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Passing of bill may deter franchisors from South Australia

by Simon Lord, last updated on 21st October 2011

21 October 2011 - The Labor Government of South Australia has pushed through its Small Business Commissioner (SBC) Bill, including the provisions which will allow it to adopt the Franchising Code of Conduct into SA law.

The new law gives the SA Business Minister the power to prescribe industry codes of conduct - such as the existing Franchising Code of Conduct under the Competition and Consumer Act – and then add changes that would only apply in South Australia. It has been strongly opposed by the franchise sector in Australia, which fears that state-by-state legislation will increase the complexity and costs of franchising across the country. Western Australia has also been considering state-specific legislation.

'The flow-on impact to the franchise sector is that increased compliance and risk management costs will increase business costs and reduce South Australia’s desirability as a destination in which to grow franchise networks,' wrote Jason Gehrke of the Australian Franchise Advisory Centre in a recent article.

But an important amendment to the South Australia Bill means that stakeholders must be consulted before any proposed changes come into effect.  In a letter to members of the Franchise Council of Australia, Steve Wright, the Executive Director of the FCA, wrote, 'The good news is that after intense debate, the Government agreed to an amendment which means it can not change the rules of franchising in SA without carrying out a 60-day mandatory consultation period with relevant stakeholders (which would include the FCA). Failure to do so can trigger a "disallowance motion" on the proposed changes.'

'This important amendment means the franchising community can continue to operate on the same rules in SA as it currently does nationwide. IIf the Government, in future, moves to change the rules, the FCA, and other relevant stakeholders, must be properly consulted. On failure to do so, the proposed changes can be stopped.'

'The new chairman of the ACCC, Rod Sims, told the FCA national convention that the ACCC had new powers of investigation and it planned to use them. However he told Federal Parliament this week that he did not agree with the concept of state-based franchising regulation and that the SA Government had misused his comments to imply he did support their approach.'

'With the benefit of information provided by FCA, the Queensland and SA Law Societies and the Law Council of Australia, non-Labor Parties and Independents raised four amendments to the SA SBC Bill. After a long debate over several days, the Government successfully split the vote of minor parties and Independents to defeat three of the amendments. The amendment which was passed was the ‘disallowance’ amendment.'

'If the SA Government takes any action to change franchising rules in SA, the FCA will be seeking to activate the disallowance amendment passed by the Parliament yesterday evening,' Mr Wright promised.

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