Franchise Council says South Australia could become a “no-go zone” after MP introduces franchising laws with ‘good faith’ provision

Franchisee rights campaigner and Labor MP Tony Piccolo has introduced laws into South Australian Parliament that would require franchisors in that state to act in ‘good faith’ towards franchisees, just weeks after Federal Small Business Minister Craig Emerson rejected a proposal to insert a good faith clause into the Franchising Code.

But Franchise Council chief executive Steve Wright has warned that franchisors could abandon South Australia if they are forced to operate under an onerous state-based law.

Piccolo’s private members bill, introduced into Parliament last night, is not guaranteed to become law. The South Australian Parliament sat for the last time last night before state elections, to be held in March next year.

However, Piccolo is determined to keep the issue of franchising – and more particularly the question of ‘good faith’ – on the agenda.

Piccolo told Parliament that the requirement to act in good faith “will, in my opinion, foster a more ethical approach to business in the franchise sector”.

“The Franchise Council of Australia, despite its public statements to the contrary, continues to oppose any meaningful reform of the code, which reflects its interest in protecting the big end of town.”

“The FCA and other critics acknowledge that the courts have already found that an ‘implied duty to deal in good faith’ already exists.”

In addition to the ‘good faith’ provision, the bill also creates the position of Commissioner of Franchising, who would have the power to mediate, conciliate and to arbitrate, collect and publish information about the sector.

Information regarding franchise disputes covers up the market failure that is occurring in the sector.”

Finally, the Bill also provides for pecuniary penalties for breaches of the new South Australian code.

However, the Franchise Council has criticised Piccolo’s bill, claiming the new laws could ruin franchising in the state.

“If Tony is fishing for votes, he might find himself in a very depleted pond because there is no way that anybody with an understanding of business could support it,” Wright says.

“It is a dead weight on franchising and could lead to South Australia becoming a no-go zone for franchise businesses from outside the state and put a serious dampener on future investment from the state’s highly successful home grown franchise systems.”

“The absolute fundamental problem is that if the Parliament were to adopt it, it would be like SA going back to the old narrow gauge rail system.”