The franchising sector is set to welcome a new version of the Franchising Code of Conduct (Code), which will take effect on 1 April 2025. The new Code largely reflects the provisions of the existing Code; however, some significant changes have been made in response to the recommendations of Dr Michael Schaper following his 2023 independent review of the Code. Despite this significant regulatory development, franchise networks largely evaded the attention of the ACCC in 2024, with minimal enforcement action being taken against sector participants.

Enforcement priorities

Historically, one of the ACCC’s goals has been to ensure that small businesses receive the protections of competition and consumer laws and small business industry codes, including in franchising. This remained an enforcement priority for 2023-2024. However, rather than pursuing franchising actions, the ACCC gave a reprieve to franchisors who have struggled to keep up with persistent regulatory change over the past few years. In doing so, the ACCC perhaps gave franchisors an opportunity to digest some of its relatively recent educational efforts, which have been targeted at the sector. Notably, at the end of 2023, the ACCC published findings from a review of 10 franchise agreements for compliance with unfair contract terms (UCT) laws and warned franchisors to remove UCTs in standard form franchise agreements or risk legal action. In our experience, this publication resulted in many franchise networks revisiting their franchise agreements for UCT compliance.

Major developments and activities

Ultra Tune

$1.5 million penalty for continued compliance failures

In 2017, the ACCC successfully brought proceedings against Ultra Tune for breaches of the Code and the ACL, resulting in Ultra Tune being fined over $2 million. Ultra Tune was also the subject of various court orders, including orders requiring it to:

• provide disclosure documents and marketing fund statements to franchisees in compliance with the Code; and
• implement an internal compliance program designed to reduce the risk of future Code and ACL breaches.

In 2022, the ACCC initiated proceedings against Ultra Tune, alleging that it had failed to comply with Court orders and was in contempt of court. Ultra Tune’s conduct included failing to update its disclosure document and provide its marketing fund statement to franchisees on time. The Court found that Ultra Tune was in contempt of court and fined it a record $1.5 million for its failures.

Ultra Tune

Contempt appeal dismissed

In January this year, the Full Federal Court dismissed an appeal by Ultra Tune regarding the earlier contempt finding. Ultra Tune unsuccessfully argued that the Court had no power to impose $1.5 million in fines against it for contempt because the Court had not included any endorsement on its original orders concerning the consequences for Ultra Tune for failing to comply with them. Ultra Tune also contested the basis upon which the $1.5 million fines were calculated. However, the Court rejected these arguments and found that no error had been made by the primary judge in imposing and calculating the fines.