Franchise industry accuses South Australian Government of sneaking legislation through the back door

The South Australian Government has introduced a new bill into Parliament to establish the post of a small business commissioner, but its backers have already been accused of attempting to use the bill as a cover for a new franchising code of conduct.

The accusations come as South Australia MP Tony Piccolo has been attempting to reform the state’s franchising laws for several years, despite protests from the Franchise Council of Australia which says national laws are sufficient.

Yesterday Piccolo announced that the small business commissioner legislation, introduced by Small Business Minister Tom Koutsantonis, had been brought before Parliament. He also said that the new bill, while structured differently, “will ultimately achieve the same objectives”.

“Once again South Australia will lead the country in providing support for our small business sector… the bill is a way of providing flexibility in achieving his objective of raising business behaviour standards in franchising.”

Piccolo also says the bill includes potential for civil monetary penalties for breaches of codes, and for civil expiation penalties.

But those in the franchising industry say this bill is just getting industry-specific legislation through the back door. A Franchising Council of Australia spokesperson today said this is “a non-transparent attempt”.

“We were supportive of introducing a small business commissioner in a role similar to that in Victoria, because it provides low cost dispute resolution.”

“But this South Australian model seems to just be franchising legislation through the back door, and it will see three different bureaucracies looking at the same things.”

Jason Gehrke, director at the Franchise Advisory Centre, says the legislation has been introduced by “stealth… via a previously unannounced amendment to its exposure draft”.

“The SA Small Business Commissioner Bill applies to franchising through its adoption and prescription of industry codes of conduct under the Australian Consumer Law (ACL), but in doing so fails to specifically name these codes.”

“This means that the Small Business Commissioner Bill creates powers to investigate and prosecute for breaches under any of the current industry codes.”

These include the Franchising Code of Conduct, the Oilcode, the Horticulture Code and the Unit Pricing Code, but Gehrke says the words “franchise” and “franchising” don’t even appear in the legislation.

“The SA Small Business Commissioner Bill not only gives the SA Government the power to subsume the Franchising Code of Conduct as a South Australian law, but also leaves the door open for the state to add its local amendments to the Code.”

But Piccolo says this is false.

“The minister has always indicated that he would be legislating in relation to franchising, so what’s being done here is that instead of having acts of Parliament which are cumbersome, what we’re doing now is just trying to include all parts of small business.”

“It’s not only consistent with what he’s been saying, it’s much fairer.”

Piccolo says he has received expressions of concern from other industries which need some assistance, and argues this is proof that a more consolidated approach is needed.

“We’ve seen farmers lobbying the Government for some time. This will give us the opportunity to look into that area.”

“I think some of the alarmist stuff that has come out in the past day is really over the top.”

Franchisee advocate and drafter of the original South Australian franchising laws, Frank Zumbo, says the new law is designed to apply to all codes, and is not solely directed at franchising.

“This act allows the minister to prescribe mandatory codes of conduct under the Fair Trading Act. If the code is then prescribed, that gives rise to two things – that the commissioner can investigate breaches, and that penalties can arise.”

“What is important to understand is that these amendments should be seen as a platform on which the minister can deal with conduct issues that arise. That could involve the franchising sector, but it could involve other sectors as well. This is not targeted at franchising.”

The introduction of the legislation comes during a tumultuous period for the South Australian Parliament. Premier Mike Rann has already signalled he will step down, but a successor has not yet been announced. The FCA has already said it hopes the political shuffle may help reject the franchising laws.

But Zumbo says the laws will come up for debate when Parliament next sits.

“We don’t want people to get overly excited here, because the mechanism for prescribing codes under the Fair Trading Act is nothing new, not revolutionary. It simply provides a platform for the minister of the day.”