Thomsons Lawyers on franchising and the SA Small Business Commissioner Act 2011

The Small Business Commissioner Act 2011 was passed in the South Australian Parliament in October 2011. Even though the Act has yet to come into operation, Thomsons Lawyers explains how it would affect franchisors, franchisees and individuals engaged in franchising activities in South Australia.

Currently, the conduct of franchisors is regulated at a national level by the Federal Government and the ACCC (Australian Competition & Consumer Commission) under the Franchising Code and the Competition and Consumer Act 2010.

According to the SBC Act 2011, the franchising Code will be prescribed under the new Act, which involves a regime of franchising regulations that is only based on franchising activities in South Australia.  This State-based legislation will clearly regulate the conduct of franchisors and franchisees in their dealings within South Australia.

However, the extra-territorial provisions of the Fair Trading Act may also include regulating dealings between interstate franchisors and their franchisees in South Australia, as well as dealings between franchisors located in South Australia and their franchisees in other locations.

This would likely create a deal of uncertainty for franchisors and franchisees, which would give a rise to difficult legal and practical issues of cross border conflict between State and Federal laws and Code obligations.

The Act could also create a major and undesirable area of conflict, which is the power of the Commissioner to investigate and resolve disputes in any manner considered appropriate, as well as the Franchising Code processes for franchise dispute mediation.

According to Thomsons Lawyers, franchisors and franchisees should continue to ensure compliance with the national Franchising Code of Conduct. The Australian commercial law firm predicts that the SA Minister will move quickly to prescribe the Franchising Code of Conduct as a state Code of Conduct.

When this occurs, there would be an early test of the Act’s objective of ensuring that business dealings are conducted fairly by the Commissioner, which would be pressed by the franchisees to aggressively enforce the Franchising Code, prosecute breaches and test the limits of his enforcement powers in South Australia.

However, until the Courts clarify the position, Franchisors are advised to ensure they understand their rights and obligations under the Act, especially in relationships to any request or investigations by the Commissioner, and to take careful advice before responding.

For more franchise advice from Thomsons Lawyers, visit their website or give them an e-mail.