Over-regulation would harm franchising sector: inquiry warned

Stricter regulation of Australia's franchising sector could detract from franchising as a functional method of doing business, an expert has warned.

Tony Conaghan, partner at trans-Tasman law firm DLA Phillips Fox, today told the Commonwealth Parliamentary Joint Committee on Corporations and Financial Services that any proposed changes to the Trade Practices Act or the Franchising Code of Conduct should be approached with great caution.

"We have seen the effects of over-regulation in various countries and notably also the US State of Iowa where the franchising sector shrunk substantially and franchisors deliberately avoid franchising into Iowa, resulting in lost contribution to GDP and job creation. Various attempts were even made to have the 1992 Iowa Franchise Act declared unconstitutional as it is considered to unlawfully interfere in contractual relationships," Conaghan said.

Franchising is a dynamic small business sector in Australia contributing some 14% of the national GDP of Australia and employing 600,000 people, according to the Franchise Council of Australia.

Conaghan said there was no reasonable basis to treat franchising different to other forms of doing business such as distributorships or licensing which all form part of the small and medium enterprise (SME) market but which are not subjected to the same rigorous regulation as  franchising.

The Parliamentary Joint Committee is examining the Franchising Code of Conduct and considering, amongst other things, whether a good faith bargaining clause should be incorporated into the Code, how the Code interacts with Trade Practices Act, and the operation of dispute resolution provisions under the Code.
 
For further information please contact:

Tony Conaghan | Partner
DLA Phillips Fox | 1 Eagle Street | Brisbane 4000
Phone  +61 7 3246 4002 | Fax  +61 7 3229 4077
tony.conaghan@dlaphillipsfox.com