Somebody needs to stand up and protect small business
While small businesses and franchisees are the engine room of the economy, it’s disappointing that only lip service is currently being paid federally to their concerns regarding anti-competitive and unconscionable conduct by larger businesses.
Sadly, the Federal Government, through its small business Minister Craig Emerson, is failing to fix the growing gaps in our laws dealing with anti-competitive mergers and unconscionable conduct. These gaps and the Federal Government’s ongoing failure to address them are costing small businesses and consumers dearly.
Instead, we are seeing window dressing federally in the lead up to the election. We have been seeing a flurry of proposed “amendments” that merely give the impression of doing “something” without actually fixing the problems.
In each case, the Federal Government is simply “confirming” existing law and practice and will not be changing or fixing any of the weak competition laws that currently allow dominant businesses to destroy competition and gouge consumers.
Any suggestions by the Federal Government or Minister Emerson that the recent proposed “amendments” will “strengthen” our competition laws can easily be dismissed and are even undermined by the Government issued Explanatory Notes that accompany the proposed amendments.
For example, on the proposed amendments to our anti-merger law the Explanatory Notes state that;
“The proposed amendments to [the law] would not involve additional costs to businesses or the ACCC as these changes largely confirm the existing administration of that section.”
This clearly acknowledges that the proposed amendments represent mere tinkering around the edges and will not change the current ACCC practice in the merger area.
More importantly, the Federal Government proposed amendments will not fix the growing problem of anti-competitive creeping acquisitions where dominant businesses destroy competition by buying out smaller competitors over time and in a piecemeal fashion that’s not prevented by our present weak competition laws.
Even Minster Emerson’s proposals relating to our laws against unconscionable conduct represent more window dressing. The Minister’s proposal to add so-called “legislative principles” to “guide” the courts in applying those laws also adds nothing to those laws.
Again, the Minister’s claims are undermined by the Explanatory Notes accompanying the proposed amendments which state that;
“Each of the [legislative] principles has been drawn from existing case law. The principles clarify, rather than alter, the effect of the statutory prohibition of unconscionable conduct.”
The “legislative principles” simply copy what the courts have been saying about the laws against unconscionable conduct. The sad reality is that the courts are taking a very narrow approach to the laws against unconscionable conduct and that means that small businesses or franchisees falling victim to reprehensible behaviour by a larger party are currently not getting any legal redress. The Federal Government’s proposed amendments will not fix this growing problem.
With numerous parliamentary inquiries finding that the current laws against unconscionable conduct are weak, it is very disappointing that Minister Emerson has not fixed the problem.
Sadly, the Federal Government and Minister Emerson have missed another golden opportunity to do the right thing for small businesses and consumers.
Unfortunately, this failure to make meaningful changes to our competition laws has not been helped by a further failure to deal with rogue franchisors that are destroying the lives and businesses of franchisees.
Again, the Federal Government’s proposals in the franchising area represent more window dressing. At its simplest, Minister Emerson is proposing to require “more disclosure” of information. In practice, however, “more disclosure” won’t stop rogue franchisors from abusing their contractual power to the detriment of franchisees.
For example, the Federal Government’s proposal to require “disclosure” of a franchisor’s power to unilaterally vary the franchising arrangement won’t stop rogue franchisors from abusing their power. It’s the misuse of the contractual power by rogue franchisors that’s the problem, not the mere existence of a power to unilaterally vary the arrangement. In any event, the so-called additional “disclosure” required under Minister Emerson’s proposals are already disclosed in the franchise agreement. The franchisor gets the power from the franchise agreement and therefore the power has to be in/“disclosed” in the franchise agreement
Minister Emerson is also proposing to give the ACCC the power to undertake random audits of franchisors. In practice, this power is meaningless as the ACCC already has the power to investigate franchisors where it has a reason to believe that there is a breach of relevant laws. With the ACCC having already been criticised for not using its powers where there is breach, why would the ACCC use a “random audit power” where there is no reason to do so? Unless the ACCC had some reason to suspect a problem with a particular franchise, a random audit would simply be a meaningless fishing expedition which would use up valuable resources for no real expected gain. Practically speaking the ACCC will only be expected to audit/investigate a franchisor where the ACCC believes there is a reason to do so. The ACCC can already do that!
Finally, the Federal Government is proposing to require the franchisor to give the franchisee notice if the franchise is not to be renewed. In practice, however, any notice of a non-renewal by the franchisor means nothing in practice as the franchisee lacks the ability to negotiate with the franchisor on the issue. Non-renewal by the franchisor means that the franchisees simply lose their investment with no ability to resell the franchised business that the franchisees have built up. In any event, franchisees dealing with a rogue franchisor are more likely to be terminated before the expiry date of the franchise agreement as part of a practice of “churning” by the franchisor, whereby the business is repeatedly ressold at an inflated price to new unsuspecting franchisees.
All in all, the window dressing by the Federal Government represents a missed opportunity to effectively deal with rogue franchisors. Minister Emerson should be following the excellent example being set by Mr Tony Piccolo, the South Australian Labor backbencher who has introduced a private member’s Bill into State Parliament to effectively deal with the rogue franchisors giving the Australian franchising sector a bad name.
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