FCA submission on consumer credit changes

The Franchise Council of Australia moved swiftly to ensure the Federal Government was aware of the industry position in relation to possible unintended consequences of the Federal Government's consultation paper ‘An Australian Consumer Law: Fair markets - Confident consumers’ consultation paper (Paper).

The FCA agreed that the implementation of a national system would, ‘…enhance consumer protection, reduce regulatory complexity for businesses and encourage the development of a seamless national economy’. However, the Franchise Council of Australia expressed concerns as to the scope of the proposed reform and the encroachment of the proposed laws into business-to-business transactions. Specifically, the Franchise Council of Australia observed that the:

• definition of “consumer” should not be extended in order to capture business-to-business transactions; and
• prohibition on the use of standard form contracts should not apply to transactions between franchisors and franchisees.

In a submission drafted by Stephen Giles and Jessica Rowe for the FCA, the FCA made the point that the terms of a franchise agreement are by necessity standard form, as they are designed to ensure consistency throughout a franchise network. An amendment to extend the definition of “consumer” to capture business-to-business transactions will therefore potentially capture many franchise agreements. If this occurs, the franchise sector will be thrown into turmoil, placing at risk the substantial economic contribution that the sector makes to the Australian economy.

The FCA asked the Government to confirm either that the definition of “consumer” will not be extended to capture business-to-business transactions, or there would be a specific exemption from the application of the legislation for a franchise agreement as defined in the Franchising Code of Conduct.

By Stephen Giles - Deacons Lawyers

Deacons Lawyers offer legal advisory services for franchisees and franchisors