Australian franchising sector reforms: new taskforce established

On 21 June 2019, Michaelia Cash, the Minister for Employment, Skills, Small and Family Business, announced the establishment of the new franchising taskforce (Taskforce), following the Inquiry into the Operation and Effectiveness of the Franchising Code of Conduct. 

In March 2019, the Parliamentary Joint Committee on Corporations and Financial Services (Committee) handed down its Fairness in Franchising report.  One of the Committee’s recommendations to the Federal Government was that it should establish an inter-agency taskforce to examine the feasibility and implementation of many of the other 71 recommendations made by the Committee.

Who are the members of the Taskforce? 

The Taskforce is co-chaired by the Department of Employment, Skills, Small and Family Business and the Department of the Treasury, and is made up of senior representatives from:

• the Department of the Treasury;
• the Department of Employment, Skills, Small and Family Business; and
• the Department of the Prime Minister and Cabinet.

There will be no representative directly from the franchising industry (franchisees or franchisors) on the Taskforce. However, the Taskforce is expected to consult with stakeholders and other Government departments and agencies with policy or regulatory responsibility for relevant Industry Codes, including the Australian Competition and Consumer Commission (ACCC).

What is the Taskforce’s mandate? 

The Taskforce’s mandate is to coordinate the Government’s response to the Committee’s recommendations and manage consultation, industry engagement and contributions from relevant portfolios. 

The Taskforce is to provide the Minister for Employment, Skills, Small and Family Business and the Treasurer with advice in the second half of 2019 and recommend ‘an achievable plan for the reform of the franchising framework that is fair, effective and accountable for franchisors and franchisees while avoiding unnecessary regulatory burden’.^[1]

Which recommendations will the Taskforce review? 

Among the 71 recommendations made by the Committee in the Fairness in Franchising report, almost a third were referred to the Taskforce. It is unclear if the Taskforce will only review these recommendations referred to it or all 71, however it has, among other things, been tasked to:

• examine how consultation processes associated with franchising policy, regulation and legislation can achieve an appropriate level of input from franchisees;
• investigate options for a public franchise register with franchisors providing updated disclosure documents and template franchise agreements annually;
• consider whether the ACCC should conduct an inquiry into all terms in franchise agreements relating to the discretion of the franchisor;
• examine conflicts of interest associated with supplier rebates and third line forcing;
• consider the appropriateness of amending the Franchising Code to require compliance with unfair contract terms legislation;
• consider how to amend the Franchising Code to include provision for a franchisee to have a right to terminate the franchise agreement in special circumstances; and
• consider amendments to the Competition and Consumer Act 2010 and the Franchising Code to implement the penalty regime recommended by the ACCC.

The Taskforce’s mandate, and timing for any output, remains unclear at this stage. However, the appointment of the Taskforce marks one of the first steps in a process of regulatory reform that could result in significant changes to the regulation of the franchise sector in Australia.