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WA Government inquiry closes - report in a month

Steve Wright

13 May 2011

The WA Parliamentary Inquiry into the Bill proposed by backbencher Peter Abetz has concluded its hearings. It has stretched its reporting deadline by a month till 23 June. FCA participated in the hearings, and was present throughout. Competitive Foods owner Jack Cowin (Hungry Jack’s) led the argument for the Abetz Bill, which, if implemented, would introduce big penalties for breaches of the Franchising Code of Conduct and potentially upend the status quo regarding end-of-term entitlements. Mr Cowin said he spoke as both a franchisor and franchisee, owning 50 KFC outlets in WA.

Mr Cowin claimed that he was a victim of churn by the franchisor of the KFC outlets, Yum! Brands, and that many franchisees were being ‘ripped off’ in this manner. His submission was strongly disputed by Yum! Brands, which said it had the right to decide whether or not an expiring agreement would be renewed with the existing franchisee. Mr Cowin has been operating the KFC stores since the 1970s, but his agreements are now nearing an end, with a handful already having reached end of term. Yum! said it had told Mr Cowin 7 years ago, in writing, that it did not intend to enter into new agreements with Competitive Foods and that it had offered a choice of a fair-priced buy-back or assignment of the licences to new franchisees, but that these offers had been rejected.

Mr Cowin acknowledged late last year that he had been active in pursuing legal changes since he had been forced to close his Rockingham KFC store in 2007. The Abetz Bill emerged suddenly last year, following the rejection of the proposed changes by the WA Labor Government in 2008 and the WA Liberal Government in 2009.

Yum! told the Parliamentary hearing that if the Abetz Bill was implemented what would follow would be legal confusion and dramatically increased disputation, with a 10-year battle between Yum! and Competitive Foods in the Supreme Court of WA at the centre of the ensuing business turmoil.

The Abetz Bill has been strongly opposed by the national franchise community and, especially vigorously, by the WA franchise community, including franchisors, franchisees and service providers. About 90% of submissions to the inquiry opposed the Bill. A total of 19 current franchisees opposed the Bill; only two supported it. Jim Penman (Jim’s Group) was the only franchisor, other than Competitive Foods, to support the Bill.

State and Federal Government bodies also opposed the Abetz Bill, which was drafted by University of NSW academic, Associate Professor Frank Zumbo, who also claims to have authored a similar private member’s bill raised by South Australian backbencher Tony Piccolo.

Among the dozen bodies who expressed their concerns with the bill were the Law Council of Australia, the WA Law Society, the Queensland Law Society, the Federal Government Department of Innovation and Industry, the WA Commerce Department, The WA Small Business Development Corporation, the University of NSW, the Asia Pacific Centre for Franchising Excellence, the National Retail Association, the Shopping Centre Council of Australia and the Franchise Council of Australia (FCA).

One of the nation’s pre-eminent trade practices, competition and consumer protection experts, Mr David Lieberman, also made a submission opposed to the bill. Mr Lieberman is a former commissioner of the ACCC and was a member of the Expert Panel which examined franchising regulation in 2009/10, recommending against introduction of the ideas proposed by Associate Professor Zumbo and Messrs Abetz and Piccolo and supported by Competitive Foods.

In an unusual turn of events, Mr Abetz was allowed to join the Parliamentary Committee inquiring into his Bill. The committee was strident in its questioning of the FCA, the Law Society and others opposed to the Bill, and this may be reflected in the tone of its report. However, it would be a major departure from the conventional course of events for a Bill with such strong industry opposition (and so little sign of stakeholder consultation before its introduction to Parliament) to be endorsed by a Parliamentary committee – especially in an area of enterprise and law which has always been national and has never been regulated by individual States.

Click here to learn more about the detail of the Abetz Bill and submissions to WA parliamentary inquiry.

Author: Steve Wright

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