State small business commissioners a step forward for SMEs: Zumbo

Recent moves by the South Australian, Western Australian and New South Wales Governments to build on the good work of the Victorian Small Business Commissioner are set to usher in a new era of confidence among Australian small businesses.

The Victorian Small Business Commissioner has gone from strength to strength since its establishment in 2003. During that time the Victorian Small Business Commissioner has played a vital role in promoting better decision-making by small businesses, as well as providing an important dispute resolution role.

The Victorian Commissioner’s responsibilities have grown and its success in resolving disputes involving small businesses has consistently been impressive. Its role as an honest broker or circuit breaker in disputes has been well received and has led to it being held in very high regard.

The ongoing success of the Victorian Small Business Commissioner has no doubt attracted considerable attention as the preferred model for State Governments seeking to implement their own Small Business Commissioner.

South Australia, Western Australia and New South Wales have all announced the establishment of a Small Business Commissioner in their respective States.

While both South Australian and Western Australian Governments have introduced legislation creating a Small Business Commissioner in their States, New South Wales has at this stage only appointed a Small Business Commissioner through an administrative process rather than a legislative process. Nevertheless, it would be expected that New South Wales will join in developing an appropriate legislative framework consistent with that found to be found in Victoria, South Australia and Western Australia.

Having a Small Business Commissioner at a State level offers substantial advantages. To begin with, Small Business Commissioners are very well placed to assist in the resolution of individual business disputes. In doing so, this fills a clear gap as the ACCC is generally not able to assist in the resolution of individual business disputes. In short, the ACCC is not equipped to undertake mediation or other alternative dispute resolution roles.

Assisting small businesses, franchisees, retail tenants and farmers to resolve business disputes with larger parties is central to the work of a State-based Small Business Commissioner. Such assistance helps keep matters out of the courts and helps maintain the ongoing relationship between the larger party, and franchisees, retail tenants and farmers.

This is certainly a key role played by the Victorian, South Australian and Western Australian Small Business Commissioners. Importantly, it is expected that these Commissioners will have a strong working relationship with the ACCC through a memorandum of understanding between the respective agencies. Such a memorandum of understanding will prevent any duplication of work between the agencies and ensure that a national approach to common issues dealt with by the agencies.

Each of the State-based Small Business Commissioners will have some role in investigating complaints from small businesses. Such complaints are generally expected to arise in the franchising, retail leasing, newsagency and farming sectors. Interestingly, these were the key areas identified in the consultation undertaken earlier in the year by the South Australian Government in relation to the establishment of that State’s Small Business Commissioner.

The ability to investigate complaints is not new as the Victorian Small Business Commissioner has always had the ability under its legislation to undertake such investigations. This role has also been included in the recently introduced legislation establishing the South Australian Small Business Commissioner.

With the South Australian Small Business Commissioner reforms having recently attracted some attention it is important to understand that the SA Small Business Commissioner is modelled on the very successful Victorian model for seeking to resolve small business-related disputes and providing a mechanism for investigating complaints in appropriate circumstances.

The South Australian Small Business Commissioner will not, for example, have an express function as found in the Victorian Small Business Commissioner legislation of helping State Government agencies to develop small business service charters, but the SA Commissioner will have the ability where requested to do so to assist small business in dealings with a SA State or local Government body.

In addition, the South Australian Small Business Commissioner will have the ability to formally require a person to provide information that is necessary for the performance of the Commissioner’s functions. One would expect that all parties would voluntarily cooperate with the new SA Commissioner and such a power to require information would be rarely, if ever, used.

Naturally, there must be a direct connection between the request for information and the performance of a function by the Commissioner and obviously the use of this power can be challenged in court. There are also clear exemptions for information that may tend to incriminate the person or is subject to legal professional privilege.

The information required to be provided to the Commissioner must be kept strictly confidential and there are severe penalties in this area.

Significantly, the South Australian Small Business Commissioner will be given full responsibility for administering the South Australian retail leasing legislation. This will allow the Commissioner to deal with retail leasing issues and to assist in resolving disputes between landlords and tenants.

Finally, the South Australian reforms include an express power for the SA Small Business Minister to prescribe mandatory codes of conduct under the South Australian Fair Trading Act in relation to small business matters. Where the Minister chooses to prescribe a mandatory code of conduct, such a code would be subject to Parliamentary scrutiny and could be disallowed. This ongoing Parliamentary oversight is an integral part of any regulatory framework.

The reforms also allow the SA Small Business Commissioner to go to court to seek civil monetary penalties for breaches of mandatory codes prescribed under the SA Fair Trading Act. This is consistent with the provision of penalties for breaches of codes of conduct prescribed under State Fair Trading Acts.

Mandatory industry codes have long been accepted as an efficient and cost effective way to deal with small business issues and have traditionally been well received by small business organisations. In this regard, the South Australian small business reforms offer small businesses immediate and meaningful benefits.

Associate Professor Frank Zumbo is a Franchising Specialist at the University of New South Wales and is currently advising the South Australian Government regarding small business and franchising reforms in that State.