Home' The Franchise Review : June 2015 Contents The Franchise review
in a franchising context, certain franchisors may have market
power as a result of being able to coordinate with their network
of suppliers and distributors, and may make decisions that
could be found to potentially misuse this position.
as such, franchisees should be alert to possible recourse if
their franchise is hampered by a franchisor taking advantage of
this potentially significant network.
regardless, the proposed changes would mean that even if
franchisors did not have the purpose of lessening competition,
if the effect of a franchisor’s conduct substantially lessens
competition in a franchisee’s, or another’s, market, this could
still be considered a misuse of market power.
The change to the misuse of market power provisions in the
act is a potential avenue for small businesses to avoid having
their position in the market compromised by the actions of a
dominant player, regardless of intention.
if the government adopts the change, franchisees may be better
positioned to question the actions made by a dominant franchisor.
Third line forcing
in the franchising context, third line forcing occurs where the
franchisor only supplies goods or services (that is, the grant
of a franchise system) or only provides a particular price or
discount, if the franchisee purchases other goods or services
from a third party.
This is currently prohibited under the act.
The review Panel recommends changing this current outright
prohibition to an effects test, so that an arrangement of this
type is prohibited only if it has the purpose, effect or likely
effect of substantially lessening competition.
Franchisors have generally managed the outright prohibition
by lodging a notification with the accc or by providing all of
the relevant goods and services directly to the franchisee.
if the recommendation is adopted, it is more likely that
franchisors can be specific as to which third party can supply
other goods or services to their franchisees without having to
go through this process.
Resale price maintenance (RPM)
rPM occurs where a supplier places pressure on a business to
resell the supplier’s goods or services at a specified minimum price.
currently, a supplier is able to seek authorisation from the
australian competition and consumer commission (accc)
prior to engaging in rPM. The authorisation process can be a
complex and lengthy undertaking.
The review Panel recommends a notification process that
confers immunity until challenged by the parties involved.
if adopted, the review Panel believes that removing the need
for authorisation in favour of a more streamlined notification
process will provide a ‘quicker and less expensive exemption
process for business’.
as such, it seems reasonable to conclude that franchise
systems will be more likely to seek approval from the accc to
set the price of any goods that are resold by their franchisees.
Pharmacies: changes to ownership and location
in an effort to boost competition and benefit the long-term
interests of consumers, the review Panel has recommended
removing the ownership and location rules for pharmacies.
By allowing more entrants into the market, pharmacies will
be competing for a relatively decreasing consumer base as
the rules on ownership and location are eased until they are
with consultation on the review Panel having concluded on
26 May 2015, the government can now decide whether or not to
implement these changes in an attempt to improve competition.
if the government chooses to adopt these recommendations,
members of the franchising sector should be mindful of the
effect they will have on the franchise relationship.
Ben Hamilton is a Partner with Hall & Wilcox Lawyers. He specialises in
Competition and Consumer Law, Franchising, Retail and Distribution and
Intellectual Property Law.
For more information, please contact Ben:
Ben Hamilton I Partner
Hall & Wilcox Lawyers
P: 03 9603 3586
The change to the misuse of market
power provisions in the Act is a potential
avenue for small businesses to avoid
having their position in the market
compromised by the actions of a
dominant player, regardless of intention.
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