Brendan O’Connor: Why Labor wants $10 million penalties for dodgy franchisors

The dream of running a small business, often as franchise operation, is an understandable attraction for many Australian families. Too often, however, the reality has seen decent people struggling with failing businesses and facing financial ruin, because they were set up to fail.

For seven years now, the Morrison government boasts that it looks after small business, yet for far too long it has stood by while small business owners and employees have been taken advantage of. No one can forget the unscrupulous behaviour of franchisors like 7-Eleven, Michel’s Patisserie or Domino’s to name a few.

Horrific examples stemming from the structural imbalance of franchisors and franchisees, have seen unfair contracts, a lack of information or misinformation from franchisors, and exploitation.

The bipartisan Parliamentary Committee on Corporations and Financial Services’ ‘Fairness in Franchising’ report, released in early 2019, outlined in detail that the status quo for franchisees is unacceptable, and made 71 recommendations to improve the operation and effectiveness of the franchising sector.

It has taken the Morrison government over a year to fully respond to the report, having just recently set out its position in August 2020.

From all accounts from a number of stakeholders, the response is underwhelming.

That is why, working with my colleague, Senator Deborah O’Neill, federal Labor will today introduce a Private Senator’s Bill that will restore fairness to the franchising sector.

The Bill will seek to amend the Australian Small Business and Family Enterprise legislation and Franchising Code to empower the Australian Small Business and Family Enterprise Ombudsman (ASBEFEO) to conduct mediation and recommend arbitration in franchising disputes so that companies cannot drain families of their assets by dragging out disputes in the courts.

The Bill will also significantly increase penalties for breaches to deter bad behaviour from franchisors, well beyond the Morrison Government’s position.

While the government would increase penalties from $66,600 to $133,200, Federal Labor will increase penalties to $10 million – high enough to effectively deter poor conduct and exploitative behaviour. This will bring the penalties in line with the Australian Consumer Law.

Late last year, federal Labor held a round table at parliament so that victims in the franchising sector could have a voice at the table and share their stories.

The stories we heard were from people who had had their lives turned inside out and dreams shattered.

The fact it’s taken so long for the government to act is telling sign of their warped priorities.

Whether it is franchising, phoenixing, or payment times, it is increasingly clear that the Liberals take small business for granted.

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