A number of the recommendations in the 2019 ‘Fairness in Franchising’ Report have the potential to significantly change the nature of the current commercial relationships that exist between fuel marketers and fuel resellers, says ACAPMA.
Many of our regular readers will be aware that one of the big issues for the fuel industry in recent years has surrounded questions about the fairness of the existing commercial relationships that exist between fuel marketers and their resellers – whether they be commission agent or dealer arrangements.
It is fair to say that these questions, coupled with concerns in a range of other industries such as hospitality and transport, resulted in the Australian Government establishing a Joint Parliamentary Inquiry into the Operation and Effectiveness of the Franchise Code and Oil Code of Conduct in March of last year.
Following nearly a year of hearings and deliberations, the Committee released its’ final report entitled: ‘Fairness in Franchising’. The Executive Summary of this report noted that, by contrast with a previous Inquiry in 2008, the evidence provided in this latest inquiry indicated “that the problems, including exploitation in certain franchise systems, are systemic” and their resolution therefore “requires a much broader and more comprehensive approach”.
As a result, the Parliamentary Committee proposed “substantial changes to the Franchising Code of Conduct (Franchising Code)” and “to the sections of the Oil Code of Conduct (Oil Code) that relate to franchising, as well as to the responsibilities and powers of the regulator”.
The report went on to note that “Prior to this inquiry, the principal regulatory response to issues in the franchising sector has been around improving pre-contractual disclosure. During this inquiry, much was made of: firstly, improving the awareness of prospective franchisees and ensuring that they have access to appropriate legal and business advice prior to entering a contract; and secondly, improving the accuracy and meaningfulness of the information provided to prospective franchisees”.
“Put simply, a number of the recommendations of the 2019 ‘Fairness in Franchising’ Report have the potential to significantly change the nature of the current commercial relationships that exist between fuel marketers and fuel resellers within our industry,” ACAPMA CEO Mark McKenzie said.
“Assessing the merits of these proposed changes, however, has been difficult to date given that the Parliamentary Committee’s report did not provide detail on how each of their recommendations would be implemented in practice.”
It is worth noting that the ‘Fairness in Franchising’ Report contained a total of 71 recommendations – the first of which was a recommendation for the establishment of an inter-agency Government Task Force (ie, Franchising Taskforce) to examine the feasibility and implementation of the Committee’s recommendations.
Last month, the subsequent Franchising Taskforce released an Issues Paper with a view to securing feedback from businesses involved in franchising – be it as a franchisor, a franchisee or other interested party – about the issues that should be considered by the Australian Government as it prepares to respond to the recommendations of the ‘Fairness in Franchising’ Report. The Issues Paper can be downloaded here.
Notably, the Taskforce has made provision for stakeholders to make confidential submissions to the Issues Paper rather than requiring – as is customary for most government consultations of this nature – that all submissions be made public. Specifically, the task force is seeking guidance on the following specific questions:
- How has franchising changed since the new Code was introduced in 2015 and how have those changes affected your business?
- What action could the franchising sector take to raise standards and conduct across the sector and what could government do to help?
- Are the problems identified by the Committee widespread or are they localised to particular areas of the franchising sector?
- Where the Report recommends changes to the Code, are the problems identified by the Committee significant enough that government action is needed or can it be dealt with another way (that is, without changing the Code)?
- What factors need to be addressed if a recommendation or other proposal is to be implemented effectively, so that the benefits outweigh potential risks and costs?
“We understand that the Taskforce is not seeking to revisit discussion of the problems that were aired during the Inquiry but rather is seeking guidance on the factors that should be considered by the Australian Government in implementing solutions to the problems identified in the original report of the Joint Parliamentary Committee,” Mr McKenzie said.
The Franchising Taskforce is seeking comments by 20 September 2019 and feedback can be provided using the online consultation form, by sending an email to franshising@employment.gov.au or by calling the Franchise Hotline on 1800 314 677 during business hours.
“This is a vitally important conversation for our industry given that more than around [two-thirds] of Australia’s service stations operate under commission agent or dealer arrangements that could be impacted by changes to the Oil Code Regulation,” Mr McKenzie said.
“The issues raised in the ‘Fairness in Franchising’ Report cannot be ignored but we, equally, we must ensure that any changes do not make it so difficult for large fuel sellers to work positively with their resellers, that they ultimately choose to bring all their retail operations in house – with subsequent loss of opportunities for small and medium businesses to participate in our industry.”
This is an edited version of a piece originally published by ACAPMA: acapmag.com.au/2019/08/franchising-taskforce-releases-issues-paper/
