By Chalpat Sonti
Mums and Dads looking to get into business are being asked to sign "gag" contracts that amount to standover tactics, it has been claimed in federal parliament.
Liberal MP Joanna Gash claimed on Tuesday night that the "deed of surrender and release" prevented prospective franchisees from suing franchisors for damages, or commenting in any way on any aspect of the contract.
Ms Gash, who did not name the franchisor involved, said the deed did not stop the franchisor from engaging in predatory behaviour or from exploiting their position.
"This constitutes an effective gag on the franchisee... I suspect that having such an instrument in place delivers the franchisor even more protection from legal remedy," she said.
"If the franchisee signed a deed of silence, how could they report any failure on the part of a franchisor to be upfront, let alone seek a remedy for damages? If that is not a standover tactic, what is?"
Her comments come as the Coalition and independent MPs push for the government to adopt the same model for reform as is being considered in WA and South Australia.
Both those states are considering legislation sponsored by state government MPs to introduce monetary penalties for breaches of the franchising code of conduct, and to enshrine the concept of good faith in legislation.
The federal government has already decided not to do so, despite the recommendation of a joint parliamentary committee - with bipartisan support - into the $130 billion-a-year industry.
Cases such as that of former Perth Auto Masters franchisee Dave Coombes have further brought the issue into the spotlight.
Federal small business minister Nick Sherry told Parliament yesterday, in response to questions from independent South Australian senator Nick Xenophon, that the new government remained committed to giving other changes to the code of conduct three years to bed in, before assessing their impact.
He had yet to see the proposed state legislation, but repeated earlier comments to WAtoday.com.au that he believed a national solution was better.
Ms Gash said everything the government had done had favoured franchisors.
"It begs the question as to whether there is another agenda playing in the background and who the primary beneficiaries could be," she said.
Labor MP Bernie Ripoll, who chaired the federal inquiry, has said that he was disappointed that the government's changes did not include financial penalties and a statutory definition of good faith.
Franchising expert Frank Zumbo, who drafted both the WA and South Australian legislation, said that amounted to "giving rogue franchisors the green light to continue".
"I call on Nick Sherry to end his 'head in the sand' approach and move to protect franchisees and the sector," he said.
The clauses raised by Ms Gash were "very troubling and raises serious questions under laws prohibiting unconscionable conduct".
"There is a real danger that rogue franchisors may use such deeds or legal strategies in an abusive manner to silence dissent and prevent franchisees from pursuing appropriate legal remedies," Mr Zumbo said.
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