Treasury Laws Amendment 2020 - Franchising Code of Conduct

By Matt Keogh MP

24 March 2021

Watch Matt's speech here

Thank you, Mr Deputy Speaker Georganas, for calling me and putting us all out of our misery. Does the ego and the hypocrisy know no bounds? To rant across the chamber knowing full well that everything he just said, his own government disagrees with. Will we see the member for Goldstein put his money where his mouth is and move a private members bill to the effect of what he has been speaking? No, I don't think we will. Will we see him cross the floor against his own government? No, I don't think he will. But he did a very good job of promoting his new book, for people who might be interested in purchasing it. I suspect there are not many who want to dive into the diatribe any further by member for Goldstein. That was an embarrassing performance if ever there was one, because anyone with any form of economic literacy who is listening to it would have known straightaway just how error-ridden that contribution was.

To turn to the actual bill at hand that we are discussing in the chamber today, the Treasury Laws Amendment (2020 Measures No. 4) Bill 2020, I wish specifically to address schedule 3, which relates to the Franchising Code of Conduct. This is something particularly close to my heart, not only as the shadow minister assisting small business but also as a member in the last parliament of the Parliamentary Joint Committee on Corporations and Financial Services, which conducted an inquiry during the last parliament into this code. Unfortunately it has to be said that the government has completely dropped the ball on protecting small businesses and franchisees, refusing to defend the many mum-and-dad franchisees and, in particular, the auto dealers around Australia, from exploitive franchisors and car manufacturers.

Fortunately, this parliament today though can ensure that Australian franchisees receive greater protection from these exploitive franchisors. However, this Morrison government proposal in the bill of only $133,000 maximum fine, otherwise known as a slap on a wrist, for those franchisors breaching the code, quite frankly, is laughable, when we consider what that represents against some of the profits being made by the franchisors in this country, indeed those that are owned overseas. Despite a bipartisan committee report, the report of the inquiry I referred to earlier, emphasising the need for a significant increase in penalties available under the franchising code, the government, until it has announced amendments to this bill, will effectively have done nothing.

Only earlier this month, the Morrison government put out a press release saying that they would increase the available penalties under the franchising code from their woeful increase of $133,000 up to what Labor had been calling for—$10 million. In December last year, the minister delivered a voluntary set of principles, specific for car dealers, which failed to include any significant increase in fines for companies such as General Motors, Mercedes Benz, Honda, which the government knew were destroying decade-long family owned businesses across Australia. Car dealers across Australia described this voluntary set of principles as a 'do-nothing policy' and 'doomed to fail'. At the time, the minister hailed the voluntary based principles in a media release as the 'biggest' for the industry. However, they did not include any fines for car manufacturers. Worse still, the minister lashed out against car dealers who dared to speak out against a half-baked policy.

After numerous reports of disruption within the coalition party room, though, and an in-depth Labor led Senate inquiry into the relationship between car dealers and car manufacturers, it was revealed last month that Minister Andrews, who had previously been responsible for this area of policy, had been sidelined and that her responsibilities for the car industry had been handed over to a separate minister. After the minister's removal, the government was left scrambling when Labor senator Deborah O'Neill moved a private senator's bill in the Senate on this very matter. It passed the Senate with the support of the crossbench, providing for an increase in penalties of up to $10 million so that companies like General Motors that have left General Motors dealers in Australia high and dry, in the way in which they have removed themselves from the Australian market, would face penalties of up to $10 million where they breached the code where it affects car dealers—or, even higher, up to 10 per cent of their annual turnover. Family owned Australian businesses deserve a government that is on their side, not a minister that has lost the faith of their own government to get the job done.

This proposed increase in penalties was a recommendation first proposed by the ACCC to deter bad behaviour exposed by the Parliamentary Joint Committee on Corporations and Financial Services inquiry into franchising. The increase in fines was substantially more than that proposed by the Morrison government, until very recently, because for all their rhetoric about being the party of small business they were reluctant to bring forward legislation that would protect small business. The amendment to increase the available penalties up to $10 million received widespread support from the automotive sector, including from wronged franchisees who had been calling for small-business owners to have equitable access to justice, to ensure that the despicable acts currently acceptable in the franchising sector were stamped out.

Labor will always fight to protect small-business owners across Australia. The franchising sector has been a breeding ground for unconscionable behaviour for decades. It's why we held the inquiry in the last parliament, and it's time to even the playing field. Peter Strong, the CEO of the Council of Small Business Organisations of Australia, has said that small-business owners, franchisees, might not know they are even being exploited by their franchisors until it is too late. James Voortman, the CEO of the Australian Automotive Dealer Association, said that the government's proposed $133,200 penalty wouldn't even cop a mention in the annual report of a large multinational car manufacturer, and that that is why they needed a penalty with teeth. The CEO of the Australian Association of Franchisees, Mike Sullivan, agreed, saying that the proposed fines put forward by the Morrison government in this legislation are barely a slap on the wrist. The punishment of up to $10 million will actually have a real impact on these massive scale operations.

This government has so far failed to fix franchising. The regulatory environment it is operating in has manifestly failed to deter systemic poor conduct and an exploitative power imbalance. The Liberal government was set to completely squib many of the important recommendations of the parliamentary inquiry review into franchising. Even the new small-business ombudsman, Bruce Billson, who was the Minister for Small Business in this Liberal government, supports these further increases to the maximum fines of up to $10 million. In a recent press release, he said:

Higher fines for significant breaches of the Franchising Code will act as a big stick that will force the larger players to think twice before acting unfairly towards their franchisees.

That's right; that's absolutely what we've been calling for and trying to do. But the government has completely resisted doing that—until now, saying they will move amendments to their own legislation.

It is about time that this government stood up for mum-and-dad franchisees, small-business owners who have been done over for far too long. The government has been shamed into now moving amendments to its own insufficient bill. This is a desperate move by the Morrison government to claw back some respect from the automotive retail industry. But the industry now know that only Labor is on their side. Only Labor is on the side of franchisees and the many thousands of Australians that they employ.