Dr Michael Schaper ACCC Deputy Chair

Transcription

1 Dr Michael Schaper ACCC Deputy Chair

2 Competition, Franchising & Consumer Law Developments for 2015 The ACCC Issues for 2015 Pricing & advertising New financial requirements in franchising Scams Hot button issues Further information

3 1. The ACCC: What We Do National regulator: oversees laws on consumer protection, fair competition, product safety, infrastructure access Competition & Consumer Act 2010 (previously known as Trade Practices Act 1974) Also regulates some specific industries (energy, telecommunications), industry codes (franchising, horticulture) and price monitoring (airports, postage, stevedoring) An independent statutory agency within the Treasury portfolio 7 Commissioners (statutory appointments), 700 staff, offices in each state and territory Enforcement agency does not set policy Most enforcement action decided through the courts Does not provide private rulings: need your own independent advice

4 Australian Consumer Law Part of the Competition & Consumer Act Covers matters such as: o Unsolicited sales practices o Misleading & deceptive conduct o Unconscionable conduct o Unfair contract terms o Consumer guarantees o Product safety Applies to all businesses, regardless of whether products are sold in a bricks and mortar shop or online Enforced by both ACCC and state/territory fair trading agencies and ASIC for financial products and services ACCC responsible for issues that have a national dimension

5 Why is the Competition & Consumer Act Relevant to Accountants? Many accountants run small firms Accountants are trusted advisors for small businesses Applies to all businesses - including professionals Competition & Consumer Act 2010 Governs most dayto-day business-tobusiness, businessto-consumer transactions

6 The Issues Your SME Clients Are Most Concerned About

7 Trends In SB Contacts, In 2014, ACCC Infocentre received 13,500 contacts: 10,200 complaints and 3,300 enquiries Most common issues raised over 4 years: Misleading & deceptive conduct Consumer guarantees & rights Franchising issues Product safety Scams Received from all types of businesses: Micro-firms (49%), small (30%), medium (14%), large (7%)

8 2. Pricing & Advertising Can a supplier stop me from discounting? What action has the ACCC taken? What information do I have to display to customers? What is a cartel? and how do I avoid them?

9 Component Price Advertising You should always display the total price of a product or service. Prices displayed by a business must be clear, accurate and not misleading to consumers. You must not show a price that is only part of the cost, unless you also prominently advertise the single (total) price. The single total price must include any tax, duty, fee, levy or other additional mandatory charges (e.g. GST or airport tax). This single price is the minimum total cost that can be quantified (or calculated) at the time. $40 + fees and charges $40 + $3 booking fee + $4.30 GST = $47.30

10 A Problematic Example

11 Example Imposing Minimum Resale Prices Retailers should be free to set their own prices. It is illegal for suppliers to: put pressure on businesses to charge their RRP or any other set price (e.g. by threatening to stop supplying to firm) stop resellers from advertising, displaying or selling goods from the supplier below a specified price There is nothing wrong with suppliers using a RRP list - as long as prices on that list are really just recommended (not enforced!) In December 2014, Italiatech and TMO admitted to restricting the resale prices of bicycle parts and accessories which prevented Australian retailers from competing effectively with international online sellers.

12 Price-Fixing & Cartels Arise when firms agree to act together instead of competing Can be a contract, arrangement or understanding Major enforcement priority for the ACCC (highly anti-competitive, inflate prices, minimise choice for consumers and stifle innovation) Many possible forms of cartel conduct: price fixing sharing markets/dividing up markets rigging bids controlling output or limiting amounts of goods/services available Exceptions for joint ventures; not intended to capture R&D Steep penalties: For individuals - maximum 10 years jail, fines of up to $340,000 (criminal offence), $500,000 (civil). Corporations - $10 million OR 3xtotal value of the benefits obtained OR 10% of turnover.

13 Alleged Egg Cartel Attempt The ACCC alleges Australian Egg Corporation Limited and others attempted to induce members to enter into an arrangement to cull hens or dispose of eggs, for the purpose of reducing the amount of eggs available. The ACCC is concerned that the alleged attempt sought to obtain agreement by egg producers to reduce supply, which if successful could have impacted on egg prices paid by consumers, ACCC Chairman Rod Sims

14 Truth In Advertising Truth in advertising a priority for 2015 particularly where misleading claims are made by large businesses with the potential to result in significant consumer detriment, or where the conduct is likely to become widespread if the ACCC does not intervene

15 Golden Rules for Advertising & Pricing Truth in advertising is not just a slogan it s the law Work out what impression your advertising claims are making in the mind of a typical customer Be upfront: always display the total price of a product or service The law applies to all promotional activities, including online Set your own prices: Don t fix prices, share markets, restrict output or rig bids

16 3. Franchising Code of Conduct New version (effective since 1st January 2015) of the Franchising Code of Conduct - mandatory code under Competition & Consumer Act. Binding on all industry participants, including overseas franchisors that have franchisees or master franchisees in Australia. Both the Code and the Act provide a range of protections for current and prospective franchisees in their dealings with franchisors. Currently 1,160 franchise systems and 79,000 franchise units trading in Australia. Infringement notices of $8,500 and court penalties of up to $51,000 apply for serious breaches of the Code.

17 Key Financial Aspects of the Franchising Code of Conduct Commencement phase: Disclosure document (14 days in advance) Start-up costs Ongoing obligations such as royalties and other fees Ongoing expenses and costs such as wages Franchisor s financial position Franchise agreement Cooling-off period (one week) Statement that got advice from independent accountant (or decided not to) Short information statement outlining the risks and rewards of franchising (new) Disclosure about online sales (new) Verify information, encourage your client to speak to current and former franchisees Making sure the dollars make sense

18 Key Financial Aspects of the Franchising Code of Conduct Operative phase of the franchise agreement: - Obligation to act in good faith (new) - Dispute resolution procedure - Material changes to the system - Transparency around marketing funds (new) - Keep marketing contributions in separate account - Only use the marketing fund for certain expenses - Annual audits - Infringement notices and penalties for serious breaches of the Code (new) - Prohibition on significant capital expenditure Termination phase: - Grounds on which franchisor can terminate a franchise agreement - Process for transfer of franchise - Arrangements when agreement expires - Restraint of trade (new)

19 4. Business Scams: Beware

20 Tricked into paying for unwanted or unordered advertising, stationery or other services A subscription form disguised as an invoice or a late notice, processed without a second thought

21 Invoice Scams Scammer hacks supplier account Scammer crafts pretending to be supplier - complete with logos and links Scammer sends to customers advising of changes to payments arrangements Customer pays invoice to scammer Supplier issues late notice for invoice Customer detects scam and reports money lost

22 7 Steps to Avoid Scams 1 2 Have clear procedures for verifying, paying and managing accounts and invoices. Limit the number of people authorised to place orders or pay invoices Make sure the firm billing you is the one you normally deal with. Look for subtle changes in the details. Never provide personal information and banking details to anybody you don t know and trust. Install reputable computer protection software and a firewall and keep them up to date. Train your staff to help them identify scam conduct before it s too late. 7 Sign-up to alerts at SCAMwatch.gov.au or follow

23 5. Hot Button Issues In 2015 New Food and Grocery Code of Conduct Unfair contract terms law to cover small businesses Harper Review of competition policy

24 Need More Small Business Info? Small business helpline Website updates Small Business Info Network To sign up, your contact details to Franchising Info Network To sign up, your contact details to Publications Advertising and selling guide Small Business in Focus Small Business & the CCA: Your Rights & Responsibilities The Franchisee Manual

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