ACCC endorses dispute resolution service but franchise groups wary

The Federal Government’s push for a dispute resolution system has won the support of the competition regulator but has only received lukewarm response from industry groups.

The Australian Competition and Consumer Commission said it supports the idea of a low-cost dispute resolution service, which is one of a number of measures proposed by Small Business Minister Nick Sherry.

Other proposals include a national small business hotline, a small business tribunal and a small business advocate.

Sherry said options under consideration are not franchise specific but the ACCC has indicated that sector will benefit most.

ACCC outgoing chairman Graeme Samuel told The Australian Financial Review the proposed measures could help the commission to deal with the 500-plus complaints received from franchisees every year.

Samuel said considerable resources could be devoted to “the process of sorting out whether a matter of contractual dispute is appropriate for mediation or whether a breach of law has taken place”.

“In terms of small business it’s probably the most important area we can focus on,” he said.

According to the National Franchise Coalition the franchise sector is in desperate need of a better dispute resolution mechanism, a stance that casts doubts on the current arrangement.

The National Franchise Coalition was established in May by a group of franchisees who felt they weren’t being supported by the Franchise Council of Australia, which is the nation’s peak franchise body.

NFC representative Isaac Chalik, a former Sumo Salad franchisee, says the Franchising Code of Conduct – a mandatory code that can be enforced by law – leaves franchisees with few options other than pursuing costly legal action.

Under the code the ACCC has the power to refer any disputes to mediation.

“The ACCC has admitted to me that it simply doesn’t have the resources to follow up all the complaints. The only other way is formal applications through the Supreme Court or the Federal Court,” Chalik says.

According to Chalik there should be a low-cost dispute resolution service for “average” franchisees to get assistance without having to consult lawyers or go to court.

“An ombudsman-type organisation that can specialise in this and investigate things on their behalf is the best solution,” he says.

Steve Wright, executive director of the Franchise Council of Australia, says there is a lot of merit in the government’s initiatives on dispute resolution.

“I think it looks like they’re moving towards something which is complementary towards existing mechanisms,” Wright says.

“What we don’t want to see is unnecessary duplication or the creation of some kind of quasi-judicial body.”