Business prefers mediation to lawyers

Victoria’s Small Business Commissioner says his office has seen a sharp increase in the number of franchise and business-to-business disputes being brought to it for resolution.

Victoria’s Small Business Commissioner says his office has seen a sharp increase in the number of franchise and business-to-business disputes being brought to it for resolution.

The prospect of launching legal action is enough to send a shiver down the spine of any business owner, and with good reason – even simple litigation can easily cost $100,000 and more.

That may explain why the state-funded Office of the Small Business Commissioner has seen more than 4500 businesses come through its doors over the past five years – and 1200 in the past year – to take advantage of its $195 dispute mediation service.

Retail lease and owner-driver contract disputes make up the majority of the office’s work, but according to Commissioner Mark Brennan, over the past 18 months there has been a noticeable pick up in the volume of business owners with mainstream contractual and franchise disagreements seeking mediation.

“As people have become more aware of what we do, we have seen significant growth in B2B disputes. They probably made up 1% or 2% of our work in the beginning but have jumped to about 15% in the past 18 months, and the sky is really the limit in terms of how many we might see,” Brennan says.

The lower costs associated with mediation have also seen a jump in franchisees seeking mediation for disputes – even if, in some cases, the cheaper option is resisted by franchisors.

According to Brennan, in one case a franchisor sought to resist attempts to have a dispute dealt with through his office because it wanted to exert financial pressure on the 70 franchisees involved by forcing them to use a more expensive dispute resolution process.

“We saw that was happening and successfully asked the Office of the Mediation Adviser (a starting point for dispute resolution under the franchising code) to refer the complaint to us, so we were able to thwart the attempt to put the franchisees under financial pressure,” Brennan says.

The Small Business Commissioner also works with the Australian Competition and Consumer Commission to quickly resolve business disputes.

“When we first started operating I had some trepidation before first meeting the ACCC because I thought they might just tell us to stay out of their way. But from the start they said ‘let’s see what we can do jointly’ and we’ve both referred cases to each other were it is appropriate – for example, we generally refer unconscionable conduct issues to them because they are better equipped in that area,” Brennan says.

Victoria is currently the only state with a Small Business Commissioner, but its success means it may not stay that way for long. “We’ve had inquiries from every jurisdiction in Australia about what we do. I’d like to see it taken up in other parts of the country; it provides good value to business and the community.”

Read more on dispute resolution and franchising code