The upper house of the South Australian parliament yesterday (20 October 2011) passed the Small Business Commissioner Bill (Bill), which paves the way for state-based franchising regulation in South Australia.

The Bill provides, amongst other things, for the Franchising Code of Conduct (Code) to be adopted into South Australian law as a prescribed code under the new legislation, to be known as the Small Business Commissioner Act 2011. The new legislation will create the office of Small Business Commissioner, who will have powers to investigate contraventions of the Code, compel people to provide information in connection to the exercise of its powers and impose on-the-spot civil penalties for contraventions of the Code. This framework will operate in concert, and potentially in conflict, with the ACCC's enforcement powers in respect of the Code.

In recent days, the Liberal Party Opposition and several key independent MPs campaigned strongly for several amendments to the Bill. Those campaigning against the Bill had expressed concern that it could put South Australian franchisors at a disadvantage compared to other states and may discourage franchisors basing their operations and opening stores in South Australia.

In spite of strong opposition from the franchising community, the Bill was passed with only one amendment. The sole amendment was an important one, as it dictates that the rules of franchising in South Australia cannot be changed without the Government first undertaking a 60 day mandatory consultation period with relevant stakeholders. If this procedure is not followed, a 'disallowance motion' can be put forward in respect of the proposed changes. The amendment means that in the short term, the franchising sector will not be subject to dual regulatory frameworks in South Australia.

The Minister for Small Business, Tom Koutsantonis, has indicated in the past that he is intent on broadening the regulatory framework governing the franchising sector, so it may not be long before the 60 day mandatory consultation period is tested.