Meet the Oilcode – A new industry mandatory code
by
DibbsBarker
Hot on the heels of the Government’s response to the review of the disclosure provisions of the Franchising Code of Conduct came a new mandatory industry code for the petroleum retail sector. The Trade Practices (Industry Codes - Oilcode) Regulations 2006 (“the Oilcode”), which came into force on 1 March 2007, has been prescribed as a mandatory industry code, pursuant to s.51AE of the Trade Practices Act 1974 (“the Act”). This means that, pursuant to s.51AD of the Act, a breach of the Oilcode is also a breach of the Act. The Oilcode therefore joins the Trade Practices (Industry Codes – Franchising) Regulations 1998, (“the Franchising Code”) as the two mandatory codes prescribed by s.51AE of the Act.1
Background to the introduction of the Oilcode
This industry was previously regulated by the Petroleum Retail Marketing Sites Act 1980, Petroleum Retail Marketing Franchise Act 1980 and the Franchising Code. However, reform was required after changes in the industry, such as multi-site franchising and the inclusion of other retail outlets, such as franchised fast food stores, on the sites. Therefore, a package of reform was introduced, which included the repeal of the Petroleum Retail Marketing Sites Act 1980, the Petroleum Retail Marketing Franchise Act 1980 and the implementation of the Oilcode as a mandatory code.
Purpose of the Oilcode
The prescribed purpose of the Oilcode is to regulate the conduct of suppliers, distributors and retailers in the petroleum marketing industry. To achieve this purpose, the Oilcode sets out a regime to:
1. Establish standard contractual terms and conditions for fuel re-selling agreements and wholesale fuel agreements for both franchise and commission agent arrangements;
2. Improve transparency in wholesale pricing and access to declared petroleum products at a published terminal gate price (a terminal gate price is a base price for fuel sold directly from a terminal);
3. Assist industry participants to make informed decisions when entering, renewing or transferring a fuel re-selling agreement through the requirement that the supplier provide a disclosure document;
4. Improve the operating environment for all industry participants by providing access to a cost-effective and timely dispute resolution scheme as an alternative to litigation.
Application of the Oilcode The Oilcode now applies to arrangements that were previously covered by the Franchising Code, such as:
(a) Fuel wholesale suppliers;
(b) Sales of declared petroleum products by a wholesale supplier to a customer;
(c) Fuel re-selling agreements, including existing agreements, except those where:
(i) The supplier reasonably believes that the amount of motor fuel supplied will be less than an average of 30,000 litres for each month for the term of the agreement; and
(ii) At least three days before entering the agreement, the supplier provides the prospective retailer with a written statement setting out the grounds for this belief;
(d) Any other retail activities included in the fuel re-selling agreement, or undertaken on the same site by the retailer for the supplier.
The Oilcode is therefore likely to catch commission agent arrangements which are not currently covered by the Franchising Code. However, it should be noted, the Franchising Code will still apply to other franchised stores that may be on the site, such as fast food franchises.
Key Points of the Oilcode
Some of the key points of the Oilcode are the establishment of:
1. Obligations of wholesale suppliers in relation to terminal gate prices;
2. An obligation for suppliers to create and maintain a disclosure document;
3. Obligations for suppliers to provide annual financial statements for marketing and other cooperative funds;
4. Sections governing the termination of a fuel-reselling agreement2007
5. A dispute resolution scheme.
Administration of the Oilcode
The Code is administered by the ACCC. Judging by the ACCC’s enforcement of the Franchising Code, it appears certain that it will also vigorously enforce the Oilcode.
Similarities with the Franchising Code of Conduct
The Oilcode and the Franchising Code are similar in a number of ways, in particular:
1. The disclosure documents required by the Oilcode and the process for the provision of these documents are very similar to the Franchising Code. However, the Oilcode requires a disclosure document to be given by an outgoing franchisee to a purchaser (similar to the former Annexure 2 under the Franchising Code);
2. The Oilcode contains similar provisions in relation to continuing disclosure, marketing funds, transfer of agreements and termination of agreements;
3. The Oilcode contains a dispute resolution procedure that is structurally similar to the dispute procedure contained in the Franchising Code.
Interestingly, some of the amendments proposed in the review of the disclosure provisions of the Franchising Code, and accepted in the Government’s response, have not been included in the Oilcode. These include: the requirement to provide more information about past franchisees and the removal of the executive officer class of persons of which a summary of business experience must be provided. Other amendments have been included, such as the disclosure of materially relevant facts within 14 days after the franchisor becomes aware of the facts.
Therefore companies that are familiar with their obligations under the Franchising Code should be able to quickly come to terms with the new requirements set out in the Oilcode. However, companies that were not previously covered by the Franchising Code will need to quickly come up to speed with their new obligations.
A copy of the Oilcode can be obtained from: http://www.comlaw.gov.au/comlaw/Legislation/LegislativeInstru ment1.nsf/0/362C19BB44F453C8CA2572260016C00C?Open Document .
Josh Henderson | Lawyer | Brisbane 04.06.2007
FCA Member
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