Those who blatantly deceive potential small business owners with offers of bogus or unworkable small business 'opportunities' are effectively criminals and can expect no leniency from the Australian Competition and Consumer Commission. ACCC Chairman, Mr Graeme Samuel, told the Australia-Israel Chamber of Commerce luncheon in Brisbane today.
The ACCC is targeting rogue operators in the franchise industry.
"The ACCC is taking a hard line against blatantly deceptive conduct and those involved risk possible criminal sanctions", he warned.
"We are already examining a number of different scenarios which we believe are criminal and are taking steps to not only shut down the perpetrators but to impose criminal sanctions.
"The ACCC is examining the options available in taking criminal proceedings for those people that are flagrantly in breach of the law. In particular the ACCC is targeting those people that grossly misrepresent the benefits, financial rewards or viability of a particular operating system. People that seek to prey on those potential small business operators are on notice that the ACCC will not tolerate, what effectively, is criminal behaviour".
Mr Samuel warned that under the Trade Practices Act 1974, the ACCC could seek criminal penalties, of $1.1 million for corporations and $220 000 for individuals, for certain contraventions.
"Franchising is an extremely successful and rapidly growing aspect of Australia's small business section, which now accounts for $80 billion in turnover per year, about 12 per cent of our GDP.
"Its attractiveness is not hard to fathom. It offers franchisees the chance to establish their own small business while at the same time allowing them to take advantage of an established and often successful brand with product support and promotion.
"It also allows legitimate businesses to expand while minimising financial risks.
"However, the success of franchising has also attracted a number of unscrupulous operators looking to capitalise on the successful reputation of franchising.
"Key areas of concern were:
- non compliance with the Franchising Code - not admitting that the arrangement is a franchise agreement, not providing disclosure and not attending mediation;
- misrepresentations - misrepresenting profit expectations, benefits or viability of the franchise; and
- unconscionable conduct - bullish and thuggish behaviour by franchisors to implement unnecessary and unreasonable changes on franchisees".
Mr Samuel said that people wishing to buy a small business can help avoid being victims of such conduct by exercising due diligence when considering a particular business offer. Purchasing a business should not be a quick decision. People should seek business and financial advice before they make any decision.
Today's announcement is part of a broader strategy by the ACCC to ensure that small businesses are better able to operate their business in a fair and competitive environment.