Bruce Billson (Dunkley, Liberal Party, Minister for Small Business) Share this | Hansard source

Madam Deputy Speaker Andrews, it was a great pleasure to receive the call from you and congratulations on your appointment. Firstly, I would like to thank all colleagues from all sides of the parliament that have contributed to this debate—really good contributions, insightful contributions, from the member for Eden-Monaro, the member for Hughes, the member for Swan, the member for Ryan, the member for Herbert and the member for Lindsay. I would also like to acknowledge the member for Oxley's contribution, particularly the encouraging news that Labor will be supporting this package. It is a very positive sign of the collaborative work that has gone on to get us to the point where we are today.

This is an important day. Franchising is very important and a crucial part of our vision of a diverse, vibrant, enterprising economy. And franchising is a big deal. The franchise industry is very important to our economy and the small business community. There are around 73,000 franchising units operating in our economy, employing over 400,000 Australians, and they are producing a sales turnover estimated to be in excess of $131 billion annually. This is a big deal.

We are the franchise capital of the world here in Australia, and so much of our learnings and insights are exported. What I am pleased to bring to the parliament is another instalment, another step, in a regulatory regime that has supported the growth, strength and confidence of franchising that so many enterprising Australians are a part of. This is what this bill goes to the heart of.

Alan Wein's report in 2013 was very good and useful. As was quoted, it was a report that the coalition welcomed as mapping out a road map for further franchise reform. The task that we have had is to translate Mr Wein's recommendations into a legislative instrument, and not only the bill before the parliament today but also the code that will follow once these enabling provisions are passed. That has been an enormous piece of work.

I recall being briefed by Mr Wein on his report and I said: 'Some of your recommendations are written in a conversational style of English. They're great to read. The question that follows is: how would you implement that?' I was encouraged by his advice that that was my problem to actually translate those wise—and I think conversationally communicated—recommendations into the instruments that we need to give effect to. He was quite happy to point out that that was our role and provide all the advice and support that he could, and he has. That is what has got us to the point where we are today.

The Competition and Consumer Amendment Industry Code Penalties Bill 2014 is a key component of our election commitment to introduce a package of reforms to improve the effectiveness of regulation of the franchise sector. The new national franchising code of conduct will be introduced later this year as part of these reforms, and this bill enables those provisions to be enacted. Some of the reform measures that will be in the code are outside the scope of the current enabling law, and that is why we have this amendment before the parliament today.

The bill amends the Competition and Consumer Act 2010 to allow regulations to be made that prescribe a pecuniary penalty not exceeding 300 penalty units for the breach of a civil penalty provision within that code. It allows 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 industry code.

These respond to some of the observations that colleagues have raised. Under the previous code, if something was inconsistent with the code, the access to remedies, the tool kit available to the ACCC, the opportunity to simply deal with that salvaged the relationship between a franchisor and franchisee and let everyone get back to business, those tools were not available. So you would have a potentially exhaustive process to use broader powers within the competition framework, or in some cases the inappropriate conduct might go unaccounted for because it was too difficult to seek some kind of remedy. A party to that franchising relationship had every ground to be aggrieved about the conduct and could point to examples where the code had not been complied with. Yet the tool kit was not there to deal with that breach in a timely and responsive way. That is what we are trying to fix. Where there is aberrant conduct that is inconsistent with the code you deal with it quickly. Let the commission issue an infringement notice. Present the evidence. Allow the party whose conduct was inconsistent with the code to simply pay the infringement notice—they know they have done the wrong thing—and everyone can get back to business. This is what we are trying to achieve.

The penalty and infringement notice regime to be implemented by this bill represents a relatively modest penalty amount but it is targeted so that its application is balanced—it is a lighter touch approach—and it will give the teeth to industry codes to which it applies while preserving their co-regulatory nature. The new Franchising Code will specify the provisions that attract a pecuniary penalty. The bill will enhance the enforcement tools available to the ACCC to allow appropriate action to be taken against breaches of the new code and to produce greater deterrence outcomes. And, as I mentioned earlier, timeliness matters. You need to be able to deal with these issues quickly so that the harm and the consequences can be negated and so that an appropriate penalty is recognised for noncompliance. That is a crucial part of the reforms that we are seeking to introduce. This will encourage a higher compliance level across the sector and may assist in reducing the number of disputes, which in turn may reduce pressure on dispute resolution services or the need for costly litigation. We all know that, when a small business finds itself in court, it is often already at a disadvantage before the matter is even heard because of the imbalance in resources and the positions the parties can take.

We are seeking to introduce a maximum civil pecuniary penalty of 300 penalty units—which is currently $51,000—for breaches of certain provisions of the new code. It would have to be a serious breach to attract the upper reaches of the pecuniary penalty. Those serious breaches are of a kind that would undermine in a fundamental way the operations of the franchising relationship and result in detriment to the parties. Beyond that, there are further avenues available which a court can exercise. It is proportionate. More modest action can be taken decisively by the ACCC, and as you move to a higher level of penalty for more egregious breaches, that is where the court process comes in to seek authorisation for those stiffer penalties. Infringement notices of 50 penalty units for a body corporate—that is currently $8½ thousand dollars—will allow the ACCC to quickly and efficiently respond to less serious breaches. To go above that figure, to activate stiffer penalties for more egregious breaches, the commission will need to engage in a court process.

The introduction of pecuniary penalties for breaches of the new Franchising Code has been the subject of comprehensive consultation with industry stakeholders and has won broad support from the franchising community. That consultation has been at the heart of how we operationalise the Wein report recommendations. I commend my team, the Treasury officials, the ACCC officials and the many stakeholders not only for their contribution but also for the goodwill that they have displayed in collaboratively translating Alan Wein's excellent recommendations into the kind of legislative and regulatory instruments that give people confidence and clarity about the nature of the reforms and give effect to the intention that was behind the Wein report recommendations.

This measure will help enhance the business environment for franchisees and franchisors alike and will promote confidence and growth in what is already a vibrant and very substantial franchising sector in Australia. Importantly, it will lay the foundations for the new Franchising Code. The existing code has been in need of renovation and reform and this government has taken up that challenge after many years of calls for action to be taken. It did not happen under the previous government but it will happen under the Abbott coalition government. I am pleased that it will be introduced through regulations later this year and I expect that it will commence on 1 January 2015. I am encouraged by the bipartisan support for that measure from those on the other side of the chamber. Not only will these reforms be of benefit to the sector more generally; they will deliver an estimated net compliance reduction to the sector of $8.6 million annually. We never lose sight of our red tape and compliance burden reduction imperative. That is embedded in this work, as we seek to do with all of our work. This will reduce the red tape burden on businesses across the franchising sector. I commend this bill the House. I hope it has swift passage through the Senate. It represents a very important step in reforming a crucial area of our small business economy—that is the franchising sector.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.

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