Franchising Code Review – Loss of Opportunity – AUGUST 2023

On 15 August 2023, the Australian Government announced a review of the Franchising Code of Conduct. Dr Michael Schaper will undertake the review of the Code in accordance with the Terms of Reference. Dr Schaper will consult widely with the public including dealers, distributors and their representative industry bodies.

The review is an opportunity for Dealers, Dealer Councils and Industry Bodies to respond on areas of the Code that currently do not provide adequate protection or require clarification. The review will have regard to a number of issues but the most significant for the automotive industry is that it will specifically assess the role of the Code in regulating the automotive sector.

Such opportunities come along rarely. Industry stakeholders should therefore, give high priority to preparing and responding to the review. The Code has seen gradual improvements for dealers in recent years but is still not perfect and relationships with distributors can still hit road blocks from time to time.

One of the road blocks in recent years is the meaning and understanding of the term “loss of opportunity in selling established goodwill” set out in clause 46A of the Code. This clause and these words were added in the 2021 changes and the significance and impact of this clause has great significance for the automotive industry.

The review will specifically consider the 2020 and 2021 reforms including “reforms which created new obligations relating to compensation in the event of early termination, and franchisees capacity to make a return on investment”. Our experience has been that some distributors are attempting to set limitations around the meaning and extent of “loss of opportunity” when no such limitations should be set. We consider that this is a key focus area for the automotive industry.

The Australian Government should be encouraged to explore the meaning and depth of this clause and these words in the Code and ensure that it reflects the meaning set out in leading contract case law on the topic. Our efforts to persuade some distributors as to the meaning of these words has fallen on deaf ears. We believe the Australian Government will be most eager to hear of our experiences and hope that it clarifies the meaning in this regard.

At V.S. George Lawyers, we welcome the opportunity to work with a leading Industry Body interested in commissioning a detailed submission on this area of the Code. First come, best dressed, as they say.

Vinesh George – 0404077078[email protected]