Increases to maximum civil pecuniary penalties under the Franchising Code

On 13 September 2021, the Treasury Laws Amendment (2021 Measures No 6) Act 2021 (Cth) (Amending Act) was assented to. The Amending Act provides that the Franchising Code of Conduct (Code) could be amended to include higher maximum penalties for contraventions of its civil penalty provisions.

In particular:

• a corporation could face maximum civil pecuniary penalties that are the greater of:
  • $10,000,000; or
  • 3 times the value of the benefit obtained by the corporation that is reasonably attributable to the breach; or
  • if the value of the benefit cannot be determined, 10% of the corporation’s annual turnover during the 12-month period preceding the breach;
• an individual could incur a maximum civil pecuniary penalty of $500,000; and
• where the Code does not set the above penalties, a maximum civil pecuniary penalty equivalent to 600 penalty units ($133,200) will apply.

Such new penalties are not yet imposed under the Code and will only become operative if the Code is amended to include them. It is anticipated that such amendments will occur soon, with draft legislation to introduce the changes currently being privately considered.

In light of the likely increases to civil pecuniary penalties, franchisors should take steps now to ensure they are adhering to Code requirements and that their documents and processes are compliant with the other Code reforms implemented in July this year.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.