The Parliamentary Committee (Corporations and Financial Services) inquiry into the operation and effectiveness of the Franchising Code of Conduct is well underway. The Inquiry includes a review of the Oil Code of Conduct. ACAPMA’s submission to the Inquiry has been made public by the Committee.
The Australian fuel retail market has long operated with the use of franchise agreements. Franchise agreements are a great mechanism for allowing smaller businesses to participate in the retail fuels market while simultaneously affording franchisors with the ability to expand their operations without the need to use large amounts of corporate capital. Like all industries, however, the long-term sustainability of franchise agreements is wholly dependent upon both the franchisor and franchisee working harmoniously for the financial and strategic benefit of their respective enterprises.
Building on previous submissions to the review of the Oil Code Regulation by the Australian Government during 2015 and 2016, this year ACAPMA has made formal submissions to the Parliamentary Committee Inquiry into the Franchising Code and Oil Code.
An overview of ACAPMA’s submission is outlined below.
In the submission ACAPMA notes that as a representative of the interests of fuel wholesalers and fuel retailers, comment was confined to those areas of the Joint Committee’s investigation that can credibly be answered by the fuel retail industry, namely:
- The operation and effectiveness of the Oil Code Regulation (2017) in ensuring full disclosure to potential franchisees of all information necessary to make a fully informed decision when assessing whether to enter a franchise agreement in the fuel retail industry
- The effectiveness of the dispute resolution mechanisms that operate under the Oil Code Regulation (2017)
- The degree to which the operation of the Oil Code Regulation (2017) creates any advantages or disadvantages to fuel retail franchise businesses, relative to the operation of the Franchise Code of Conduct
- The adequacy and operation of the termination provisions of the Oil Code Regulation (2017)
The submission outlines that, consistent with previous ACAPMA submissions, it is considered that the disclosure obligations contained in the Oil Code Regulation (2017) are both comprehensive and clearly articulated for all parties. Accordingly, ACAPMA argues that there is no need for any further modification of the disclosure obligations in the current Oil Code.
ACAPMA’s submission note that there has been a significant increase in the industry’s use of the dispute resolution process over the last 12 months, which appears to be largely attributable to emerging industry challenges associated with the effective management of the franchisor/franchisee relationship in the face of national pressures. It is considered that these issues have been further complicated with the passing of the Protecting Vulnerable Workers Bill 2017 (particularly the “reasonable measures test” set out in Section 558B3), generating considerable uncertainty about the exact nature of the obligations of the franchisor to the franchisee – and vice versa. It is suggested by the submission, that this issue is best resolved by the FWO issuing guidance to the fuel industry on the real-world application of the reasonable measures test, as soon as practical – as opposed to risking substantial adverse consequences for franchisees/franchisors by changing the Oil Code to accommodate what essentially amounts to being obligations under Australian employment law.
Lastly the submission outlines that it is considered that the principal advantage of the Oil Code, relative to the Franchise Code, is that the Oil Code makes provision for Commission Agent Agreements. These Agreements provide a means of low cost market entry for new participants. Removal of the Oil Code Regulation, in lieu of the Franchise Code of Conduct, would likely result in the loss of this business model with consequent negative impact on the ability of the industry to attract new market participants.
The full submission can be located from this list of public submissions on the Committee website: https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/Franchising/Submissions