ACCC calls for million-dollar penalties for dodgy franchisors

The Australian Competition and Consumer Commission has used its submission to the Senate’s inquiry on the effectiveness of the franchising code to argue for powers to seek million-dollar penalties for poorly behaved franchisors.

The consumer watchdog argues the current maximum civil penalties for breaching the nation’s franchising code — $63,000 per breach — are nowhere near enough to actually deter dodgy operators.

“For the codes to be effective, the consequences of breaching the codes must be sufficiently serious to incentivise compliance,” it argued.

One of the Commission’s recommendations therefore is to bring penalties in line with Australian Consumer Law, which would allow it to take franchise businesses to court asking for maximum penalties of $1.1 million per breach.

The watchdog also highlighted that although it does have the power to audit businesses under the franchising code, this is of little benefit because if the franchisor ignores the request, the only option is to go to court to seek an injunction.

“This is a costly and inefficient method of securing compliance and only provides a weak incentive for franchisors to comply,” the ACCC said in its submission.

A better option would be to give the ACCC power to fine businesses when they do not comply with audit requirements, the watchdog argues.

The Senate committee has so far received 57 submissions from franchisees, franchisors, experts and stakeholders in the franchising space. Read the full list here.

NOW READ: “On the verge of bankruptcy”: Red Rooster franchisees allege troubles as senate inquiry submissions roll in