The Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 (Bill) has been introduced to Parliament, bringing a number of likely changes.

The Commonwealth Minister for Small Business, the Honourable Bruce Billson MP introduced the Bill into Parliament in mid-July. The passage of the Bill is the first step towards the reforms that have been outlined in previous Automotive Dealer issues and are expected to commence on
1 January, 2015.

The reforms, which will form part of the greater Competition and Consumer Act 2010 (CCA), will give the Australian Competition and Consumer Commission (ACCC) more power in issuing penalties for non-compliance of the Franchising Code of Conduct (Code) and not other industry codes.

Right now, the CCA does not allow for the ACCC to issue monetary fines, however considering the apparent support for these reforms from both political parties, this may not be the case for much longer.

This will be the first time where distributors in particular will be subject to ‘civil pecuniary penalties’ (CPP) and fines (issued under an infringement notice) for breaches of the Code’s provisions.

It is expected that once the Bill becomes law, the ACCC will be able to seek orders  from the Court to issue a civil pecuniary penalty of up to $51,000 per breach. While this may not be enough to deter some distributors who do not comply with the Code, the damage to the distributor’s brand image will likely act as a further deterrent.

With the passing of this Bill, the ACCC will also have the power to fine distributors and individuals outside of a civil pecuniary penalty, that is, for breaches which fall outside of the CPP guidelines. This will put Dealers in a more advantageous position to ensure distributors comply with the Code.

As such, the ACCC may issue infringement notices to a company of up to $8,500 and $1,700 for individuals. The company or individual can choose to comply with the infringement notice and pay the fine, however a failure to comply with the infringement notice may result in the ACCC seeking court action for further consequences.

The Minister also confirmed the Government’s intention to proceed with introducing a new Franchising Code of Conduct in his Second Reading Speech. This will apply to franchise agreements entered into on or after 1 January 2015.

Watch this space for further developments on this issue.