New bill clips wings of suppliers

Franchisors may soon find it more difficult to be the sole supplier of goods and services to a franchisee. A right-of-choice provision in the 4th version of the Consumer Protection Bill (CPB) will prevent a franchisor from requiring that a consumer (or franchisee) purchase goods or services from the franchisor or from any other supplier.

Bowman Gilfillan director Eugene Honey says this will be the case unless the supplier can show that convenience in bundling the goods and services outweighs the limitation of choice for the consumer, or provides economic benefit to consumers. He says on the right-of-choice issue it is also a defence in certain instances if the goods or services are “reasonably related” to the franchisor’s branded products or services and suggests that franchise agreements provide for core and noncore products. Core products or services would be the primary, unique products related to the brand.

The CPB is intended to be a bill of rights for consumers by introducing wide-ranging business compliance requirements. Key provisions of the bill, says Honey, include the right to equality, privacy, choice, information and disclosure, fair and responsible marketing, honest dealing and fair agreements, fair value, good quality and safety and supplier accountability. Honey says the CPB includes numerous provisions requiring honest and fair dealing that precludes undue influence or pressure and unfair tactics. False, misleading or deceptive representations concerning material facts are prohibited.

The consumer has a right to fair, just and reasonable terms and conditions that would include protection against unreasonable or unjust prices or terms or excessively one-sided or inequitable provisions. In addition, notice is required when provisions are unusual or “not reasonably to be expected”.

Honey says a news definition of a franchise agreement includes an agreement where a franchisor grants to a franchisee for consideration a right to carry on business under a system or marketing plan substantially determined or controlled by the franchisor. In addition, the franchisee’s business is substantially or materially associated with advertising schemes or programmes or with the trade marks of the franchisor, or any combination of these, which are licensed to the franchises.

The franchisor will be required to disclose information to the franchisee that will be set out in regulations to be published by the minister.