS................................................................................................................................ xxi MINISTERIAL RESPONSE......................................................................................................................... xxv CHAPTER 1 INTRODUCTION.......................................................................................................................... 1 1.1 WHAT IS FRANCHISING.................................................................................................................... 1 1.2 REGULATION OF FRANCHISING..................................................................................................... 3 (a) Franchising Code of Conduct................................................................................................ 3 (b) Disclosure Document............................................................................................................ 5 (c) Enforcement and compliance................................................................................................ 6 1.3 INQUIRIES AROUND FRANCHISING............................................................................................... 7 1.4 SIGNIFICANCE OF UNIFORM NATIONAL FRANCHISING REGULATION ............................. 10 1.5 FRANCHISING BILL 2010 (WESTERN AUSTRALIA)................................................................... 13 CHAPTER 2 MAGNITUDE OF THE PROBLEM?........................................................................................ 17 CHAPTER 3 RECENT AMENDMENTS TO REGULATORY FRAMEWORK ........................................ 23 3.1 FRANCHISING CODE OF CONDUCT ............................................................................................. 23 (a) Post-Matthews Report amendments (2008) ........................................................................ 23 (b) Post-Ripoll Report amendments (2010).............................................................................. 24 3.2 COMPLIANCE AND ENFORCEMENT REGIME ............................................................................ 27 (a) Direct remedies for breaches of the Code ........................................................................... 29 (b) Remedies via breaches of the Competition and Consumer Act 2010.................................. 29 (c) Broader investigative powers (ACCC)................................................................................ 30 (d) Franchise sector education .................................................................................................. 32 3.3 COMMITTEE’S VIEW ON RECENT AMENDMENTS ................................................................... 32 CHAPTER 4 CONSIDERATION OF THE BILL ........................................................................................... 37 4.1 INTRODUCTION................................................................................................................................ 37 4.2 VALIDITY AND CONSISTENCY OF THE BILL............................................................................. 37 (a) Validity ............................................................................................................................... 37 (b) Consistency ......................................................................................................................... 38 4.3 RETROSPECTIVITY .......................................................................................................................... 40 4.4 CLAUSE 4 - WA FRANCHISE AGREEMENT ................................................................................. 41 (a) Extra-territorial application................................................................................................. 41 (b) Definition of WA franchise agreement ............................................................................... 42 4.5 CLAUSE 11 - GOOD FAITH .............................................................................................................. 44 (a) Inclusion of good faith generally ........................................................................................ 46 (b) Definition of Good Faith in the Bill .................................................................................... 52 4.6 PART 4 - ENFORCEMENT AND REMEDIES.................................................................................. 58 4.7 CLAUSE 12 - CIVIL MONETARY PENALTIES .............................................................................. 62 (a) The application of civil monetary penalties for breach of clause 11................................... 62 (b) The application of civil monetary penalties for breaches of the Code ................................ 63 (c) The potential for “double jeopardy”.................................................................................... 67 4.8 CLAUSE 13 - INJUNCTIONS ............................................................................................................ 70 4.9 CLAUSE 14 - REDRESS ORDERS .................................................................................................... 72 (a) Power of the court to issue a renewal order ........................................................................ 73 (b) Period of limitation - clause 14(4)....................................................................................... 75 - iii - ECONOMICS AND INDUSTRY STANDING COMMITTEE 4.10 CLAUSE 15 - DAMAGES ...................................................................................................................77 (a) Use of the term “harm” and its definition ............................................................................77 (b) Right of action for persons not party to a franchise agreement............................................78 CHAPTER 5 COST IMPACT OF THE BILL ..................................................................................................81 5.1 INTRODUCTION.................................................................................................................................81 5.2 COST IMPACT TO THE STATE ........................................................................................................81 (a) Enforcement.........................................................................................................................81 (b) Disinvestment and business flight risk.................................................................................85 5.3 COST IMPACT TO FRANCHISE PARTICIPANTS ..........................................................................86