As the WA Parliament heads down the track towards state legislation for the franchising sector, the national body representing the $128bn industry is sounding alarm bells. The Franchise Council of Australia’s executive director, Steve Wright, said the franchising community was up in arms about the private members’ bill raised by Liberal backbencher Peter Abetz, and supported by WA Labor.

The proposed bill aims to pick up an area highlighted by franchising inquiries yet not taken up by the Federal Government: a definition of good faith. It also aims to introduce fines for the contravention of the Act.

Abetz told Franchising the changes were easily achieved at a state level and would not impact on the uniformity of the national legislation. The law would affect only franchisees or franchisors conducting business in WA, he said.

As reported by Hansard, Abetz told the WA Parliament at the bill’s first reading “I want to make it clear that this bill is not about changing the structure of franchising agreements. It is about the conduct expected of those who negotiate and enter into such agreements.”

According to Abetz, acting in good faith will be defined as acting fairly, honestly, reasonably and cooperatively. “A clear definition in everyday terms of what the obligation “to act in good faith” means, which this bill provides, will be far more helpful for franchisors and franchisees than to try to understand what the common law obligation to act in good faith might mean from time to time,” he told Parliament [Hansard].

Abetz is keen to stress the bill will not impose additional costs. He told Franchising “It has zero compliance costs. The only ones who will have increased costs are the rogue franchisors.”

The bill’s provision for redress orders includes granting the Court power to make a renewal order if there has been an absence of good faith in relation to franchise renewals.

However the FCA’s stance is that the proposed Franchising Bill 2010 will result in an automatic right of contract renewal. The industry body is also concerned about the opportunities for personal injury compensation in issues over franchising contracts, fines of up to $100,000 to be levied by a single commissioner, and the impact of the regulations on a nationally-legislated sector.

“Both Labor and Liberal Governments rejected calls for the introduction of this type of legislation in 2008 and 2009 and all State Governments nationwide have agreed, through the COAG process, that the Federal Government should continue to regulate the sector,” explained Wright.

The bill will fail to help franchisees, he said. He predicts that it will be harder for franchisees to get funding as financiers view the bill as a destabilising and potentially damaging development.

“The outcome of that is that franchisees will find it more difficult to find a buyer when they seek to sell their business, and when they do, the sale price is likely to be lower.”

Earlier this year South Australian MP Tony Piccolo confirmed he will go ahead with his own private members’ bill aimed to tighten the State’s laws on franchising in favour of franchisees.