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Monday, 27 June 1994
Page: 1993

Senator DEVEREUX —My question is directed to the Minister for Small Business, Customs and Construction, Senator Schacht. Recently it was reported in the Australian Financial Review that the franchise review would be expedited. I understand that originally it was intended to review the franchising code of practice early next year but that the minister has decided to bring the review forward by six months. Is the minister able to provide any further information on the purpose and nature of the review? Why has it been necessary to bring forward the timing of the review?

Senator SCHACHT —The franchising industry in Australia has a turnover per annum of between $30 billion and $40 billion. It is one of the major growth sectors in the Australian economy and more and more small businesses are coming into being through the franchising system. So it has a very important role in the economy. Back in 1991 the then Minister for Small Business and Customs, Mr Beddall, as a result of many complaints from the industry, and particularly franchisees, established a task force to look at whether there should be legislative action or a voluntary code for the relationship between franchisors and franchisees. As a result of that task force's recommendation, which was accepted by the government, a voluntary code of practice was established in which franchisors, franchisees, organisations, groups and individuals were asked to sign up and work with a common code of practice. It has an independent chair and representatives from various parts of the industry.

  The code has been established and operating for about 18 months, but there have still been some complaints from some sections of the industry, particularly from some franchisees, that not all the major franchisors in Australia have signed the code. In particular, there is a lot of disappointment in one part of the industry that the federal Chamber of Automotive Industries has not signed the voluntary code in view of a celebrated case last year when a car dealer had a dispute with a major car manufacturer in Australia. The cost of that court case ran into tens of millions of dollars with no satisfactory outcome.

  This indicates that there is dissatisfaction. Though the operation of the code was to be reviewed by the end of this year, I decided that it would be in the interests of the industry if the review were brought forward. The review is about to be established. I hope to be able to make an announcement in the near future of those people participating in carrying out the inquiry and the review of the code.

  The general terms of reference for the review will include the effectiveness of the franchising code of practice, the effectiveness of the Franchising Code Administration Council and areas of dispute that are not directly covered by the code and methods used to address them. The inquiry will be asked to report to the government on any deficiencies in the code and its administration, recommendations to address any such deficiencies, implementation strategies and the implications of adopting each recommendation. The fundamental issue that the review will deal with is whether there should be a legislative outcome for operation of franchising in Australia and whether we should move from a voluntary code to a legislative outcome.

  So far the government has resisted such requests from many franchisees, but this is an area where we believe it is timely to have such a review and have advice given to the government. Only after very careful consideration will the government step towards a legislative outcome. One thing we do not want, though, is six state governments with six different legislative codes of practice for the franchising industry because that would make it a costly and duplicative system, which would be to the disadvantage of this very important part of the private sector in Australia.