ACCC, ASIC put to work on 'exploitative' franchising sector
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ACCC, ASIC put to work on 'exploitative' franchising sector

The consumer watchdog should be given new powers to police the franchising industry, according to a parliamentary inquiry which has found the current regulatory regime failed to stop "systemic poor conduct" and "exploitative behaviour".

Additional powers and fresh approaches for the regulators formed several of the key recommendations from the probe including a call for the Australian Competition and Consumer Commission to be given powers to stop franchisors from selling or opening unprofitable stores to generate up-front sign-on fees.

Domino's Pizza was one of the companies the inquiry looked at.

Domino's Pizza was one of the companies the inquiry looked at. Credit:AAP

The Australian Securities and Investments Commission (ASIC) should also monitor this practice - called "churning and burning" - at listed companies with an eye to their continuous disclosure obligations, the report said.

ASIC should also take a "much more proactive role" in monitoring corporate governance at franchisors and to take enforcement action when necessary.

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The committee's other proposals to beef up the ACCC's oversight of the industry included giving it power to police contracts between franchisors and store owners to stamp out unfair terms, and for it to examine current agreements relating to the sale of products from head office to franchisors.

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The report also suggests the ACCC could maintain a public register that informs prospective franchise owners about the operations of each franchisor and a website similar to ASIC's MoneySmart that outlines the risks of becoming a franchisee.

The ACCC's own proposal to allow franchisees to collectively bargain with their head office should be adopted, the report says.

The report adopted all the ACCC's recommendations from its submission to the inquiry.

ACCC chairman Rod Sims said the watchdog would be "delighted" in principle to do more work in the sector, as long as it was given the additional resources required.

"We take more franchising cases as a percentage of [total] complaints than just about any other area," Mr Sims said.

"We have some extremely exciting investigations on franchising on the way."

There are currently 70 investigators at the ACCC looking at franchising complaints, including Retail Food Group, which was singled out in the report for its "particularly unjust" business model.

An ASIC spokeswoman said it would examine the report's recommendations.

Reporter for The Age

Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.

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