Joanna Gash (Gilmore, Liberal Party, Shadow Parliamentary Secretary for Tourism) Share this | Hansard source

I am delighted to speak in support of this motion. The more I and some of my colleagues delve into franchising in Australia, the more we are astounded at the impunity with which many honest people have been driven to the wall without satisfactory remedy. I am also astounded that nothing seems to be being done to redress the injustices incurred, nor are any remedial measures being introduced to prevent or discourage a repetition of these events.

It appears to me that there is a purposeful and systematic practice by which some franchisors induce the failure of a sizeable proportion of a franchisee network for the singular purpose of resale at an advantageous price. The practice has been termed ‘churning’. Whether or not you accept the existence of such things, you cannot deny the high incidence of failed franchises that started off on a sound financial basis. The net effect of these practices has caused untold distress to many people who entered into contracts in good faith and with enthusiasm.

After considerable effort, the ACCC finally accepted and investigated some of the cases I brought to them, yet not one prosecution has come out of the process. I am told that, if a confidentiality agreement has been signed between the franchisee and the franchisor, the ACCC decline to investigate. If that is the case, should such an instrument be allowed to stand in the way of getting to the truth? I have deep concerns that the ACCC accepted such a position knowing of the potential for possible breaches of the Criminal Code and I have grave doubts that these matters were investigated as thoroughly as they should have been. I can only draw three reasonable conclusions: (1) that the act is inadequate and needs tightening; (2) that the ACCC is not applying the responsibilities given it with the degree of competence these cases need; or (3) that all the affected franchisees are commercially and uniformly incompetent.

I believe there is evidence of unconscionable conduct on the part of some franchisors but I am not confident the ACCC has properly examined the claims. There seems to be a problem with defining what constitutes ‘unconscionable conduct’ under the act and that of a layperson. In just about every case I have looked at, the franchisor has acted with impunity in the way it shared information with the franchisee and the degree of control it exerted over the franchisee. Information is often withheld or manipulated. I understand there is a practice of inducing a breach, and the franchisees are powerless to defend themselves because the means to do so has been denied them.

Certainly, the recent inquiries in Western Australia and South Australia support the supposition that a huge clean-up is long overdue. If the ACCC lacks adequate resources to effectively prosecute its brief then give it the resources it needs. But if the ACCC has the resources and cannot even prosecute one case then I would question the competency of that agency. Indeed, there has even been some suggestion of breaches of the Criminal Code, and I have urged a number of franchisees to take their case to the police.

The pattern that has emerged in all of this is to bleed affected franchisees financially, thereby denying them the ability to afford a reasonable legal challenge. There needs to be legislative relief in the form of a tribunal commission where these matters can be adjudicated. We are suggesting that the industrial relations model can be looked at as a guide. Although these matters surround the concept of harsh or unconscionable conduct, it seems a difficult proposition to prove, at least as far as the Trade Practices Act is concerned. Much of this has to do with defining exactly what that means, and at the moment the benefit of the doubt is unwavering slanted towards the franchisor.

I think each case should be examined by someone other than the ACCC because, from what I have seen so far, I am not at all heartened. I applaud the fact that there is a Senate investigation underway—not before time—as this is a matter that transcends politics. I am convinced that churning exists and it must be stamped out. If the act does not cater for the discouragement of such an immoral practice then it must be amended. If it does then the watchdog is not doing its job. Either way the government has to act today to restore confidence in this blighted industry.

In closing I would like to read into the record three succinct extracts from emails with regard to Bakers Delight, and these can be produced. The first is from Richard Taylor, Chief Financial Officer of Bakers Delight, to Simon Brookhouse, the Victorian and Tasmanian franchise manager for the ANZ Bank, dated 22 February 2005 with regard to Ms Deanne DeLeeuw, who was still an active franchisee at the time. It read:

The South Coast bakeries group heads closer and closer to oblivion.

Is that not evidence that suggests plans had been conspired to terminate Ms DeLeeuw’s franchise well ahead of time?

The second email is from Jurgen Schnabel, Senior Manager of the ANZ Bank, dated 10 March 2005. He wrote:

... we will accept whatever Bakers Delight decides to give us from the sale of Kiama and Vincentia, without question.

Does this not constitute some degree of collusion towards the premature but planned demise of this franchisee? And finally:

... we have to consider the greater relationship with Bakers Delight given our overall exposure to this group within PM.

That was in an email from Simon Brookhouse of the ANZ Bank dated 10 March 2005. This was when the ANZ agreed to accept a nil return from Bakers Delight for the Shellharbour franchise. (Time expired)

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