Fiona Scott (Lindsay, Liberal Party) Share this | Hansard source

I rise in support of the Competition and Consumer Amendment (Industry Code Penalties) Bill 2014. This amendment bill introduces a new franchise code of conduct into the Australian business sector. The franchise industry is a critical pillar of the small business community, particularly within retail, and includes amazing brands that we all know and love. Battery World, Gloria Jean's, McDonald's, Hungry Jack's, Subway, Hairhouse Warehouse, Pie Face, OPSM, Total Tools, Boost Juice, Grill'd, Bakers Delight, Terry White Chemists and Laser Clinics are just some of the brands that all Australians know and use every day of the week. All too often, it is these brands that fill our urban shopping centres, our high streets or even Queen Street in St Marys, and are local icons within the retail and shopping sector in Australia.

According to the NSW Business Chamber, 90 per cent of franchise businesses are in fact Australian and most franchise businesses are small businesses. So many Australians dream of owning and running their own small business. Often, when you talk to them about this dream, it involves a franchised coffee shop or a franchised clothes shop—a franchise where they think they can have autonomy, running their own life and running their own business.

My upbringing was no different to many other types of families. My family started their own business in 1936.

When a large multinational business decided to come into our area, in fact, to directly challenge my father's business and the life of our family,— our family home was mortgaged against the business—my father went with 10 other local businesses across the Sydney basin and started his own franchise. This franchise grew from being just a Sydney basin to right across Australia and then, eventually, into New Zealand. The business he started was, of course, the Auto One business. My experience within the franchise sector is not unique. It was through the Auto One business that we were able to compete with Federal Mobil at the time, hold onto our business. The business still exists to this day as does the Auto One group, although we have now sold the business on.

This sector has such great capacity. It has great capacity of nurturing small businesses. It has great capacity of our entrepreneurial community binding together, working together, being competitive against some of the multinationals. Today the franchise businesses in Australia number some 73,000, and employ over 400,000 Australians producing a sales turnover in excess of $131 billion annually. In fact, Australia is one of the most heavily franchised countries per capita in the world.

Since its introduction in 1998 the franchising code of conduct has been reviewed many times—eight times in fact. When the Howard government introduced this important piece of legislation it was to regulate the conduct of participants in franchising towards other participants in franchising. As the Minister for Small Business identified upon introducing this legislation in July, the code is now 16 years old and in the minister's words is beginning to look its age. This is why the coalition government is introducing a new franchising code, one that simplifies and modernises the way franchising is legislated, one that fulfils our election commitments to refine the franchising code, to strengthen its effectiveness, improve its responsiveness to the sector's unique commercial characteristics and tensions and also to guard against additional state based regulation.

The new code of conduct aims to strike the balance between the needs of franchisors and franchisees while understanding the unique nature of the relationship between them. We want to promote growth in this sector, reduce red tape and make sure all participants in the industry follow best practice principles. The reforms will give the ACCC greater flexibility in how it enforces the franchising code to encourage increased compliance and reduce disputes within the sector. Further, they will result in an estimated compliance saving $8.6 million annually for the sector.

In 2013 Mr Alan Wein conducted the most recent review of the franchising code. This independent review involved comprehensive stakeholder consultations across the franchising community and found that there was widespread industry support for introducing pecuniary penalties to deter breaches of the franchising code. The coalition welcomed the Wein review and its recommendations and at the time stated that it was a useful roadmap to franchise reform. Building on the recommendations and the strong feedback from stakeholders, in April 2014, this government took swift action to develop and release exposure drafts of the bill and the new franchising code for public comment. Feedback on the proposed reforms was very positive and received widespread support across the sector.

The ability to include civil penalty provisions in the franchising code is a key component of the reform package. The Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 will facilitate a change to the way the franchising code of conduct is enforced by amending the Competition and Consumer Act to, firstly, allow regulations to be made that prescribe a pecuniary penalty not exceeding 300 penalty point units for a breach of a civil penalty provision of an industry code and allow the industry regulator, the Australian Competition and Consumer Commission, to issue an infringement notice where it has reasonable grounds to believe a person has contravened a civil penalty provision of an industry code.

These measures will more effectively deter breaches of the code and enhance the enforcement tools available to the ACCC, by allowing it to take rapid action when breaches of the code do occur. This will facilitate greater compliance across the sector and may assist in reducing the number of protracted, costly disputes. This better practice in franchising will in turn make the sector more attractive to investors both locally and internationally.

The bill sets the limit for pecuniary penalty for contravention of an industry code at 300 penalty units, currently $51,000. The amount of an infringement issued by the ACCC for the code breach is 50 penalty units, $8,500, for a body corporate and 10 penalty units, $1,700, in any other case. The new code will also: improve disclosure by including the introduction of a short, easy-to-understand information statement for prospective franchisees; cut red tape by clarifying and streamlining provisions; improve the transparency of marketing funds; make franchisors more accountable to franchisees and required to pay for significant capital expenditure; and, finally, offer protections to franchisees by limiting, in a fair and balanced way, the enforceability of restraint-of-trade clauses at the end of a franchise agreement in special circumstances.

I am very passionate about this legislation, not just because of my family business background but because I also have had the privilege of working for Westfield, at Westfield Penrith, which was a post-acquisition development and rebranding of a billion-dollar shopping centre, and I met pensioners, or people who had just retired, who had taken their entire super and dumped it into a franchise. These were people that invested their whole future in getting that Donut King or that Gloria Jean's up and running. These are the people we need to protect. We need to make sure that they have the best possible go. These provisions will help so many of these businesses. They will help these businesses to be so much more competitive. We need to protect small business in this country. We need to protect the employment that small business creates. I commend the bill to the House.

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