Emerson’s franchising announcements fail small business

Posted by Josette Dunn on 10th March 2010

Recent announcements by Federal Small Business Minister, Craig Emerson, regarding unconscionable conduct and franchising laws fail small businesses and franchisees, according to Associate Professor Frank Zumbo, Competition and Consumer Law Expert at the University of New South Wales.

Mr Zumbo claims that the new announcements are just spin and offer no effective action on issues of fundamental concern to small businesses and franchisees, saying “The announcements are a huge disappointment and fail to address the underlying gaps and problems with the existing unconscionable conduct and franchising laws”.

The existing unconscionable conduct laws do not have a clear definition of what amounts to unconscionable conduct, which has resulted in the Courts giving a very narrow and onerous interpretation to the concept of unconscionable conduct.

In the face of this longstanding narrow judicial approach to unconscionable conduct the Federal Government is proposing to provide “interpretative principles” as “an aid” to interpreting the existing unconscionable conduct laws. Mr Zumbo believes these so-called interpretative principles will tell us nothing new as they will simply outline what the Courts have already told us.

Unfortunately for small businesses and franchisees, the proposed interpretative principles do not deal with the real problem, which is the continued lack of a statutory definition of what is unconscionable conduct. “Even the implementation of the proposed interpretative principles is vague and uncertain with no clear indication of how such interpretative principles will actually be put in place and what legal effect (if any) they will have.” Says Mr Zumbo.

“The most disappointing aspect of the proposed legislative principles is quite simply that they will not stop unscrupulous big businesses and rogue franchisers from continuing to engage in unethical business conduct to the detriment of small businesses and franchisees.”

Mr Zumbo believes what’s needed is pecuniary penalties for breaches of the Franchising Code of Conduct and laws requiring franchising participants to act in good faith as proposed by previous franchising inquiries.