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Wednesday, 27 October 2010
Page: 928


Senator XENOPHON (3:49 PM) —My question is to the Minister for Small Business, Senator Sherry. South Australia’s Minister for Small Business, the Hon. Tom Koutsantonis, has recently announced that he will introduce a bill into state parliament imposing financial penalties for breaches of the Franchising Code of Conduct and a statutory duty of good faith in franchising relationships. These reforms are in line with the recommendations of three parliamentary inquiries into franchising by the Western Australian and South Australian parliaments and, most recently, the federal Parliamentary Joint Committee on Corporations and Financial Services in 2008. Therefore, will the minister indicate: when will the federal government adopt these two recommendations on a national level, and does he welcome the South Australian moves?


Senator SHERRY (Minister for Small Business, Minister Assisting on Deregulation and Minister Assisting the Minister for Tourism) —I thank Senator Xenophon for the question, and I thank him for the notification to my office about the question and the issues raised. Firstly, yes, I am aware of the announcement, via a press release by the South Australian minister. I have sought detailed copies of the explanation of the amendments. To my knowledge I have not yet received the detail of the amendments, although I am aware of the broad issues they deal with via the press release.

In responding to your question I think it is important to understand that a set of reforms has only just been completed in respect of the franchising code. It is a mandatory industry code established under the Trade Practices Act 1974. It regulates the conduct of participants in franchising towards each other. It requires franchisors to disclose facts to franchisees and to follow set procedures in their dealings with franchisees. They will have more protection following the completion of a recent set of reforms. That transparency and greater certainty results from recent amendments to the Franchising Code of Conduct which took effect from 1 July 2010. So there are reforms that have only just taken effect from 1 July 2010.

Also, I think it is important to note that there will be new enforcement powers for the Australian Competition and Consumer Commission, including audit powers which will commence on 1 January 2011. So I think it is important to understand that there has only just been national legislation. resulting from very extensive consultation, that has only just passed the parliament and new powers to commence— (Time expired)


Senator XENOPHON —Mr President, I ask a supplementary question. Does the minister concede that, notwithstanding the changes he set out, the Franchising Code of Conduct is not truly mandatory and is nothing more than empty words if there are no financial penalties for breaches of the code?


Senator SHERRY (Minister for Small Business, Minister Assisting on Deregulation and Minister Assisting the Minister for Tourism) —Firstly, I do not accept Senator Xenophon’s description of the recent package of reforms as ‘empty words’. There was a broad level of support for the recent package of reforms. In one area the reforms only commenced a few months ago, on 1 July. In another area, the additional powers for the ACCC, the reforms will commence next year. The position of the government with respect to other measures was considered in that set of national negotiations and discussions, which has already taken place. As part of that outcome, we have seen legislation and new powers. Part of that outcome, as indicated by my predecessor Dr Emerson, was a three-year bedding-down period to assess whether there were any further requirements on top of— (Time expired)


Senator XENOPHON —Mr President, I ask a further supplementary question. The three parliamentary inquiries revealed real issues of noncompliance to the Franchising Code of Conduct across Australia. What is the federal government doing to ensure that all franchisors are complying with the code? Does the minister acknowledge that having financial penalties would be an effective mechanism for ensuring compliance?


Senator SHERRY (Minister for Small Business, Minister Assisting on Deregulation and Minister Assisting the Minister for Tourism) —My central point in responding to your questions is that the package of legislation—which considered all of the issues raised by the three recommendations that you have referred to—has only recently passed through the federal parliament, nationally consistent. My predecessor was right, and I agree on behalf of the government that the agreed period of three years to assess the impact of the new legislation is what is necessary to determine with certainty that those new powers are appropriate in the circumstances. The final point I want to stress is that it is important to have a national approach, as we currently have under the ACCC— (Time expired)