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Competition and Consumer Law Update - November 2014

This update covers:
  1. Competition and Consumer Act amendments - new fine and penalty regime for contravention of industry codes
  2. New Franchising Code of Conduct – 1 January 2015
1. Competition and Consumer Amendment (Industry Code Penalties) Act 2014

Recent amendments to the Competition and Consumer Act (“CCA Amendments”) give the regulator, the Australian Competition and Consumer Commission (“ACCC”), powers to apply penalties and issue infringement notices to businesses that have breached industry codes of conduct which contain civil penalty provisions.1  The CCA Amendments will come into effect on 1 January 2015. 

Section 51AE of the Competition and Consumer Act allows regulations to be made under the Act prescribing mandatory industry codes of conduct. A breach of a prescribed mandatory code of conduct is a contravention of the Competition and Consumer Act,2 which can result in the ACCC or an affected party taking legal proceedings claiming injunctive relief and damages for loss suffered.

At present there are five mandatory industry codes of conduct which are prescribed and regulated under the Competition and Consumer Act, covering a wide range of industries including franchising,horticulture,4 bulk wheat exporting,5 petroleum marketing6 and grocery retailing.7  These mandatory industry codes do not currently contain penalty provisions. However the CCA Amendments allow mandatory industry codes to prescribe pecuniary penalties not exceeding 300 penalty units for contravention of those provisions which are specified as “civil penalty provisions”8 in the industry codes. At present, one penalty unit equates to $170.9  Not every provision of an industry code will be prescribed as a “civil penalty provision” which is the subject of a pecuniary penalty, if contravened.  

Where a “civil penalty provision” of an industry code is breached, the ACCC can take court proceedings under section 76 of the Competition and Consumer Act against companies and individuals for the alleged contravention and seek payment of the pecuniary penalty. The CCA Amendments also allow the ACCC to issue infringement notices to companies and individuals (for/up to a maximum of 50 penalty units or $8,500 for companies and 10 penalty units or $1,700 for individuals)10 where the ACCC has reasonable grounds to believe that a person has contravened a “civil penalty provision” of an industry code.11

The ACCC must issue the infringement notice within 12 months of the date that the alleged contravention of the “civil penalty provision” of the industry code occurred, otherwise the infringement notice has no effect. Each infringement notice can only relate to one alleged contravention of a “civil penalty provision” of an industry code.  Although the ACCC cannot issue multiple infringement notices to a person for the same alleged contravention of the “civil penalty provision” of the industry code,12 companies or individuals may be issued with multiple infringement notices where numerous breaches have occurred. 

Companies or individuals issued with infringement notices will be able to dispute the notice by making a written representation to the ACCC seeking a withdrawal of the notice13 within the infringement notice compliance period of 28 days.14

2. New Franchising Code of Conduct – 1 January 2015

The Australian franchising industry has been regulated under a mandatory industry code, the Franchising Code of Conduct, since 1 July 1998. During this time the code has been amended twice, with amendments commencing on 1 March 200815 and 1 July 201016 (“the Old Franchising Code”).
The regulation prescribing the new franchising code of conduct was made by the Governor General on 30 October 2014 and will commence on 1 January 201517 (“the New Franchising Code”). The New Franchising Code incorporates some of the recommendations made by Mr Alan Wein, who was commissioned by the Government to undertake a review of the Old Franchising Code and tabled his report titled “Review of the Franchising Code of Conduct” on 30 April 2013. 

The New Franchising Code imposes an obligation on the parties to a franchise agreement to act in good faith, expands franchisors’ obligations in respect of disclosure, gives the franchisee additional rights where the franchisor refuses to renew a franchise agreement without good cause, and provides   pecuniary penalties for non-compliance with specified provisions of the Code.

Stephens Lawyers & Consultants have a high level of expertise in trade practices/competition and consumer law and franchising, including compliance with the Competition and Consumer Act, and ACCC investigations and audits.

Our lawyers represent leading companies in both litigious and commercial matters. Please contact us for assistance in complying with competition and consumer laws.

Authored by Katarina Klaric
[Matthew Martin, Lawyer – research assistance is acknowledged] 

Footnotes

1.The Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 was passed in the Senate on 4 September 2014  and received Royal Assent on 24 September 2014, and is cited as Competition and Consumer Amendment (Industry Code Penalties) Act 2014 (Cth).
2. Competition and Consumer Act 2010 (Cth) s 51AD (renumbered as s 51ACB in the Competition and Consumer Amendment (Industry Code Penalties) Act 2014 (Cth) sch 1 s 2.
3. Trade Practices (Industry Codes — Franchising) Regulations 1998 (Cth).
4. Trade Practices (Horticulture Code of Conduct) Regulations 2006 (Cth).
5. Competition and Consumer (Industry Code—Port Terminal Access (Bulk Wheat)) Regulation 2014 (Cth).
6. Competition and Consumer (Industry Codes-Oilcode) Regulation 2006 (Cth).
7. Trade Practices (Industry Codes - Unit Pricing) Regulations 2009 (Cth).
8. Competition and Consumer Amendment (Industry Code Penalties) Act sch 1 s 5 [Competition and Consumer Act s 51AE(2)].
9. Crimes Act 1914 (Cth) s 4AA.
10. Competition and Consumer Amendment (Industry Code Penalties) Act sch 1 s 3 [Competition and Consumer Act s 51ACF].
11. Competition and Consumer Amendment (Industry Code Penalties) Act sch 1 s 3 [Competition and Consumer Act s 51ACD].
12. Ibid.
13. Competition and Consumer Amendment (Industry Code Penalties) Act sch 1 s 3 [Competition and Consumer Act s 51ACJ].
14. Competition and Consumer Amendment (Industry Code Penalties) Act sch 1 s 3 [Competition and Consumer Act s 51ACI]. The ACCC can only grant one extension of time for compliance with an infringement notice, which cannot be longer than 28 days.
15. Trade Practices (Industry Codes — Franchising) Regulations 1998 (Cth), taking into account amendments up to SLI 2007 No. 240.
16. Trade Practices (Industry Codes — Franchising) Regulations 1998 (Cth), taking into account amendments up to SLI 2010 No. 125.
17. Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth).

For further information contact: 

Katarina Klaric
Stephens Lawyers & Consultants 
Suite 205, 546 Collins Street 
Melbourne VIC 3000 
Phone: (03) 8636 9100 
Fax: (03) 8636 9199 
Email: stephens@stephens.com.au 
Website: www.stephens.com.au 
All Correspondence to: 
PO Box 16010 
Collins Street West 
Melbourne VIC 8007 

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