Franchisee activists hoping for a new dawn in franchise regulation will be disappointed by the competition watchdog’s decision not to prosecute bakery franchise Bakers Delight in relation to unconscionable conduct allegations.
The Australian Competition and Consumer Commission announced yesterday that it had concluded its investigations into allegations that Bakers Delight engaged in misleading and deceptive and unconscionable conduct towards franchisees in operating its franchise system.
“Having conducted an in-depth investigation, including analysing a large amount of documentary evidence and conducting a number of detailed interviews with various witnesses, the ACCC has decided not to take any further action,” said a statement from the ACCC.
However, the ACCC is holding “continuing discussions with Bakers Delight with a view to ensuring its trade practices law compliance procedures and complaint handling processes are best placed to deal with issues that might arise in the future”.
A number of franchisees had alleged Bakers Delight had been churning (selling franchises destined to fail and then reselling them to others) and collusion with banks, including that Bakers Delight shared information about a franchisee with a bank which led to losses being suffered.
These allegations were made public last March when the Liberal member for Gilmore and then government whip, Joanna Gash, told the House of Representatives that she had been given information “that suggests the principals of the franchisors of Bakers Delight engaged in practices that I can only describe as not only dishonest but possibly criminal”.
But the ACCC was unconvinced. “It should not be assumed that where there is smoke there is always fire,” ACCC Chairman, Graeme Samuel, said in a statement. “The ACCC is experienced in testing matters raised with it and often its investigations lead it to the conclusion that those matters cannot be substantiated or should not be pursued further.”
The fact that the ACCC has taken the unusual step of making a public statement about its decision not to take further action reflects the pressure the ACCC has been under to get tough on franchisors.
“This said,” said Samuel, “given the bargaining disadvantage franchisees and other small businesses often find themselves in, where the ACCC forms the view that there is evidence supporting a claim that a franchisor has behaved unconscionably or in a systematic misleading manner, it will take action.”
Hopes of a more activist ACCC were raised in March when the ACCC commenced proceedings against 170-store franchised telecommunications retailer Allphones for unconscionable conduct.
Cher Borradale, a former franchisee who has been a loud critic of franchise regulation and a lack of will from the ACCC to take action against rogue franchisors, is disappointed with its decision in the Bakers Delight case.
She believes the lack of action is a question of a lack of funding. “[The ACCC] deliver spin but they won’t come out and admit the complaint should be pursued, that they don’t have the funds,” she says.
“Samuel’s remark about ‘smoke’ and ‘no fire’ is insulting to people who have lost so much and have been threatened so blatantly.”
A Bakers Delight company secretary said in a statement: “It’s in our best interest to work with and support our franchisees; it’s pivotal to the success of the entire network.”
The debate about further regulation in the franchising industry does not end here however. The SA and WA parliaments have both conducted inquiries into the franchising industry that are expected to report soon.