On November 27, 2009 the Minister for Small Business Dr Craig Emerson announced the establishment of an expert panel to consider unconscionable conduct. The panel will provide advice to the Government by the end of January 2010 on some outstanding issues raised in recent parliamentary inquiries into the Franchising Code of Conduct and the provisions of the Trade Practices Act 1974 (TPA) that prohibit unconscionable conduct. In the specific context of franchising, the panel will be considering the merits and the feasibility of introducing into the Franchising Code a list of examples of behaviours that are inappropriate in franchising relationships.

Norton Rose partner Stephen Giles drafted the submission on behalf of the Franchise Council of Australia and will be representing the FCA in discussions with the Government and the Expert Committee. The FCA examined the merits of the proposal and concluded that the inclusion of a list of examples would not enhance the understanding or application of the law. Indeed it was likely to lead to greater uncertainty, and possibly even a narrowing of the interpretation of unconscionable conduct. Interestingly, although seemingly innocuous, the suggestion to add examples or principles would in fact have reversed the onus of proof in any situation which came within an example. Further, some of the suggested examples would clearly only be unconscionable in very limited circumstances, and in other circumstances could well be quite legitimate business practises.

Advocates for change have endeavoured to alter the regulatory framework in several ways over the past few years. There have been attempts to more radically change the Franchising Code of Conduct, to introduce a new statutory duty of good faith, to redefine unconscionable conduct such that it in fact prohibits conduct that is unfair, to introduce State based franchise legislation and now to introduce “examples or principles” of unconscionable conduct. If no action is taken in this instance there is quite likely to be more action at a State level.

The Expert Committee is likely to wish to provide some examples to Government, but the devil will be in the detail. As unconscionable conduct needs to be considered in the context of all relevant circumstances, it is hard to isolate an individual action as an example of conduct that will typically be unconscionable. A better way is to allow the courts and the ACCC to continue to produce complete examples that are in the context of all relevant circumstances.