Complaints about franchises rise as ACCC looks to crack down

Complaints to the consumer watchdog about franchises have increased as the Australian Competition and Consumer Commission increases its audits.

A report on small business activities published by the ACCC yesterday shows complaints about franchises rose from 271 complaints in January to June last year to 454 complaints in the last six months.

Most of the complaints were based on allegations of unconscionable or false and misleading conduct.

Dr Michael Schaper, the deputy chair of the ACCC, told SmartCompany the ACCC is keen to ensure more franchisees understand their rights under the Franchising Code of Conduct, and to know that they can contact the watchdog to lodge a complaint or seek further information.

“In the most recent report, a big area we have seen an increase in is unconscionable conduct, especially for franchises,” he says.

“We are putting more of an effort into letting businesses know about unconscionable conduct and when it will be a breach of the law; likewise in franchising, we are spending more time to educate both prospective and existing franchisees.”

Schaper says the watchdog has increased the number of audits it is doing of franchises, which could be one of the reasons for the rise in complaints.

“We have picked up the number of audits we are doing on franchises to see if they are compliant with the Franchising Code of Conduct, we are trying to be proactive with it,” he says.

“We are also doing random audits, which sends a message to the whole franchising community to make sure they know the ACCC is out there.”

While complaints about franchises rose, the report shows complaints about small business fell to 1,471 complaints from 1,803 complaints in the six months prior.

The complaints about small business mostly related to misleading conduct, false representations and consumer guarantees.

Schaper says the number of complaints about small business was very small in terms of the number of small businesses and in comparison to the number of complaints about big business.

“In terms of small business this is a very small number in relation to the size of the small business population in Australia, that doesn’t mean it is not significant, but over the last few years we have received an average of 2,000 complaints every six months compared to the two million small businesses operating in Australia,” he says.

“The numbers are also small compared to the number of complaints overall about business that we get into our hotline which deals with several tens of thousands of complaints.”

He says the appointment of more state small business commissioners has impacted on the number of complaints.

“Finally, we also now have more small business commissioners. So in the past some of those have been very good at identifying matters and saying they are ACCC matters and referring onto us and we are more than happy to deal with and we are working with them to see how to speed that process up,” he says.